Kelly O'Dwyer (Higgins, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics, I present the report of the committee's delegation to China from 28 July to 6 August 2014. I seek leave to make a short statement in connection with the report.

Leave granted.

I am very pleased to speak to the report of the House of Representatives Standing Committee on Economics 2014 parliamentary delegation to China. As the chair of the committee, I had the honour to lead the delegation, which visited Beijing, Chengdu and Shanghai. Firstly, I would like to thank the other members of the committee who took part in the delegation for their contribution to the visit: the deputy leader of the delegation, Mr Pat Conroy, also Mr Scott Buchholz and Dr Peter Hendy. The delegation worked very well and brought together a variety of interests and knowledge of economic matters and other issues in China, which proved to be very valuable during our meetings and our discussions.

It was a pleasure to visit three quite different parts of China, and a wonderful opportunity for meaningful engagement and discussion between the Australian delegation and our Chinese neighbours. The delegation enabled us to reaffirm the very valuable relationship and cooperation which Australia has with China to establish connections with our counterpart committees in the country and to gain a substantial insight into economic developments across China and issues being faced in individual provinces. The delegation felt very welcome in each city we visited and was warmly received by parliamentarians and government officials, business representatives and academics.

The main aims of the economics committee in undertaking this visit were to gain a deeper understanding of the Chinese economy and to learn about China's economic reform agenda, its banking and non-bank lending sectors, its trade and investment relationship with Australia, and where opportunities might exist to strengthen ties between our two countries. Discussions also extended to areas including health, education, environmental policy, social development and security.

In Beijing, the delegation met with the financial and economic committee of the National People's Congress, with government ministries, banking regulators, the National Development and Reform Commission, China Development Bank and members of the business community.

In Chengdu, we met with representatives of the Sichuan Provincial People's Congress and Australian business representatives in the province. We also visited the site of a proposed new residential and commercial zone known as the Tianfu New Area and met with its administration. It will cover an area of 1,578 square kilometres to the south of Chengdu and consist of one city with six functional zones. The provincial government expects its population to reach six million by the time of its completion in 2030. It is estimated that this will bring the total population of Chengdu to 23 million people—around the size of Australia's population.

In Shanghai, the delegation met with the financial and economic affairs committee of the Shanghai People's Congress, with Shanghai Zhongfu property holding group, Chinese academics and the AustCham Financial Services Working Group. We were also privileged to visit the Shanghai Stock Exchange, the Shanghai Pilot Free Trade Zone, Baosteel's steel mill and port facilities, and the Changxing Island base of Zhenhua Heavy Industries.

This report outlines the matters discussed during our visit with a broad focus on China's economy and reform agenda and in the context of Australia's trade and investment relationship with China. China's economic reform agenda was a prominent subject of discussion, with a focus on the government's recognition that for a long time growth had relied on high input, and that innovation was now the key to China's economic future.

Endorsed at the Third Plenum of the 18th Chinese Communist Party Congress in November 2013, the package of reforms is aimed at reforming China's economy over the coming years. They include opening the financial sector to more competition both domestically and internationally, interest rate and capital account liberalisation, setting up a deposit insurance system, enabling the establishment of privately owned banks, further liberalising cross-border capital and financial transactions, development of domestic capital markets and allowing greater flexibility in the exchange rate.

Some areas of interest to the delegation among the reforms being contemplated were improvements to property rights and private ownership of property, creating fair and open market systems, improving taxation and budget systems, the opening of border and inland regions and changes to policies to assist small- to medium-sized enterprises. Overall, the reforms appear to be having a positive impact in China, particularly in cities like Chengdu, with good investor sentiment and a high level of representation by large foreign companies, including a growing number from Australia. However, it seemed to the delegation that many of the reforms were proceeding slower than was hoped, with the trade-off between reform and China's GDP growth target looming as one of the main potential areas of constraint.

As members would be aware, the House Economics Committee is currently undertaking an inquiry into Australia's foreign investment policy as it applies to residential real estate, during which questions have been raised by submitters, witnesses and commentators about the level of investment by Chinese individuals and enterprises in Australian residential real estate. The ways in which Chinese investors may be obtaining funding to purchase property in Australia has also been queried, particularly in terms of the sustainability of China's so-called shadow banking sector. While the inquiry is not focused on investments coming from any particular country, the delegation took the opportunity presented by its visit to China to gain a better understanding of China's banking system and lending processes, including those within the shadow financing industry.

In this regard we heard that China is taking steps to tighten its oversight of the shadow banking industry in an attempt to slow rising debt levels and bolster financial stability, although it was clear that currently the sector is not regulated nearly as closely as traditional banking activities, and there is often very little transparency about what shadow banks are investing in or how their loans are performing.

On behalf of the delegation I would like to sincerely thank the National People's Congress for their hospitality during our visit. I would also like to thank our Australian Ambassador to China, Ms Frances Adamson, our Consul-General in Chengdu, Ms Nancy Gordon, and our Consul-General in Shanghai, Ms Alice Cawte, and their staff for the excellent program and their support and hospitality. I would also like to thank Mr Peter Banson, the economics committee secretary, for his professional assistance both with the delegation and his excellent stewardship of this report.

I know that members of the delegation were very pleased to have the opportunity to visit China as part of the Australian parliament's annual committee delegation program and I thank the Speaker, the Hon. Bronwyn Bishop, for this opportunity. The program enabled us to arrange a focused visit with meetings targeted at the committee's interests. In addition to strengthening the parliamentary and bilateral links between Australia and China, the focused nature of the visit will result in a significant contribution to the committee's current and future work. I commend the report to the House and move:

That the House take note of the report.