Friday, 23 October 2015

Andrew Charlton: Eight Opportunities

Andrew Charlton is a former Senior Economic Advisor to the Australian Prime Minister who is currently a Director at AlphaBeta, a strategy advisory business that serves clients throughout Australia and Asia. Andrew Charlton and his AlphaBeta team have closely monitored the faltering China economy, on which Australia relies so heavily. And he says that Australia can take advantage of new sources of Chinese growth.

“This won’t be easy,” he wrote in a report, shortly after he and his AlphaBeta colleagues went to China to research the matter first-hand. “For the last ten years, we rode the China minerals wave by luck. We had bountiful supplies of what China crucially needed.” 

The next growth phase won’t be as easy as the first, he continued, and they’ll need to work harder to position the Australian economy so it complements the future Chinese economy. But he and his AlphaBeta team have identified eight opportunities for business and investors outside of minerals and mining.

There is no doubt that China’s economy is slowing. Even Chinese government officials have acknowledge it. During their September 2015 visit, the AlphaBeta team heard repeatedly that China’s future growth will be “slower but safer,” and one government official conceded its economy has been flowing down for at least five years. “China’s economy,” Andrew Charlton wrote in the AlphaBeta report, “is now growing its slowest annual rate in twenty-five years, and there are now signs that we’ve reached the bottom.”

But Australia enjoys many comparative advantages in sectors other than mining that could go well with China’s future growth. “We have identified eight opportunities for business and investors outside mining,” he said, noting that the Mandarin word for “eight” sounds like the word that means prosper or wealth. “Hopefully these eight sectors will lead to prosperity for Australia too.” They are:

  • There are more than two hundred million “consuming class” households in China, and this is expected to rise by more than one-third in the next fifteen years. There are, in short, more people with disposable income than ever before. “This could represent a significant opportunity for Australian retailers.”
  • The rising consuming class will fuel the demand for food. Meat consumption alone could increase by forty percent in the coming fifteen years.

  • Travel is increasingly attractive and important to the new consuming class; this is being fueled by more annual leave for workers, visa relaxation, and other factors.

Financial services: 
  • The Chinese government is putting liberalised capital markets at the top of its reform agenda.

Clean energy and environmental services:
  • China has sustained much environmental damage and is going “green.”

  • China’s aging population will promote new growth in the healthcare industry.

Advanced manufacturing:
  • China’s 2025 manufacturing strategy identifies sectors in which Australian firms can benefit, such as railroads.

  • More than ninety thousand Chinese students currently study in Australia, a service export that could grow by another thirteen billion dollars in the next five years.

Andrew Charlton received his doctorate in economics from Oxford University.

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