TALK to any economist about the future of Australia and the most common response is; “it’s all about China”.
Forget the sheep’s back, Australia is now well and truly riding the rickshaw.
China is Australia’s biggest trading partner, accounts for more than a third of our exports, is now our biggest source of international tourists, is among our biggest offshore investors and … it’s continuing to get even more important.
China’s impact on the economic health of Australia and your future financial wealth is massive. That’s why there is so much focus on every bit of China economic data which is released.
Success in selling to China will spark a surge in a company’s share price.
Chinese property investors are being partly blamed for the housing affordability issues in Sydney and Melbourne.
Most Australians are probably benefiting from the impact of China through the rise in share values within their superannuation fund.
But how do you benefit more directly from the China boom? There are a few options.
China has a range of different share markets operating with varying degrees of regulation and prestige.
The Hong Kong sharemarket is known as the one which most closely resembles a first world western market while many of the others are very volatile and risky.
China has some incredibly big global corporate giants headed by technology empire Tencent, telco China Mobile and digital conglomerate Alibaba.
They are world class companies doing great things.
You can invest directly in A-class shares of companies like this but it isn’t for the faint hearted, needs good advice and an understanding of the regulatory system.
Transacting through a good stockbroker is a must.
AUSTRALIAN SHARES WITH CHINA OPERATIONS
A more comfortable way to benefit from the China story through the sharemarket is to invest in Australian companies successfully selling their products or services there.
The list of Aussie companies making money out of China is growing all the time and are across a huge range of industries.
In travel, there’s Sydney Airport (benefiting from the increase in flights bringing Chinese tourists), through to Qantas and Virgin (operating the flights) plus Flight Centre (selling the travel packages).
Dairy producers such as Bellamy’s, Bega and A2 have been profiting from selling baby formula and cheese to China.
Blackmore’s are selling vitamins, Treasury Estate wine, Ramsey Healthcare, Toll Holdings … the list is growing all the time.
And we haven’t even mentioned the obvious resource stocks like BHP, Rio and Fortescue which feed the Chinese need for steel.
Talk to your stockbroker about how successfully each of these companies are operating their China business.
Always remember that success can quickly reverse if Chinese authorities suddenly change regulations or if key customers are offended and withdraw their support.
EXCHANGE TRADED FUND
ETF’s are an easy liquid way to invest through mirroring a Chinese investment index.
The most prominent ETF’s available with a China skew are:
iShares MSCI Hong Kong ETF, reflects the performance of the Hong Kong stock market index.
iShares China Large Cap ETF, measures the Financial Times index of the top 25 listed China companies.
Market Vectors China AMC A-share ETF, reflects the performance of the A-class index of the top 300 listed China shares.
Like any ETF, they are easily bought and sold on the Australian sharemarket and are basically a low cost index fund.
SELL PRODUCT DIRECT TO CHINESE CONSUMERS
Most people think it’s only big Australian companies which export to China and, yes, our big mining and gas companies do sell billions of dollars of product to China.
But now technology is opening up this massive market to Australian small business … and there are some extraordinary success stories.
It is now easier than ever before for an Aussie small business to sell direct to Chinese consumers who love anything to do with Australia.
We stand for healthy lifestyle, good food, clean living, top class education and medical care.
Many small businesses use one of the Alibaba digital platforms (which are sort of online shopping centres similar to eBay) like Tmall and Taobao.
They sell products to a Chinese consumer online and then ship it to them using Australia Post and a number of other parcel delivery services.
By David and Libby Koch