Chinese companies are on a steep learning curve in Australia, says corporate adviser Alistair Nicholas, co-author of a report on Chinese investors in agribusiness that was launched in Beijing yesterday.
Mr Nicholas, executive vice-president of Powell Tate Australia, said Chinese companies often “don’t get it” when a manager posted to Australia communicates back to head office in Beijing or Shanghai the need for strategic change.
The 68-page report, distilled from interviews with Chinese investors in Australia and China, is titled: “The licence that matters: beyond Foreign Investment Review Board approval.”
Warwick Smith, a director of ANZ Bank China and chairman of the Australia China Council, says in the foreword that the report “highlights the failure of many Chinese investors to obtain a ‘social licence’ — which might loosely be defined as community acceptance — to operate in Australia … which is essential to their success in the market”.
Mr Nicholas, who worked for 13 years in China, including running his own advisory business in Beijing, said “they are fighting some of the same battles as we were 10-15 years ago as Australians entering the Chinese market”. He added: “Everything has to go back to China for approval, followed by a hundred questions as to why things have to be done that way — slowing down the whole process.”
Although Chinese companies are picking some of their best and brightest to go overseas, “they are keeping them on a very short leash, almost micromanaging them”.
He said they still exhibited “a zero-sum mentality, approaching every negotiation as a battle rather than an opportunity for a mutually beneficial outcome.” In response, Australian firms “should start such talks high, and know when they’re going to pull out”.
Chinese companies were drawn to Australia, he said, by the rapid growth in trade and by the free trade agreement between the countries. “But if they decide it’s too hard, they will go somewhere else” — as State Grid did after being barred by Canberra from buying NSW’s Ausgrid, swiftly investing in Brazil instead.
The report says investors too often believe that gaining contractual approval from governments, as with Ningbo Dairy Group’s purchase of five farms in Victoria’s Gippsland, is “sufficient to move forward with aggressive expansion plans”. But they must also “demonstrate a commitment to Australian society that goes beyond earning profits in order to succeed”.
Those interviewed, Mr Nicholas said, had a common misconception that Chinese firms faced problems in Australia due to providing too much public information rather than too little, or to sending the wrong message.
“Australians want to know more about Chinese investors, just as Chinese consumers want to know more about the foreign firms whose products they buy,” he said.
Chinese businesses sometimes failed to do adequate due diligence, or they employed, perhaps through family connections, Chinese people in senior roles who may be living in Australia who otherwise lacked qualifications.
Other firms in their supply chain were sometimes treated poorly, Mr Nicholas said — asking service suppliers, for instance, to do further work before they were paid in full, or delaying payment for months. “They don’t always understand the value they get from service firms.”
He said subcontractors to such Chinese firms should ensure they did not leave the bulk of the payment until completing work.
By ROWAN CALLICK