Chapter 8 - Trade in services
8.1
The services industry has emerged as a vital sector of most
countries' economy. Its efficiency underpins overall economic performance.[546] An OECD paper has noted:
Not only do economies derive the bulk of their employment and
income from services, but many services—financial, telecommunications and
transport—are vital intermediate inputs for the production of other goods and
services.[547]
8.2
This chapter examines the trade in services between China
and Australia. It
discusses the use of the term services and the statistics available on the trade
in this sector. The chapter then looks at the services industry in China,
the opportunities for Australian companies to trade in services and the
impediments they face. Finally, it considers two major areas of trade in
services with China
important to Australia—education
and tourism.
The term 'service'
8.3
The meaning of the term services is very broad. Under
the multilateral system, the General Agreement on Services (GATS) and commitments
made under the WTO govern trade in services. The GATS, however, does not define
the word 'services', rather it uses the term 'trade in services'. The GATS
definition of trade in services covers not only the cross-border supply of
services but also transactions involving the cross-border movement of capital
and labour.[548]
8.4
The difficulty with formulating a precise definition of
services is that the term generally refers to intangible products. It covers a
broad sector that encompasses a number of industry categories. The activities
anticipated by GATS under the term services range from 'architecture to voice–mail
telecommunications to space transport.'[549]
Health, education, tourism and banking are also examples that fall within the understanding
of a 'service'.
Statistics on investment and services
8.5
The vagueness in definition means that accurate or
precise statistics are not available on trade in services. Although
acknowledging that trade in services is 'difficult to quantify', DFAT was of
the view that:
Official statistics tend to underestimate services trade but
indicate that Australia–China services trade has grown rapidly over the past
decade. In 2003, bilateral services trade was valued at almost $1.9 billion. China
is one of Australia's
fastest growing services export markets—annual growth has averaged around 14
per cent in five years to 2003—and China
now ranks as Australia's
seventh largest export market for services.[550]
8.6
Mr Ian
Satchwell, ACIL Tasman, was also of the view
that Australia's
trade in services is not fully appreciated. He stated:
The services sector nationally, and its role in trade with China,
is probably undervalued, because it is not a discrete industry sector like
mining or gas; it is made up of firms in disparate industries. Data on services
trade, therefore, probably does not tend to represent the full value and
services are not as tangible as LNG, iron ore or widgets.[551]
8.7
Dr Stephen
Morgan noted the difficulties in obtaining
accurate and comprehensive statistics on investment and services. He stated
that in trying to collate the data on investment and services you will have:
...a small army of people working for a couple of weeks and be
not much better off than if you just had the handout, the flyer, the basic
one-liner statement associated with trade, investment and so on.[552]
8.8
He further observed that Australian data on Australian
investment in China
'is always significantly different from Chinese data'. He explained:
The criticisms and issues I am raising here are not necessarily
directed at ABS for any failing on their part. They could improve the
accessibility of the data. They could collaborate more effectively with
industry and academics to perhaps better understand the nature of Australian
investment in China
and the nature of our trade in services. For example, two weeks ago a
parliamentary officer from the Victorian state government called me because he
was struggling with the services data. He was trying to work on the nature of Victoria’s
services trade with China.
I made a number of suggestions as to how he could use the national data that we
have with what we know about the nature of services generated across Australia
by state to come up with some approximate back of the cigarette packet type
estimates.[553]
Committee
view
8.9
The committee believes that the Australian government
in consultation with relevant agencies such the ABS, should review the
statistics made available on Australia's trade in services with a view to identify
ways to improve the current system of gathering statistics so that they would
provide an accurate and comprehensive representation of that trade.
8.10
Despite the difficulty in obtaining accurate statistics
on trade in services, the DFAT joint feasibility study on the Australia–China
free trade agreement stated that the annual growth has averaged 26 per cent to
2004 and that China now ranks as Australia's seventh largest export market for
services.[554] The following section
considers the service sector in China
and the scope for Australian companies to improve their trade with China
in this sector.
The service sector in China
8.11
In Andrew
Stoler's assessment, Chinese authorities
were 'becoming preoccupied by the fact that while the country has succeeded
brilliantly at becoming the world's "factory", its service sector has
lagged behind miserably'.[555] At a
conference on Australian trade, he explained:
Today in Australia,
the services sector accounts for about 80% of national GDP. The world average
is slightly over 60 per cent and services often represent 70% or more of GDP
even in developing countries. In China,
services account for only about 38% of GDP—and that share is falling. And where
home-grown Chinese companies are services providers, they are often dismal
performers.[556]
8.12
China
has recognised the benefits likely to accrue from liberalising its service
sector and is now committed to opening up this sector to foreign interests. In China
changes to the regulatory system governing trade in services mark a significant
shift in approach and policy, representing a milestone in reform.[557] For example, under the WTO, China
agreed to permit:
-
foreign service suppliers to establish joint
venture enterprises in the telecommunications services—within three years of
accession foreign investment shall be no more than 49 per cent and within
five years there would be no geographic restrictions;
-
upon accession, foreign financial institutions
to provide banking services in China without client restrictions for foreign
currency business, within two years to provide local currency business to
Chinese enterprises and within five years to provide banking services to all
Chinese clients;
-
foreign non–life insurers to establish as a
branch or as a joint venture with 51 per cent foreign ownership and within
two years of accession to establish as a wholly–owned subsidiary;
-
upon accession, foreign life insurers 50 per cent
ownership in a joint venture with the partner of their choice;
-
upon accession, large scale commercial risks,
reinsurance and international marine, aviation and transport insurance and
reinsurance to form joint ventures with foreign equity of no more than 50 per cent
and within five years allow wholly foreign–owned subsidiaries.[558]
8.13
Besides improving market access, China
has made commitments to increase the transparency of its trade and investment
regimes.
8.14
The reforms have produced positive results. Investment
in China's
service sector continued to increase in 2004, with the number of research and
development centres and regional headquarters established by multinational
companies increasing significantly.[559]
Furthermore, China has agreed to open sectors of its service economy previously
closed off to foreign companies and has indicated that they intend to improve
their business environment by removing obstacles that weaken foreign investor
confidence. At the beginning of 2005, it indicated that it would gradually open
banking, insurance, securities, commerce, telecommunications, tourism and other
service industries to foreign competition.[560]
These reforms should provide developed countries such as Australia
with significant trade and investment opportunities.
Opportunities for Australian companies to trade in services with China
8.15
Australian services businesses have much to offer China.
Alan Oxley
has suggested that the services sector is the one 'most likely to generate a new,
special characteristic in the economic relationship.'[561] DFAT agreed with the view that
Australian companies are being presented with opportunities to enter or expand
their activities in the services sector as China
implements market reforms.
8.16
It noted that the trade in services is expanding
rapidly and will be an increasingly important element of the commercial
relationship. It also observed that growth in services extends beyond tourism
and education. They now include, for example, financial services; professional
services like legal, engineering, and data base services; architecture, medical
and health services; communications services; air and maritime transport
services; services linked to developing partnerships in energy and mining; and
freight and logistics services as well as agricultural consulting, technologies
and machinery. Trade also has been increasing in environment, recreational and
sports–related services, and scientific and technical consulting services.[562] In the department's view:
These developments demonstrate both countries' strengths outside
traditional areas of trade and investment and highlight a broad new area of
opportunity for the bilateral commercial relationship.[563]
8.17
This report has discussed the complementarity in trade
between Australia
and China. The
same feature applies to Australia's
trade in services with China.
Another advantage stems from the complementary interaction between Australia's
trade in goods and its trade in services. For example, ACIL Tasman is exporting
its home grown services to China,
some of which directly complement its trade in goods. It explained:
We work in wool technologies promoting the sale of Australian
and Western Australian wool, which is somewhat differentiated, into China.
We conduct LNG and gas market studies in China
and in Australia.
We undertake gas market training for Chinese gas executives, and we conduct
market entry studies for Australian companies.[564]
8.18
According to ACIL Tasman:
Australia
is leveraging its growing trade in goods into complementary growth in the
services sector and, at the same time, we like to think that the services
sector is enhancing market prospects for our trade in goods. That is a key
point that we would like to make. We think, therefore, that a really good
understanding of the Australian services sector should be a priority for
government.[565]
8.19
While recognising that China
has come a long way in opening its economy, two analysts have sounded a note of
caution. They stated that China must step up its institution building and rebuilding—'including
dismantling remaining central planning institutions, formulating policies
consistent with WTO agreements, amending laws inconsistent with WTO rules, and
imposing uniform rules throughout the country'.[566] Mr
Graeme Thomson
has argued that much regulation and preferment of local service providers is
diminishing under WTO accession but:
...China
will retain significant restrictions on pricing, ownership, business scope or
region and further liberalization would boost efficiency and more meaningful
and better paid employment for Chinese workers. Australia
too could benefit from a freer flow of services from Chinese service providers.[567]
8.20
The Australia China Business Council also believed that
if China were
to relax many of the constraints that currently hamper trade in services,
Australian enterprises, which are internationally competitive and have
recognised expertise, would have the opportunity to compete on fair and equal
grounds with Chinese firms.[568]
Committee
view
8.21
The committee accepts that reform in China
in the services sector may not be progressing as quickly as the international
community would wish. Even so, the committee notes that China
has taken considerable steps to open up this sector to foreign competition. The
following section looks at aspects of the financial services sector in China
that are of particular interest to Australia.
Financial services sector
8.22
Chapter 4 highlighted the urgent need for the Chinese
to develop sound institutions with good corporate governance practices in order
to generate public confidence in their economic system.[569] This observation is particularly
relevant to institution building in the financial services sector. For example,
banking is one of the main areas in need of reform in China.
Mr Eswar Prasad,
analyst with the IMF, stated that China's
state–owned banking system 'has been plagued by a legacy of policy lending to
state enterprises that has resulted in the accumulation of a large stock of
nonperforming loans (NPLs)'.[570] He explained
that, 'This was lending not done on a commercial basis, but it was directed in
a sense by the central planning authority, the government'.[571] Mr Stoler has stated that 'Chinese
state banks are struggling to transform their operations before the sector is
liberalised in 2006 as a result of WTO commitments', concluding that they 'are
right to be worried'.[572]
8.23
In evidence to the committee, Dr
Davis, ACCI, noted that the Chinese, as
required under the WTO rules, are progressively opening the banking sector up.
He explained:
I understand the requirements of their accession to the WTO,
they are required to allow Australian banks entry. I do not have the details at
my fingertips. I believe that they are moving their banks towards Basel
rules or capital adequacy...In terms of the sustainability of their fiscal
system, they have issues in their tax system that they have to get right. They
have large legacies from the state owned enterprise days. They have bad debts.
On the positive side, at least they have substantial foreign reserves that they
can draw upon if they need to.[573]
Stock
market
8.24
The stock market in China
is another area calling out for reform. It developed in tandem with the
socialist market economy.[574] Premier
Wen acknowledged that China
is 'not knowledgeable or experienced enough' to establish an all-round
securities market, admitting that the 'infrastructure of such a market is weak
and the market mechanism is imperfect'.[575]
He announced that China
would continue to develop the capital market and increase direct financing by:
-
improving the quality of the listed companies;
-
establishing an open, fair and transparent
securities market;
-
tightening oversight and fight flaws and crime;
-
enhance infrastructure for the securities
market, concentrating on putting an appropriate system in place; and
-
protecting the interests of investors,
especially non–governmental investors.[576]
8.25
As noted in chapter 2, corporate law reform and the
establishment of sound and responsible financial institutions are areas in
which Australia
can make a positive contribution to China's
endeavours to develop and improve its financial services sector.[577] Having worked carefully and concertedly
on corporate law reform over the last few years, Australia
is in an ideal position to offer assistance to China.
Regulators such the Australian Competition and Consumer Commission, the
Australian Securities and Investments Commission and the Australian Prudential
Regulatory Authority have a wealth of experience in the area of corporate
reform.
8.26
Australian firms are also well placed to take advantage
of the opportunities presented as China
implements its reform program. Mr Calder,
KPMG, told the committee that the company provides expertise on the delivery of
financial advisory services, as part of teams in China,
on matters such as the privatisation, or corporatisation, of state owned
enterprises, investigations of fraud and other forensic issues and computer
security.[578]
8.27
The Australia China Business Council noted that over
recent years several Australian banks and insurance companies, including ANZ Banking
Group, Commonwealth Bank, Macquarie Bank and IAG insurance group, have been
granted licences to establish and develop their businesses in China.[579] It was of the view that further
liberalisation of the current restrictions applying to financial services in China
would allow Australian banks and other financial institutions to provide a
greater range of products and services to their customers in China.[580]
Committee
view
8.28
On a number of occasions in this report, the committee
has noted Australia's
comprehensive reform program in corporate law and the expertise of many
Australian business in the financial sector. This wealth of experience places
Australian companies at a distinct advantage not only in advancing their own
business interests in China but in helping the country through the difficult
phase of transforming their financial institutions.
Education
8.29
Australia
already has an established presence in education and tourism that dominates Australia's
export trade in services. The following section looks at the opportunities for
further expansion in these two areas.
8.30
China
openly admits the shortcomings in its education system. At the beginning of
2005 it acknowledged that it 'must adopt a scientific outlook on development
and implement the strategy of reinvigorating our country through science, education
and trained personnel'. It pledged to make education a 'strategic priority'.[581]
8.31
The Department of Education, Science and Training (DEST)
noted that China
had recently stated its aim of becoming 'a major exporter of international
education and an international hub, which may see it become a competitor to Australia
as well as a partner in the education area'.[582]
Even so, according to the department, the Chinese government recognises that
its present education system cannot support the demand for education:
More than 100 000 Chinese students left the country in 2002 to
study overseas. The demand for overseas education is primarily limited by
foreign governments' visa policies and is closely related to the ability of
Chinese students to pay for their education. With continuing strong economic
growth and improvement in per capita income, the proportion of families willing
to invest in an overseas education will continue to increase strongly.[583]
Chinese students in Australia
8.32
Education is Australia's
leading services export to China,
and according to the Department of Immigration and Multicultural and Indigenous
Affairs (DIMIA) contributes 46,000 jobs for Australians.[584] DFAT cited the following statistics
to highlight the growing importance of China
to Australia's
education sector:
The number of Chinese student enrolments was 58 574 in 2003. This
figure rose to 68 857 in 2004. In 2004, Chinese students comprised
approximately 20 per cent of the total number of enrolments of international
students in Australia.
In addition, around 30 000 Chinese students studied and/or received
training at Chinese institutions in China
linked to Australia,
particularly through course content and teaching staff. This growth in
education services seems set to continue in response to rising Chinese incomes,
the high priority being given to education and increased spending generally on
high quality services. The number of Australian students studying in China
has also risen over the past decade. Around 1 000 Australian students were
studying in China
in 2003.[585]
8.33
DEST informed the committee that in 2004, Chinese
nationals made up the highest number of international students enrolled in Australia.
In 2004, Chinese students represented 21.3 per cent of the total number of
internal students studying in Australian institutions (322,776). DEST provided
the following statistics:
Chinese students studying in Australia 2004
Higher education sector |
30,041 |
43.6%* |
ELICOS |
15,006 |
21.8% |
Schools |
12,557 |
18.2% |
Vocational education and training |
9,779 |
14.2% |
*this sector enjoyed the highest growth: an increase of 25% from 2003[586]
8.34
The department expected the strong growth to continue
through 2005 but almost all from the vocational and higher education sectors.[587]
Education services in Australia
8.35
Many submissions recognised the potential for Australia
to build on its already well–established education links with China.[588]
8.36
The Wollongong City Council highlighted the
considerable economic benefits that flow to both the University
of Wollongong and the city from its
long-standing connections with China.
The University has approximately 1,700 Chinese students enrolled, making it the
largest body of foreign students at the university. They pay university fees of
approximately $15,000 per anum and spend about the same amount on living
expenses. This expenditure contributes at least $51 million to the region
annually. There are also about 300 Chinese students studying English language
courses at Wollongong University College in preparation for university studies.
They too make a significant contribution to the local economy.[589]
8.37
The most popular courses for Chinese students at the
university—engineering, informatics, commerce and science—are the very areas
that hold great promise for expanding and deepening Australia's
trade relationship with China.
This important connection with Chinese students, however, goes beyond purely
economic considerations. It also contributes to establishing and maintaining
social, cultural and research links. Education is critical in building long
standing rapport that supports business and commercial links in the long run.[590] This is discussed later in chapter 15.
8.38
Clearly, Australia
has established its name in China
as a preferred country for the education of its students. The education market,
however, is highly competitive and Australia
must match or better other countries in the quality of the education services
it offers if it wants to maintain or expand market share.
8.39
There are a number of factors that influence a
student's decision to travel overseas to continue his or her eduction—the safety
and welfare of the student, the ease of access to the host country and the
quality of the services. These factors are discussed below.
Securing the reputation of Australia
as a safe place
8.40
In considering an educational institution for their
child, parents want reassurance that their child will be in a safe environment
with appropriate pastoral care.[591] In
this regard, DIMIA works with DEST to identify student welfare concerns. Mr
Rizvi, DIMIA, noted:
We have had reported to us from a range of sources within
Australia and also following a delegation from the PRC Ministry of Education
some concern particularly about the welfare of the younger students from China.
Many of these people are probably outside their country for the first time,
they are still fairly young, many of them have a substantial amount of money to
spend for the first time and they are away from their parents for the first
time. They are in a pretty vulnerable position, and there has to be a level of
consciousness about that vulnerability and about how we make sure we are doing
what is reasonable to protect their vulnerability and indeed, from there, to
protect the long-term viability of Australia’s overseas student market. If Australia
was to be viewed as a country where those younger students were going to be at
some risk then our competitive advantage is diluted.[592]
8.41
DIMIA informed the committee that Student Welfare
Reference Groups, which include relevant government agencies, providers and
students, community and industry representatives, have met since early 2004.
They share and discuss concerns, liaise with police and welfare agencies and
identify 'best practice' to be disseminated throughout the industry.[593] Matters may include accommodation or
issues of actual physical risk. For example, relatively young, inexperienced
people, perhaps with a lot of money for the first time, may be susceptible to
standover tactics. DIMIA also cited students getting themselves into
difficulties with gambling as another concern.[594]
Committee
view
8.42
The committee did not examine in detail this matter of Australia
as a safe place for students. Even so, it recognises that governments at all
levels and educational institutions must not only take seriously their
responsibility for the safety and welfare of foreign students but actively
promote the work done to enhance the welfare of students. The committee
believes that this should be a priority.
Arrangements for student entry to Australia
8.43
The current student visa program was introduced in
2001. According to DIMIA, it initiated reforms in 2002 to enhance the
flexibility of the student visa requirements. They were intended to bring
'greater consistency in the financial requirements across student visa subclass
and added flexibility to the English language requirements and financial
evidentiary requirements for higher risk applicants'.[595] The department has also introduced
measures to facilitate the lodgement and processing of student visa
applications from China,
including a formal internet lodgement trial.[596]
8.44
Even so, some witnesses were critical of the student
visa arrangements. The Wollongong City Council was of the view that Australia's
potential to attract greater numbers of Chinese students was undermined by
government policies. It stated that DIMIA imposes strict controls on Chinese
students entering Australia.
DIMIA classifies China
as a Category 4 country in its risk assessment of foreign nationals most likely
to breach conditions of their student visa. In the Council's view, this high
rating effectively restricts the number of Chinese students undertaking
undergraduate courses in Australia.
It explained:
The most obvious impact is the requirement for students from
Category 4 countries to produce evidence that they have the finances to cover
their living expenses and tuition fees for the duration of their course. This
is a considerable amount of money for three, four or more years of
undergraduate study. The inability to demonstrate this level of financial
resources forces many Chinese students to undertake undergraduate courses
elsewhere, before coming to Australia
for the shorter post-graduate courses.
In 2001 the Australian Government also introduced a requirement
that Chinese students must pass the International English Language Testing
System exam before they can study at
an Australian university. While this policy seems logical in theory, it is in
practice extremely restrictive and detrimental to Australian education
providers and the Chinese students themselves. This policy has had a major
impact on the Wollongong University
College, by considerably reducing
the length of time a Chinese student spends doing an English language course.
It has also had an adverse impact on the Chinese students, because most of them
are now not being trained in Australian–accented English. This affects their
listening skills in lectures and tutorials and makes their study unnecessarily
harder.
In addition, it is extremely difficult for people living in
large parts of northern and western China
to apply for student visas. This restriction is aimed at the poorer provinces
of China whose
residents are deemed more likely to overstay their visas and remain in Australia
illegally. As a result, residents of these provinces are denied the opportunity
to study in Australia.[597]
8.45
The Western Australian government also cited problems
with visas as a major restriction on trade. It noted that a student coming from
China to attend
an institution in the TAFE or the private sector experiences more difficulty in
obtaining a visa than one going to university. Mr
Gunningham provided the example of the TAFE
sector in Western Australia,
where there are about 450 students in colleges under partner agreements across China.
The Western Australian Government would like to bring more of these people to Perth
but pointed to the visa problem.[598] Mr
Gunningham believed that if this problem
were fixed there would be a marked improvement.[599]
8.46
The Northern Territory
government supported the view that the current visa entry requirements for
students from China
impede the growth in student numbers. It believed that action to improve the
arrangements would help overseas students seeking to undertake studies in the Northern
Territory.[600]
Committee
view
8.47
In light of the criticism raised by a number of
educational institutions about visa restrictions, the committee suggests that
the Australian government, in consultation with Australia's
educational institutions, review visa requirements with a view to improving the
system.
Joint ventures
8.48
The Australian government has introduced a number of
incentive schemes designed to attract overseas students. For example, on 1 July 2003, it launched the
Professional Development Visa (PDV) scheme. According to DIMIA, overseas
Chinese organisations form the majority of those participating in this scheme.
It is designed to allow Australian businesses to provide 'tailored training
programs to groups of professionals, managers and government officials from
overseas'.[601] They include courses leading to Masters of International
Management, Masters in Public Administration, English Language, Hospital
Management, Senior Training in Finance and Professional Teaching in Higher
Education.
8.49
The scheme supports and encourages the development of
partnerships between Australian organisations (mainly universities) and Chinese
government agencies. According to DIMIA, at 28 February 2005, there were 28 PVD sponsorships involving
partnerships with Chinese organisations with over 200 Chinese nationals
obtaining PVDs.[602]
8.50
The committee supports schemes that encourage
Australian organisations to work in conjunction with Chinese organisations to
attract Chinese students to Australian educational institutions.
Recognition of qualifications
8.51
An important aspect not yet touched on in this
discussion on education is the importance of mutual recognition of
qualifications.[603] The Charles Sturt
University (CSU) has succeeded in having four of its degree offerings formally
recognised by the Chinese Government. The university is pleased with this
result as only 17 Australian degrees in a total of 80 overseas degree programs
have been formally recognised by the Chinese Government.[604] It would like to see 'the Australian
Government provide assistance, both financial and diplomatic, to facilitate
Australian university recognition by the Chinese Government'.[605]
8.52
The Western Australian Government argued that the
failure to have mutually recognised qualifications is a serious obstacle to
providing education services. It gave the example:
If you are, say, marketing a TAFE qualification in Beijing, in
Shanghai or in any other part of China and a student asks, ‘What will this
qualification mean to me when I get back to China?’ the answer is, ‘Very
little, because there is no recognition.’ So help is needed on the visa side
and help is needed with the mutual recognition of qualifications.[606]
Committee
view
8.53
Word of mouth is an important means of promoting a
service, particularly education. Students returning to China
happy with the quality of the education they received in Australia
will in many ways become ambassadors for Australia's
education services. It is particularly important for their qualifications to be
recognised in China.
The committee would like to see the Australian Government take a leading role
in working with Australian and Chinese educational institutions, professional
bodies and responsible government agencies to achieve mutual recognition of
qualifications across all professions.
Recommendation 9
8.54
The committee recommends that the Australian government:
-
work
closely with the states and educational institutions to support and promote the
work being done to enhance the welfare of overseas students in Australia;
-
in
consultation with state governments and educational institutions review the
visa requirements for overseas visitors with a view to allowing greater access
for foreign students; and
-
take a
lead role in discussions with Australian and Chinese educational institutions,
professional bodies and responsible government agencies to achieve mutual
recognition of qualifications across all professions.
Providing education services in China
8.55
China's
enthusiasm for improving its education system offers opportunities for
Australian service providers. DEST noted that the Chinese government has
developed policies and laws encouraging the delivery of foreign education with
a Chinese institution. It explained that the appeal of an international
qualification, coupled with limited access to domestic higher education
opportunities in China,
had led to an expansion of joint programs. It maintained that Australia
is 'at the forefront of foreign program delivery in China'.[607]
It observed that:
...there has been a proliferation of what are known as education
joint ventures or joint programs in China.
The Implementation Measures for the Regulations on Chinese–Foreign Cooperation
in Running Schools (hereafter Measures) which took effect from 1 July 2004 provide administrative
rules for setting up and running Chinese–Foreign cooperatively–run schools and
education programs.
Most importantly, the new Measures along with 2003's Regulations
raise the legal and administrative expectations for the delivery of foreign
education with Chinese partners and increase the importance of the partnership
arrangement. Australia
is one of the most active foreign countries involved in these joint venture
arrangements in China.[608]
8.56
It stated that an estimated 30,000 Chinese students are
now studying at Sino–Australian joint ventures in China,
which cover all levels of education from English language through to school,
vocational education, undergraduate and postgraduate programs.[609]
8.57
For example, in 1997, the Illawarra Institute began to
explore seriously the opportunities for expanding their vocational education
and training courses into China.
Since then it has developed a series of programs and consultancy services in China
and has around 20 staff working there.[610]
8.58
Mr Barry Peddle, Director, Illawarra Institute and
Chair of TAFE Directors Australia, noted that Chinese public and private
investment in schools, vocational and higher education infrastructure in China
is 'phenomenal, reflecting a determination by the Chinese authorities to
sharply improve education and skills training standards across the country'. [611] He commented further that:
...at the moment China still needs to improve its teacher
education and ongoing professional development and is looking to develop
educational managers and administrators—providing Australia with a major
opportunity to assist in training Chinese people to meet this demand.[612]
8.59
In his view:
...the Australian government should place a higher priority on
education in its aid programs to countries across Asia,
including China,
to capitalise on this country's strong reputation for quality education
teaching and administration as well as our highly regarded national curriculum
framework and teacher competency standards.
...Australia
has an advantage over many other countries because the Chinese recognise the
quality of our system which is really international best practice. [613]
Committee
view
8.60
The committee recognises that the provision of
educational services operates in a highly competitive international market. To
remain competitive, Australia must ensure that it maintains and promotes its
reputation as a safe place for young students, that conditions for entry and
stay in Australia do not discourage overseas students and finally, that the
reputation of Australia's educational institutions and the quality of their
education remains high. The committee believes the Australian Government should
increase its efforts towards the mutual recognition of qualifications. It also
recognises that Australia
has much to offer the Chinese in their endeavours to improve their education
system and that joint ventures are an ideal vehicle for doing so.
Tourism
8.61
Chinese citizens have hitherto tended to travel within their
own country, but as China
increasingly opens to the outside world they are venturing overseas for work,
study and leisure.
8.62
The number of Chinese tourists visiting Australia
is the fastest growing market in the services sector for Australia.
DFAT described the growth of two–way tourism as spectacular:
In 2003, 176 100 Chinese travelled to Australia
compared with 42 600 in 1995. Chinese visitors now make up nearly four per cent
of overseas visitors to Australia, and the Australian Bureau of Tourism
forecasts that Chinese visitor numbers could rise to around one million by 2012
driven by growing disposable incomes, the priority given to international
travel by prosperous Chinese, and government–to–government arrangements to
facilitate group international travel such as the extension of 'approved
destination status' to more areas within China.[614]
The following table shows the substantial growth in the
number of Chinese nationals visiting Australia
over the past ten years.
8.63
It should be noted, however, that the number of Chinese
travelling abroad has also risen dramatically. In 2004, a total of 28.85
million Chinese visitors went abroad, accounting for an increase of 42.7 per
cent.[615]
Table 8.1: Chinese arrivals in Australia 1997–98 to
2003–04
Year |
Number of Chinese arrivals |
1997–98 |
60,354 |
1998–99 |
61,361 |
1999–2000 |
82,100 |
2000–01 |
117,216 |
2001–02 |
146,438 |
2002–03 |
158,754 |
2003–04 |
171,568 |
DIMIA, Submission P51, p. 11
8.64
Chinese tourists also rate very highly on the average
expenditure rating, as shown in the following table.[616]
Table 8.2: Average expenditure for all visitors by selected countries
of residence
Year ended 30 December 2003 to 2004
|
Package
tour and prepaid international airfares
Year ended 30 December |
Expenditure in Australia
Year ended 30 December |
Total
Year ended 30 December |
|
$ |
$ |
$ |
$ |
$ |
$ |
|
2003 |
2004 |
2003 |
2004 |
2003 |
2004 |
Hong Kong |
1,177 |
1,292 |
2,982 |
3,245 |
4,159 |
4,537 |
Indonesia |
830 |
1,049 |
3,844 |
3,903 |
4,674 |
4,952 |
Thailand |
1,121 |
1,125 |
3,492 |
3,817 |
4,613 |
4,942 |
Korea |
1,689 |
1,553 |
2,790 |
2,881 |
4,479 |
4,434 |
China |
1,689 |
2,124 |
4,075 |
3.522 |
5,764 |
5,646 |
Malaysia |
901 |
944 |
2,825 |
3,413 |
3,726 |
4,356 |
Germany |
2,992 |
3,093 |
3,420 |
3,351 |
6,412 |
6,443 |
USA |
3.045 |
3,092 |
2,586 |
2,507 |
5,631 |
5,599 |
Canada |
2,509 |
2,434 |
2,911 |
3,085 |
5,420 |
5,519 |
United Kingdom |
2,820 |
2,566 |
3,034 |
2,875 |
5,853 |
5,441 |
A sample taken from Table 8, Average
expenditure for all visitors by country of residence, Tourism Australia, Inbound
tourism trends, year ended 30 December
2004, p.31. (Published March 2005.)
8.65
Overall in 2004, spending from Chinese visitors reached
$1.4 billion, an increase of 39 per cent on the previous year.[617] The accounted for 7 per cent of all
international expenditure.[618]
Approved Destination Status (ADS)
8.66
In part, the expansion in the numbers of Chinese
tourists to Australia
was due to Australia's
status as an 'approved destination' for Chinese tourists. The Approved
Destination Scheme (ADS) was an initiative of the Chinese Government. In 1999, Australia
was one of the first western countries (along with New
Zealand) to be granted ADS status. Since
then, Australia has hosted over 160,000 Chinese tourists undertaking leisure
travel in groups. The scheme allows Chinese citizens access through streamlined
group travel, 'arranged and coordinated through gazetted travel agents', to Australia.[619]
8.67
According to DIMIA, the ADS scheme has been successful
in increasing the number of Chinese tourists to Australia
while achieving high levels of integrity and compliance with visa conditions.[620] The increase is impressive.
Table 8.3: Approved
Destination Status Scheme arrivals
Year |
Number of arrivals |
Approved Destination
Status Scheme—China |
1999–2000 |
6,960 |
2000–01 |
24,555 |
2001–02 |
31,306 |
2002–03 |
28,044 |
2003–04 |
31,633 |
1 July to 31 July
2004 |
19,221 |
DIMIA, Submission P51, p. 13.
8.68
The ADS scheme has recently been strengthened with a
range of reforms to ensure Chinese tourists will continue to receive a quality
Australian tourism experience. DIMIA stated that the changes are to ensure that
tourists receive 'a good tourism product while in Australia'.[621] It noted that there had been
allegations of some tourism proprietors behaving unscrupulously by restricting tourists'
visits to selected stores only, as well as concerns about commissions that have
been taken. DITR is working closely with state governments to address these
matters.[622]
8.69
The ADS Code of
Business Standards and Ethics is an important component of the scheme. The committee believes that compliance
with the code must be monitored and enforced.[623]
8.70
Despite its success in attracting Chinese tourists to
its region, the Wollongong Council was critical of the government's Approved
Destination Status program. In its view, the program limits the opportunities
for residents of some of China's
less advanced provinces to obtain tourist visas because they are considered to
be more likely to breach their visa conditions.
8.71
DIMIA noted these concerns but explained to the
committee that as the scheme moves away from Beijing
and Shanghai the difficulties with
managing the travel agents increase and the level of control diminishes. It underlined
the need to proceed cautiously—'to balance issues of facilitation versus
integrity'.[624]
8.72
Even so, since its introduction in 1999 the scheme has
expanded from the three regions of Beijing,
Shanghai and Guangdong
to include an additional six provinces. According to DIMIA, the department is
gradually working through the process of training additional ADS agents; when
they have reached a level of competency the department will look at expanding
the scheme to other regions of China.
They indicated that:
Eventually we hope to cover all regions of China
by progressing the scheme in that gradual way. The key is to make sure that the
agents are sufficiently well trained so that the people coming here have an
enjoyable visit and the vast bulk of them return before their visas expire.[625]
8.73
While, in principle, Tourism Wollongong (TW) supported
this policy of gradually expanding the scheme, it was concerned that other
international markets such as Britain
and Western Europe would take advantage by offering more
attractive visa conditions.[626]
8.74
The Wollongong City Council also mentioned the limited
availability of aircraft seats on the Australia–China route. It wanted the
Australian government to play a more active role in increasing air traffic
between the two countries.[627]
8.75
It should be noted that organisations in the Wollongong
region have made a concerted effort to promote the region as a tourist
destination. TW actively targeted the Chinese market as the main source of
international visitors to the city and surrounding region because it identified
China as the
international market with the highest potential for growth. It appreciated that
attracting even a small percentage of total Chinese visitors to Australia
would provide strong tourism growth for Wollongong
and the region. It has:
...participated in trade missions to Hong Kong in 2002, 2003 and
2004 and to mainland China in 2003, 2004 and as recently as February 2005...TW
has also hosted visits by Chinese travel writers and television presenters who
have generated strong publicity and awareness of Wollongong in specific Chinese
markets, notably Guangzhou and Shenzhen in Guangong Province.[628]
8.76
These efforts have been rewarded with 8,000 tourists
participating in day trips from Sydney
to Wollongong and the Illawarra as
part of their Australian holiday package. TW realises the advantages to be
gained by teaming with Wollongong University
College and other education
providers to conduct tours.[629]
Committee
view
8.77
The committee is impressed with the enthusiasm and
dedication of the Wollongong Council and other associations in the region such
as Tourism Wollongong in promoting business activity in their district. They
provide an ideal model for other local councils and associations and deserve
recognition for their work. They have raised concerns about impediments that
discourage visitors to Australia.
The committee believes that both DIMIA and Tourism Australia
should give close attention to their concerns.
An attractive destination
8.78
According to Tourism Australia,
Australia has
strong appeal for group holiday tourists. The main attractions focus on 'Australia's
physical and natural environment, the variety of scenery, the beaches and
coastal areas and the clean air'.[630]
The most popular activities were shopping for pleasure, visiting the beach,
going to markets, visiting national and state parks and botanical or other
public gardens.[631] Tourism Australia
found that Chinese visitors:
...expect to participate in a variety of activities that are
genuinely different from what they can do at home and to experience local
Australian culture. They seek a personal experience of Australia,
and the freedom that allows them to get to know a country and culture that is
very different for their own.[632]
8.79
DIMIA noted that the results of recent research by the
Australian Tourist Commission indicated that 73 per cent of ADS travellers
would recommend Australia
as a holiday destination to family and friends and 54 per cent would like to
return for another holiday within five years. It suggested that on both counts Australia
performs better than its major Western competitors—United
States, Canada
and Europe.[633]
A 2003 survey, also noted that Chinese tourists on group tours stated that they
were likely to return to Australia
or to recommend Australia
to their friends. Despite this apparent endorsement, they nonetheless rated
their satisfaction with their Australian visit lower than that for similar
tours to other western destinations.[634]
The Chinese Ambassador Fu Ying told a conference in July 2005 that tourist
agencies were not offering relevant services and that there had been increasing
complaints.[635]
8.80
This comment takes on greater significance in light of
a study conducted by Ms Grace Wen Pan
who found that one of the key issues in the Chinese inbound travel business to Australia
is quality of service.[636]
Committee
view
8.81
The Australian tourist market is poised to benefit from
the increasing number of Chinese now travelling abroad. Australia
has the opportunity to build on its reputation as a desirable place to visit and
to capitalise on the potential for growth in this market. The industry,
however, should not simply look to this expanding market to bolster their
productivity. The findings of the 2003 survey and the observations of Ambassador
Fu suggest that Australian providers should
lift their standards.
8.82
The committee believes that Australia
cannot rely solely on its natural attributes to attract Chinese tourists. There
is no place for complacency or lack of imagination in the tourist industry. It
must ensure that service delivery standards are high and meet the expectations
of Chinese visitors. The committee suggests that the Australian tourist
industry, including the federal, state and local governments and their
respective agencies, work together to identify the areas that Chinese tourists
consider could be better. Armed with this information, the committee believes
that the Australian tourism industry should then direct its energies to
assisting or encouraging service providers to make changes. This would apply
not only to private enterprise concentrating on accommodation and tour guide
services, shopping and recreational activities but to governments who may have
a role in improving the processes involved in visa applications, customs
clearance and entry requirements. Governments also have an important part in
ensuring that infrastructure with regard to travel facilities is of a high
standard.
Recommendation 10
8.83
The committee recommends that:
- the
Australian tourist industry and the federal, state and local governments and
their respective agencies, work together to identify the areas that Chinese
tourists consider could be improved;
- following
this study, the Australian tourism industry direct its energies to assist or
encourage service providers to make appropriate changes;
- the Australian
government note the criticisms raised by witnesses in this report about visa
requirements, and review these requirements and the procedures for processing
visa applications and clearances through customs;
- the Australian
government place a priority on extending the Approved Destination Status (ADS)
program beyond the regions now covered by the scheme;
- the
Australian government, in planning and allocating funds for infrastructure
development or in attracting investment for infrastructure development, take
account of the increasing importance of Australia's tourist industry to the
Australian economy and devote resources to ensuring that transport and
associated travel facilities are of a high standard; and
- the
Australian government acknowledge the work being done by local councils such as
the Wollongong City Council in attracting tourists to their region and supports
such councils in their endeavours to boost Australia's tourist industry, for
example through the promotion of such regions as part of Australia's tourist promotion
campaign.
Australians visiting China
8.84
DFAT noted that there has also been strong growth of
around 12 per cent in the number of Australians tourists visiting China.
It stated:
According to the China National Tourism Administration, around
50 000 Australian tourists visited China
in 1990, 130 000 in 1995, 234 000 in 2000, and nearly 300 000 in 2002. Again,
this steeply rising trend seems set to continue in line with increasing global
interest in China as a tourist destination and expected flow–on effects from
the Beijing Olympics in 2008.[637]
Conclusion
8.85
Without doubt trade in services with China
holds great promise for Australian businesses. At the moment Australia
enjoys a number of advantages that derive mainly from the perception of Australia
as a safe place of great natural beauty and whose delivery of services is high.
China's demand
for services in both education and tourism is growing at a remarkable rate. Australia
should not be complacent and rely on this growth together with its established
reputation as a good place to study or visit to maintain or increase its market
share. Competition is too fierce. Both sectors must be alert to the importance
of promoting their services to the Chinese market. Greater efforts must be made
to facilitate the entry of Chinese students, tourists and business people to Australia,
and to ensure that the quality of service provided is high.
Navigation: Previous Page | Contents | Next Page