Local manufacturers struggle to compete with China
The World Today – Friday, 25 August , 2006 12:38:00
Reporter: Andrew Geoghegan
ELEANOR HALL: As BHP Billiton’s multi-billion dollar profit result revealed this week, China’s relentless growth has been a huge boon for many Australian business.
But there’s a downside. A survey of Australia’s manufacturing industry has found that this sector of the local economy is losing out to Chinese competition. In just the last year, manufacturers have suffered a net financial loss of almost $900 million in trade with China.
And as finance correspondent Andrew Geoghegan reports, some manufacturers are warning that the local industry will not survive.
ANDREW GEOGHEGAN: It would be an understatement to say China is a country on the move. The rapid pace of economic growth has created huge demand for private transport. In Beijing alone, 1,000 new cars are estimated to be pulling onto the roads every day.
JASON LI: The car and the growth of the car is just an extraordinary phenomenon in china.
ANDREW GEOGHEGAN: Jason Li, a Chinese Australian living in Beijing, works for the China Automobile Association.
JASON LI: It’s really stuff of dreams. It’s very much tied to growing economic development, the rise in middle class. It’s such a status symbol. It’s such a centrepiece of lifestyle now.
ANDREW GEOGHEGAN: And Australian business is cashing in on the Chinese dream.
GLEN DOBINSON: Certainly with the population based in China of around about 1.2 billion people, and that’s a lot more than the Australian population, quite a few fold.
ANDREW GEOGHEGAN: Glen Dobinson is the Managing Director of Dobinson’s Springs and Suspension, a Rockhampton manufacturer. He’s been successful in capitalising on the growth of China’s car industry.
GELN DOBINSON: So we are trying to capitalise on that four wheel drive market, particularly up there where they have suspension range of products and we’ve had a client dealing with us since early this year, who’s had around three orders, and we have to grow on that base.
ANDREW GEOGHEGAN: However, Glen Dobinson says he’s making hay while the sun shines. He sees some very dark clouds on the horizon in the form of cheap manufactured goods imported from China.
GLEN DOBINSON: We find, one of our competitors now is starting to import product out of China, and distributed though Australia as well, to our client base, we are going to have to compete head on with Chinese imports, which, I can only see in the long term, if that keeps up, we are … it’s not going to be an easy ride for us down the road further, yeah.
ANDREW GEOGHEGAN: To the point where you think you might struggle to survive here?
GLEN DOBINSON: Yeah, I think 10 to 15 years time it could be a different story to the stage, where if we can’t compete, yeah, we might have to look at maybe importing and rebranding our product ourselves, that’s, either that or you got no business. So that’s something that we’ll have to think seriously about in the long-term future.
ANDREW GEOGHEGAN: Glen Dobinson’s problems are symptoms of an Australian manufacturing industry in decline.
And the car components sector is suffering the most acute pain, as highlighted this week by the struggling Ajax fasteners business in Melbourne. It’s been bailed out by carmakers, because it can’t compete with cheap imports.
HEATHER RIDOUT: A lot of the benchmark prices are China prices, so, if Ajax have to quote for their fasteners, they have a benchmark, Chinese fastener producers, as a price they have to match. So it is very tough.
ANDREW GEOGHEGAN: Heather Ridout is the Chief Executive of the Australian Industry Group.
It’s surveyed 700 manufacturers and found that they’ve accumulated almost $7 billion in benefits from China. However, cheap Chinese competition has cost those businesses closer to $8 billion in lost sales.
Heather Ridout.
HEATHER RIDOUT: Australian manufacturers are now doing much more business in China. China has been identified as the strongest potential overseas market, for industry in terms of their exports, in terms of their overseas production, in terms of their overseas access to Australia. But in that term, the equation still remains strongly in China’s favour with a loss of approaching $1 billion.
ANDREW GEOGHEGAN: While the outlook may be gloomy for manufacturers the forecast for Australia’s services sector is bright.
Australian Andrew Stoler is a former deputy director general of the World Trade Organisation and is in China at the moment.
ANDREW STOLER: Just as the Australian manufacturing sector is nervous and sensitive up here in China, they have a very inefficient services sector, which is quite worried about increased competition from Australia.
ELEANOR HALL: That’s Andrew Stoler, the former Deputy Director General of the World Trade Organisation, ending that report from Andrew Geoghegan.