Good time for beef industry From AFR Year of the Rooster lucky...

Good time for beef industry
From AFR
Year of the Rooster lucky for the Kangaroo


Exchanging gifts is a big part of Chinese culture. Business people visiting China usually receive a small gift (not to be confused with a bribe) from their hosts as part of the intricate relationship-building process.
There are high expectations in the business community that Chinese Premier Li Keqiang will come bearing gifts of his own during a five-day visit to Australia this week.
The visit is significant for many reasons. Li is bringing a powerful delegation of government officials and representatives from Chinese companies covering almost every industry from resources, consumer goods, food, wine, tourism and real estate.
Behind all the rhetoric and symbolic hand-shaking, the visit is expected to yield some actual co-operative investment and trade deals covering beef exports and energy. Both sides are also expected to use the opportunity to iron out technical issues related to the Free Trade Agreement signed 2 years ago.

It also comes days after China delayed the introduction of new e-commerce rules, which had been weighing on the shares of companies such as vitamins group Blackmores, Bellamy's Australia and The a2 Milk Company.

However, that decision, which affects exporters from more than 70 other countries, is more to do with China's new-found love affair with globalisation than Li trying to butter up the federal government.
Business leaders familiar with the China opportunity such as Andrew Forrest and Christine Holgate have high hopes around the visit.
Forrest, the Fortescue Metals Group chairman who more recently turned his attention to the beef trade, will call on Prime Minister Malcolm Turnbull to embrace China when he speaks at a business summit in Sydney on Friday. Forrest will also be calling for progress on overcoming non-tariff trade barriers on chilled beef which remain in place despite the implementation of the Free Trade Agreement.
"I'll be asking Australia to really embrace China as a friend and a natural trading partner, and to China to say non-trade barriers such as artificial trade barriers to Australian chilled red meat do China no good and Australia harm," Forrest told Chanticleer.

Beef industry optimistic

The beef industry is optimistic about securing greater access to the China market but Forrest says non-tariff export barriers to chilled beef, which is accepted by the Americans and Europeans, should be dealt with. Forrest owns Harvey Beef and is co-chair of ASA100.
"The fact that the Premier is here and has taken time out of his incredible schedule to visit Australia, every Australian business person should take it as a sign of seriously investing in this relationship," he says.
Forrest, like many Australians who understand China, says it is significant that one of the most powerful political leaders in the world is spending five days in Australia, finishing with an AFL football match in Sydney on Saturday.

Albert Tse, whose Wattle Hill fund invests in Australian firms exporting products to China, agrees: "It is unprecedented for the Premier of the world's second-largest economy with 1.3billion consumers to spend five days visiting one country. We should take this as a clear indicator that China holds its relationship with Australia as highly important.
"Premier Li's visit is a strong sign that the year of the Rooster will be a lucky one for the Kangaroo."
Trade in focus

Li's visit will highlight Australia and China's common position on trade liberalisation now that Beijing can cast Donald Trump as the villain in the growing wave of protectionism sweeping global politics. On the flipside, this puts more pressure on Australia to pick its sides carefully on issues such as the South China Seas dispute.

But what does the visit mean for investors? It is easy to get over-excited about Australia's significance in the China story. It is true China loves Australia's "clean, green" image and its rising middle classes are buying vast quantities of vitamins, infant formula, wine and other food and baby products. But Chinese online giant Alibaba is also selling products from more than 70 countries to Chinese consumers via the country's sophisticated e-commerce platforms.
The Australian business community is divided between those who believe China is too risky and those who say companies are in danger of missing the opportunity of a lifetime.
Blackmores boss Holgate, who is one of the speakers at a forum in Sydney on Friday where Li and Turnbull are giving keynote addresses, says 35 per cent of global trade is going to come from China. "This is an incredible opportunity Australia. If we want prosperity for our country, then we need to grab hold of this big opportunity with China. Indonesia is another one. Really work with these countries. Mining will always be important but let's have some diversity," she told Chanticleer.
"We as a country need to step back and wonder why we are not in the top 10 countries for ease of doing business, and why is New Zealand number one?"

Holgate has been on somewhat of a roller-coaster ride with China over the past year but remains unphased about the shifting regulatory environment. Consumer stocks selling products into China were hammered in April last year when Beijing flagged a tightening of regulations governing e-commerce sales. Many investors warned this was a wake-up call for Australian companies riding the China wave. That was until Friday last week when Chinese authorities delayed indefinitely the tightening of cross-border e-commerce rules governing 15 free trade zones in China.
It says a lot that the news took days to filter down to Australian investors. Blackmores shares jumped 13 per cent on Tuesday and gained another 2.3 per cent on Wednesday. Shares in infant formula brand Bellamy's rose 15.7 per cent on Tuesday and another 2.3 per cent on Wednesday. Australian investors have been notoriously bad at reading events in China.
Holgate was still fielding questions from many of her retail shareholders confused about China's free trade zone regulation on Wednesday.
"This has taken away all that concern now and has reassured people you will be able to trade as usual and we are keeping all the 15 free trade zones," she says. "Will they have a different policy in a year's time? I don't know. But will we have a different prime minister in a year's time, I don't know."
One senior executive with years of experience selling to China urges caution around the latest changes, but said the new rules appeared to give certainty for at least 12 months. A one-year horizon is enough certainty for many investors in a listed company.
Many executives with experience in China have another important message: "I always have my radar up. If someone says it's too good to be true, it generally is," one says.
History on imports

China also has a history of turning on imports from a particular country when political events do not go its way. In December, China banned imports of 19 Korean cosmetics products following Seoul's decision to deploy a US-built missile defence system. That has since escalated into travel bans hurting Korean tourism.

However, there will be more good news than bad for Australian business during this week's visit by the Chinese Premier. In an opinion piece published in today's Australian Financial Review, Turnbull applauds Chinese President Xi Jinping's defence of open markets at Davos and says he will talk to Li about how Australia and China can progress this agenda in the Asia-Pacific. Turnbull says he will explore other economic opportunities between the two countries and getting more from the free trade deal.
Other Australian executives attending the summit include Rio Tinto boss Jean-Sebastian Jacques, Telstra chief Andy Penn, Qantas boss Alan Joyce and Australia Post senior executive Bob Black. The focus will be on looking at opportunities to diversify away from mining and capitalise on China's growing appetite for Australian health and food products, as well as skills in areas such as aged care.


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