Rather, companies in Australia and New Zealand should focus on obtaining a more nuanced understanding of Asia-Pacific’s own new reality, characterised by evolving demand patterns and the changing role of China.
Providing such understanding was the aim of a series of events we held recently in key cities across ANZ’s home markets. These delivered multiple insights around two key themes. First, long-term shifts in demand are more significant than short-term volatility, despite the practical challenges the latter may present. Second, businesses seeking to make the most of opportunities in this new reality had better refine their thinking about China’s policy goals and changing economic profile—no easy task.
Shifting demand patterns
Much attention has been paid to the potential impact on this part of the world of Donald Trump’s trade policies but, as we’ve argued before, Asia is well placed to withstand the resurgent politics of anti-globalisation. Others agree: the Asian Development Bank recently forecast that Asia-Pacific economies (excluding Japan) would account for 60% of worldwide economic growth this year between them, even with a moderate slowdown expected in China. The prosperity of our businesses relies on the extent they can tap into this economic dynamism.
Australia is already seeing the impact of shifting demand patterns from Asian economies in this new reality. While resources exports have been subject to some volatility in recent years--and there is little doubt the China-led supercycle is over—other sources of demand from increasingly wealthy Asian populations is catching up, supported in recent months by a softer AUD.
Growth in services exports, in particular tourism, education and financial services, is rapidly compensating for weaker shipments of resources. Recent data shows the value of tourism-related services alone has almost caught up with iron ore. The constraints here are almost exclusively on the supply side, in the form of the number of flights it is possible to run from key markets, China in particular. The positive knock-on effects from expanding supply by adding more flights, such as more hotels, tourism jobs and service infrastructure, are considerable and nowhere near reaching their potential.
And, of course, foreign brands still enjoy some crucial advantages within China, especially when it comes to tapping the growing Chinese middle class’s demand for quality, trustworthy products. Consumer trust in suppliers is in fairly short supply in China, the keynote speaker at our events explained, particularly in the food supply chain. Hence the popularity of daigou sales, where orders are placed online in China for sales agents to pick up produce in physical stores overseas—including in Australia and New Zealand
—with receipts often required as proof of purchase in the specified location. Reinforcing the message of trust with discerning Chinese consumers will therefore be increasingly important.