Homepage
PR Newswire
22-11-2014, 05:20 PM
A personal investment in China
Geoff Winestock
1590 words
22 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Cultural exchange Even more important than speaking Chinese is understanding how business thinking and management works, write Angus Grigg and Geoff Winestock.
When William Stone left his investment banking job in May he didn't take the safe option. Rather than join another bank and continue his comfortable life in Sydney's eastern suburbs, he packed a suitcase and headed to Shanghai.
On arrival the 28-year-old set himself the near impossible task of learning Mandarin in four months.
It was a defensive strategy.
"I kept seeing the Chinese on real estate deals [while he was working at Investec] and realised they were going to be a huge player in the Australian property market," he says during a break from class in Shanghai's former French Concession.
"But the two sides didn't understand each other," he says.
Language was only part of the problem, according to Stone, who says the bigger issue is the cultural divide around how business is conducted.Need to speak Chinese
"That's when I realised I needed to speak Chinese because if I didn't, my competitors surely would."
In theory, his timing could hardly be better as the just completed free trade agreement with China should provide big opportunities for Australian professional service providers.
But while the federal government is trumpeting it as a big win for the sector, there are doubts about Australia's ability to capitalise on the opportunity.
The general lack of understanding about China among the business community is the main problem, even if the raw trade numbers suggest otherwise.
Figures released on Friday show Australian exports to China topped $107 billion in the 12 months to June 30, up 27 per cent from a year earlier.
They are impressive numbers, but this trade is dominated by coal and iron ore, which requires little actual knowledge of China.
"We have done a lot of business with China but we have not done a lot of business in China," Clinton Dines, the former head of BHP Billiton in China says.Key distinction
It's a key distinction, one that makes Dines worry that Australia is not ready to take on such a huge and alien market.
As he sees it, the majority of Australia companies are small, locally focused and have almost no experience of what it's like to run a distribution chain, manufacturing operation or a services company in China.
And as for the idea that Australia is in the region, Dines says that's "nonsense".
"It's quicker to fly to London from Shanghai than it is to Sydney," he says.
Dines has honed this view from his 35 years in China – a period in which the country has gone from a Maoist backwater to the world's second-largest and fastest-growing major economy.
With this change you would expect an equally dramatic rise in understanding about China, particularly among Generation Y Australians, who have grown up less attached to the Anglosphere.
But not so, according to Stone and his partner, Lynsey Willenberg, a 27-year-old entrepreneur who is looking to bring her health business to China.Still the exception
"Most of my friends thought I was crazy moving up here," she says.
Willenberg, who boasts clients such as Gucci, and is a brand ambassador for clothing line Lulu Lemon, says she remains the exception among her friends.
"The lifestyle is too good in Australia," she says.
Stone adds that his friends understand the logic of what the couple is doing, but have little interest in doing it themselves.
And it appears those that are 10 years younger than Stone and Willenberg are not embracing Chinese or other Asian languages either. In 2013, just 902 students in NSW studied Chinese at HSC levels, a drop of 5 per cent from the previous year.
Overall, those studying a foreign language stood at 8 per cent, according to figures provided by the NSW Department of Education.Window into different culture
Not that language is everything, but it does provide a window into a different culture and is often the first step in understanding a foreign country.
Dines, a fluent Mandarin speaker, makes this point and says while businessmen such as Stone and even Facebook founder Mark Zuckerberg have rushed to learn the language, it is "the icing on the cake".
He is more concerned that Australian businesses lack more basic management skills. "If Australian dairy farmers think they have a problem with Coles and Woolies, wait till they have to deal with China," he says.
This "playing for keeps" approach to business in China saw Foster's lose close to $1 billion trying to break into the local beer market.
Even more extreme was the experience of Rio Tinto, which saw its head of iron ore trading, Stern Hu, jailed for 10 years on corruption charges by a Shanghai court in 2010.
Such experiences possibly explain why few major Australian companies have a meaningful presence in China. Lack of blue-chip namesProperty giant Goodman Group is possibly the largest Australian direct investor in China, with committed capital of $US2 billion ($2.3 billion), although 80 per cent of this has been provided by its financing partner the Canadian Pension Plan Investment Board.
The next largest would likely be BlueScope Steel with about $1 billion of assets in China.
This lack of Australian blue-chip names making a substantial commitment to China was reflected in this week's Australia-Chinese Achievement Awards, announced by Prime Minister Tony Abbott.
The success stories were mostly small niche players.
Take the Launceston-based Bridestowe Lavender Estate, which was a finalist in the awards.
The company has built a thriving business packing its flowers into branded "Bobbie" teddy bears, which it sells to Chinese tourists or via the internet.
But its success in China has almost been accidental.
The results are not to be knocked, however, as the company has run out of stock for this year, although there was one left over for Chinese President Xi Jinping when he visited Tasmania this week.Two key things
Robert Ravens, Bridestowe's managing director, says two key things he learnt about the Chinese market were its obsession with celebrity and the passion consumers can suddenly develop for certain branded products.
While Bridestowe was smart enough to capture the opportunity, it was not the result of a concerted China strategy.
That's mainly because lavender, which most Australians associate with their grandmother, is hardly a traditional Chinese thing.
Bridestowe's Chinese story began about five years ago when Wong Wing Chee, better known as Chef Wong from the hugely popular Asian edition of MasterChef, went to Tasmania on holiday.
He tasted Bridestowe's lavender ice-cream, which was being developed as an alternative to the dying market for dried lavender pillows.
Chef Wong then spruiked it back in Hong Kong, a market that often sets trends for the mainland, and the tourists started arriving at the company's farm.
Then came the lucky part. By chance a Chinese soap opera had decided that lavender was the new symbol of romance at the same time as Bridestowe had begun producing the cutesy lavender bears.Social media exposure
It was one of the few products on display in the farm shop, when an actor called LiChen visited and took a Bobbie back as a present to his actress partner Xinyu Zhang, who posted a picture of herself on social media with the caption "sleeping with Bobbie on a cold Shanghai night".
Sales rocketed as Chinese tourists literally formed queues at the entrance to the lavender farm and, in typical fashion, Ravens had to deal with fake Bobbie bears appearing within a month of Bridestowe bringing out each a new model.
These are lessons about the Chinese market for other Australian companies but they are about mass marketing and not about traditional Confucian values.
"It tells you about the power of celebrity and the lemming approach to consuming in China," Ravens says .
"If someone says it's okay, they will follow. They aren't early adopters."
Lion Dairy is another example of a smallish player making its way in China.
While lower tariffs on dairy is one of the big wins from the free trade pact, Australian farmers still have to break into what is becoming a hugely competitive market dominated by global companies.
French giant Danone has been operating in the market since 1987. New-Zealand giant Fonterra recently announced plans for a partnership with Chinese listed firm Beingmate.Sceptical about theory
Given this competition, Dines says he is sceptical about the theory that Australia's resources-based mining boom will quickly be replaced with a "dining boom" based on food exports.
For Lion Dairy, a lack of knowledge about China forced it to use an agent or middleman to market its Australian Pura, Farmers Union and Yoplait brands.
In this case it was Chinese Australians, Irene and Andy Lin who moved to Melbourne from China in 1988 and despite being over 50, started a trading business.
For a year Lion Asia has marketed its products through the Lins.
Duncan Makeig, managing director of Lion Asia Dairy, says the partnership with the Lin's has been crucial.
"Building effective partnerships is critical for Australian businesses looking to expand abroad.
"In dairy, the quality of your cold chain distribution system is paramount, as this underpins product quality and consumer confidence in your brands."
Fairfax Media Management Pty Limited
Document AFNR000020141121eabm0001y
Geoff Winestock
1590 words
22 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Cultural exchange Even more important than speaking Chinese is understanding how business thinking and management works, write Angus Grigg and Geoff Winestock.
When William Stone left his investment banking job in May he didn't take the safe option. Rather than join another bank and continue his comfortable life in Sydney's eastern suburbs, he packed a suitcase and headed to Shanghai.
On arrival the 28-year-old set himself the near impossible task of learning Mandarin in four months.
It was a defensive strategy.
"I kept seeing the Chinese on real estate deals [while he was working at Investec] and realised they were going to be a huge player in the Australian property market," he says during a break from class in Shanghai's former French Concession.
"But the two sides didn't understand each other," he says.
Language was only part of the problem, according to Stone, who says the bigger issue is the cultural divide around how business is conducted.Need to speak Chinese
"That's when I realised I needed to speak Chinese because if I didn't, my competitors surely would."
In theory, his timing could hardly be better as the just completed free trade agreement with China should provide big opportunities for Australian professional service providers.
But while the federal government is trumpeting it as a big win for the sector, there are doubts about Australia's ability to capitalise on the opportunity.
The general lack of understanding about China among the business community is the main problem, even if the raw trade numbers suggest otherwise.
Figures released on Friday show Australian exports to China topped $107 billion in the 12 months to June 30, up 27 per cent from a year earlier.
They are impressive numbers, but this trade is dominated by coal and iron ore, which requires little actual knowledge of China.
"We have done a lot of business with China but we have not done a lot of business in China," Clinton Dines, the former head of BHP Billiton in China says.Key distinction
It's a key distinction, one that makes Dines worry that Australia is not ready to take on such a huge and alien market.
As he sees it, the majority of Australia companies are small, locally focused and have almost no experience of what it's like to run a distribution chain, manufacturing operation or a services company in China.
And as for the idea that Australia is in the region, Dines says that's "nonsense".
"It's quicker to fly to London from Shanghai than it is to Sydney," he says.
Dines has honed this view from his 35 years in China – a period in which the country has gone from a Maoist backwater to the world's second-largest and fastest-growing major economy.
With this change you would expect an equally dramatic rise in understanding about China, particularly among Generation Y Australians, who have grown up less attached to the Anglosphere.
But not so, according to Stone and his partner, Lynsey Willenberg, a 27-year-old entrepreneur who is looking to bring her health business to China.Still the exception
"Most of my friends thought I was crazy moving up here," she says.
Willenberg, who boasts clients such as Gucci, and is a brand ambassador for clothing line Lulu Lemon, says she remains the exception among her friends.
"The lifestyle is too good in Australia," she says.
Stone adds that his friends understand the logic of what the couple is doing, but have little interest in doing it themselves.
And it appears those that are 10 years younger than Stone and Willenberg are not embracing Chinese or other Asian languages either. In 2013, just 902 students in NSW studied Chinese at HSC levels, a drop of 5 per cent from the previous year.
Overall, those studying a foreign language stood at 8 per cent, according to figures provided by the NSW Department of Education.Window into different culture
Not that language is everything, but it does provide a window into a different culture and is often the first step in understanding a foreign country.
Dines, a fluent Mandarin speaker, makes this point and says while businessmen such as Stone and even Facebook founder Mark Zuckerberg have rushed to learn the language, it is "the icing on the cake".
He is more concerned that Australian businesses lack more basic management skills. "If Australian dairy farmers think they have a problem with Coles and Woolies, wait till they have to deal with China," he says.
This "playing for keeps" approach to business in China saw Foster's lose close to $1 billion trying to break into the local beer market.
Even more extreme was the experience of Rio Tinto, which saw its head of iron ore trading, Stern Hu, jailed for 10 years on corruption charges by a Shanghai court in 2010.
Such experiences possibly explain why few major Australian companies have a meaningful presence in China. Lack of blue-chip namesProperty giant Goodman Group is possibly the largest Australian direct investor in China, with committed capital of $US2 billion ($2.3 billion), although 80 per cent of this has been provided by its financing partner the Canadian Pension Plan Investment Board.
The next largest would likely be BlueScope Steel with about $1 billion of assets in China.
This lack of Australian blue-chip names making a substantial commitment to China was reflected in this week's Australia-Chinese Achievement Awards, announced by Prime Minister Tony Abbott.
The success stories were mostly small niche players.
Take the Launceston-based Bridestowe Lavender Estate, which was a finalist in the awards.
The company has built a thriving business packing its flowers into branded "Bobbie" teddy bears, which it sells to Chinese tourists or via the internet.
But its success in China has almost been accidental.
The results are not to be knocked, however, as the company has run out of stock for this year, although there was one left over for Chinese President Xi Jinping when he visited Tasmania this week.Two key things
Robert Ravens, Bridestowe's managing director, says two key things he learnt about the Chinese market were its obsession with celebrity and the passion consumers can suddenly develop for certain branded products.
While Bridestowe was smart enough to capture the opportunity, it was not the result of a concerted China strategy.
That's mainly because lavender, which most Australians associate with their grandmother, is hardly a traditional Chinese thing.
Bridestowe's Chinese story began about five years ago when Wong Wing Chee, better known as Chef Wong from the hugely popular Asian edition of MasterChef, went to Tasmania on holiday.
He tasted Bridestowe's lavender ice-cream, which was being developed as an alternative to the dying market for dried lavender pillows.
Chef Wong then spruiked it back in Hong Kong, a market that often sets trends for the mainland, and the tourists started arriving at the company's farm.
Then came the lucky part. By chance a Chinese soap opera had decided that lavender was the new symbol of romance at the same time as Bridestowe had begun producing the cutesy lavender bears.Social media exposure
It was one of the few products on display in the farm shop, when an actor called LiChen visited and took a Bobbie back as a present to his actress partner Xinyu Zhang, who posted a picture of herself on social media with the caption "sleeping with Bobbie on a cold Shanghai night".
Sales rocketed as Chinese tourists literally formed queues at the entrance to the lavender farm and, in typical fashion, Ravens had to deal with fake Bobbie bears appearing within a month of Bridestowe bringing out each a new model.
These are lessons about the Chinese market for other Australian companies but they are about mass marketing and not about traditional Confucian values.
"It tells you about the power of celebrity and the lemming approach to consuming in China," Ravens says .
"If someone says it's okay, they will follow. They aren't early adopters."
Lion Dairy is another example of a smallish player making its way in China.
While lower tariffs on dairy is one of the big wins from the free trade pact, Australian farmers still have to break into what is becoming a hugely competitive market dominated by global companies.
French giant Danone has been operating in the market since 1987. New-Zealand giant Fonterra recently announced plans for a partnership with Chinese listed firm Beingmate.Sceptical about theory
Given this competition, Dines says he is sceptical about the theory that Australia's resources-based mining boom will quickly be replaced with a "dining boom" based on food exports.
For Lion Dairy, a lack of knowledge about China forced it to use an agent or middleman to market its Australian Pura, Farmers Union and Yoplait brands.
In this case it was Chinese Australians, Irene and Andy Lin who moved to Melbourne from China in 1988 and despite being over 50, started a trading business.
For a year Lion Asia has marketed its products through the Lins.
Duncan Makeig, managing director of Lion Asia Dairy, says the partnership with the Lin's has been crucial.
"Building effective partnerships is critical for Australian businesses looking to expand abroad.
"In dairy, the quality of your cold chain distribution system is paramount, as this underpins product quality and consumer confidence in your brands."
Fairfax Media Management Pty Limited
Document AFNR000020141121eabm0001y
