Date posted: 28/08/2017 4 min read

The rise of China's middle class

In episode 13 of the Acuity podcast Bob Carr discusses how Australian business can benefit from the predicted explosion of China’s middle class.

In Brief

  • Episode 13 of the Acuity podcast is titled: ‘New customers are coming from China with Bob Carr’.
  • Carr discusses how Australian business can benefit from the predicted explosion of China’s middle class, forecast to grow by 850 million by 2030.
  • The Acuity podcast is available to stream and download for free.

 

Episode 13 of the Acuity podcast features Bob Carr, former Australian Foreign Minister and former NSW Premier. He is now director of the Australia-China Relations Institute at the University of Technology Sydney.

In this episode, Carr explains how the growth of China’s middle class is “an extraordinary opportunity for Australia”. Australian tourism, education, agriculture, real estate and services such as aged care and health care can benefit from a predicted explosion in the growth of China’s middle class, which is forecast to grow by 850 million between 2009 and 2030 and to 73 per cent of its total population by 2030, up from 12 per cent in 2009. 

There are going to be big opportunities in China for Australia under the free trade agreement which was launched in 2015, he tells Acuity in the podcast. “We can now get in and with Australian-owned providers offer these services to the newly-enriched, exploding Chinese middle class.”

By 2030, future spending by China is predicted to far outstrip that of America, says Carr. New research from the Brookings Institution shows spending by Chinese consumers will reach $US14.3 trillion, accounting for 22 per cent of the global total, compared to US consumers with 7 per cent and Indians with 17 per cent.

“Nothing stands out like this explosion in the Chinese middle class and we’re in the middle of this explosion now.” 

It will be up to Australia to set the rules for Chinese investment in Australia, however, Carr warns. For example, restrictions can be set up on foreign ownership of housing, which may restrict overseas investors just to new housing.

“Nothing stands out like this explosion in the Chinese middle class and we’re in the middle of this explosion now.” 
Bob Carr

Likening what’s happening now to Japanese investment in the 1980s, Carr says he agrees with former Prime Minister John Howard that Australians will become accustomed to Chinese investment. “I don’t know anyone who thinks it’s a bad thing that Gina Rinehart can get cattle into Chinese supermarkets, where they’re available for purchase by the middle class.”

Under China’s ‘One Belt, One Road’ economic strategy, China is growing its economic engagement with northern Australia and also will offer infrastructure opportunities such as the construction of roads and 50 airports to be opened up in Central Asia. “I think the fact that China is talking infrastructure is a pretty positive thing.”

In order to do business with China, Australian firms need to play by the rules and get careful advice on Chinese law, says Carr. When the Chinese economy matures and the private sector becomes bigger, reaching about 70 per cent of its economy, doing business is likely to compare with that of western countries.

Former Australian Foreign Minister Bob Carr speaks during the 6th World Peace Forum in Beijing, China.

VCG/Getty Images

Australia must compete for Chinese business with the 10 nations which comprise ASEAN, so Australia should not lecture China on how to order its internal affairs, says Carr.

In turn, China will need to respect the laws of sovereign nations when it comes to investing in controversial projects in Asia, Australia and beyond.

“China’s got a new status and a new credibility, but they know if they become a bullying presence in Southeast Asia they will lose that,” says Carr. “If China’s pushy, that will force nations to think about how they cooperate to limit China’s rise as a regional power.”