China is moving away from heavy industry and manufacturing as drivers of the economy. The domestic consumer market will be the new powerhouse for the world’s most populated nation. That means Australia has to change as well. It would be like a store that specialises in only a few products, yet doesn’t adapt to current buyer trends.
If we want to be more than the quarry yard of the world, we need to offer what our customers want. In a recent interview with The Australian Financial Review, Stephen Roach, a senior lecturer at Yale University’s School of Management and former chief economist at Morgan Stanley, talked about what services and industries will be in demand in China’s future.
As China transitions from manufacturing for exportation to service industries that drive urbanisation, he pointed out five major growth areas – retail and wholesale trade; domestic transportation; hospitality and leisure; finance and healthcare.
Here are some of the companies that could work successfully in those five areas.
Toll Holdings Limited (ASX: TOL) is an integrated logistics provider and the market leader for road freight transportation in Australia. It gets about 20% of its revenue from Asia.
Hospitality and Leisure:
Crown Resorts Ltd (ASX: CWN), the integrated resorts company and casino operator, already has investments and venues in Macau, the Las Vegas of Asia. It is expanding its City of Dreams brand of resorts into surrounding countries and could develop hotels and leisure facilities in China if opportunities arise.
Retail and wholesale trade:
Brambles Limited (ASX: BXB), a global supply-chain logistics company, predominantly operates in the Americas, but its Asian business is seeing good growth. In FY2013, it was up 25% from increased business in China and India as well as improved revenues in Malaysia and Thailand.
Australia and New Zealand Banking Group (ASX: ANZ) is probably the most advanced in developing business in Asia amongst the Big Four banks. It sees the potential of financial services, banking and wealth management that China has and is moving forward to establish itself there.
Ramsay Health Care Limited (ASX: RHC), the private hospital owner and operator, is expanding into Asia with hospital facilities currently in Indonesia and Malaysia. The company has been on an acquisition path recently and is currently looking at opportunities in Vietnam and China.
Australia has the advantage of being well advanced in the service industries. Australian companies that can expand into the region with their expertise and technology can make inroads not only into China but other neighbouring countries that are going through the same changes that China has over the past several decades.