Adapt to shifting Chinese demand, warns HSBC

By Killian Plastow
 — 1 minute read

Australian businesses and policymakers must accommodate the ongoing shift in Chinese demand away from resources and towards services, argues HSBC.

A new HSBC report titled Australia’s broadening economic links to China points out that Australia’s continuous growth over the last 25 years has been underpinned by the country’s relationship with Asian markets, particularly China.

“Australia is benefiting significantly from the rise of China,” the bank said, noting that Australia’s economy has grown by 24 per cent in the last eight years, compared with 12 per cent for the US and 8 per cent for the UK over the same period.


“A key driver of Australia’s outperformance has been China’s strong demand for commodities and, more recently, for services,” HSBC said.

HSBC warned however, that as the demographics of the Chinese market shifts, Australian authorities need to increase their support for the services sector – including tourism and education – to compete with other countries.

“For Australian policymakers and businesses, building stronger ties with China provides opportunities for growth. Signing the China-Australia FTA in 2015 was a positive step, but more needs to be done to turn the provisions in the agreement into action,” the bank said.

“Unlike mining, where Australia has a clear and natural comparative advantage, many countries are competing to provide service exports to China.”

HSBC said increased investment in suburban infrastructure would support the services industry, while the China-Australia free trade agreement (CHAFTA) signed in 2015 could be used as a first step in building an economic relationship.

“The signing of CHAFTA, which is one of the most comprehensive trade agreements China has ever entered into with an advanced economy, was a significant milestone in the relationship between the two countries. But it represents only one step on the road to closer ties,” HSBC said.

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Adapt to shifting Chinese demand, warns HSBC
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