INVESTING

How to catch the next China wave

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I have said it before, and I will say it again: if you have a business - or some specific skill - then buy yourself an airline ticket to Shanghai, Beijing, Guangzhou, Chengdu, Wuzhen, Shenyang, Xiamen, Hangzhou or any of a dozen other large Chinese cities and start exploring.

There is no doubt there are enormous opportunities for Australians from the free trade agreement - that will only dawn on many people when someone else has taken full advantage of them. The trick is to move early, learn early and gain contacts and knowledge.

All you have to do is put your backside into an airline seat. And there are plenty of them on offer. Seven airlines now fly to and from China out of Sydney Airport: Air China, China Eastern, China Southern, Sichuan Airlines, Xiamen Airlines, Hainan Airlines and Cathay Pacific. It's not even costly to get this education: China Eastern or Qantas will get you there for about $1200 return.

China wave

So it's encouraging to have seen in the past month, the largest yet Australian trade delegation to China. But for investors, especially those who might not strap themselves into that plane seat, what you really want to look at is the guest list.

The trade mission, organised by the Department of Foreign Affairs and Trade as part of Australia Week in China, visited 12 cities (some of those I mentioned above). But it was the diversity of the topics covered by this delegation that shows the opportunities for business and investors are broader than you might imagine.

The sectors covered by the delegation included: agribusiness (you would have expected this); financial services; health and aged care; innovation; international education (worth $19 billion a year, our fourth-largest export earner); premium food and beverage and consumer products; tourism (there will be 1.2 million Chinese visitors down here this year, overtaking the Kiwis); and urban sustainability and water management.

In other words, there is a diverse range of opportunities in China for our companies, so there's a large selection that investors can also explore. Though there was a large contingent of small and medium-sized businesses in China for the trade mission, many larger established players - including Blackmores and Bellamy's, whose share price performance off the back of their China sales has been phenomenal, if volatile - were also there. (See stories about local food companies, pages 80 and 82.)

As with any business relationship, the keys to trading with Chinese companies are trust and reliability. Also important are the time you spend learning about the people you are dealing with, being precise in what you are seeking and honouring your end of the deal. It also means quickly walking away if you are dissatisfied with the outcome. But patience is vital.

Despite the obvious differences in culture, population and language, the similarities between the two countries are also important. China, too, has a rapidly ageing population that must be managed and cared for. It has been through a massive infrastructure building boom similar to ours (though China's building has been largely for urban infrastructure, whereas in Australia it was for mining). Now both of us are relying on their consumers for a new wave of sustainable growth. China will be aided by the enormous growth in its middle class.

The China story clearly has risks, political and economic. And some Australian companies that dive in will come a cropper. But do not be swayed by negative headlines about China's growth. Yes, things might slow but that is largely about the reduction (not total end to) in its phenomenal infrastructure building.

The emphasis for your investment investigation should be Australian products and services that focus on healthcare, food, retirement care, education and water treatment. These offer enormous potential in the next phase of China's development - and there will be many local companies that enjoy decades of growth as a result.

What you need to do is investigate the companies making inroads into China, assess their chance of success and hitch a small part of your wagon to them. It is almost a case of: one boom ends, another starts some place else.

One boom ends, another starts some place else.

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