From Bricks ‘n Mortar:

China has an abundant supply of r2riches studies. Mr W was born in a village two hours out of Shanghai. His family was large; money scarce. With only an elementary-school education, Mr W aged 14 started working as an apprentice mason. He soon became a foreman. In the early '80's, aged 21, Mr W, formed his own construction team and began bidding for projects. Twenty years later, his booming company had become one of the top private companies in China. Nine years ago, looking for a sunrise industry, Mr W by then in his early 40's, with a USD 25m investment, leapt into new media. Leveraging local Government support and attracting young talent from all over China, Mr W is now declaring that in five years, half his company's turnover (USD 1.2 B) will come from his new media venture. When Mr W decides to undertake a project, he doesn't procrastinate. And he's not afraid to take risks. His long-term goal is not only to be dominant in China, but to become one of the largest new media companies in the world. His second platform is subsumed by the third, with his latest venture; building a massive theme park in China, with an investment of USD 500m. Not yet 50, Mr W's star continues to rise, unrestrained by his beginnings as an apprentice mason with no formal education beyond elementary school. Mr Wu has stringent goals for his new venture - a focus on creativity; a unique cultural style. The number of visitors, boundless creativity; the return on investment has to be better than foreign benchmarks and achieved more quickly. This is the man now looking at investment in Australia. Will it be new media, commercial projects, mining or infrastructure development; all options are on the table.

Increasing interest in Fixed Assets

If we look at investments reported in Australia by Chinese companies - both state owned and private, these invested a total of $3.2 billion in Australia in 2011, an 86 per cent increase from 2010. A senior trade official from the Chinese Embassy, Shi Ziming, was reported recently saying, "Chinese private companies were likely to lead the next wave of Chinese investment abroad despite the present dominance of state-owned enterprises. Private companies accounted for more than 50 per cent of Chinese investment abroad last year. Private enterprises will definitely play a more and more important role in the process of the nation's outbound investment activities." This is certainly our experience. If we look at the significant clients coming to us over the last 15 - 18 months via our Shanghai office, they are predominantly company owners representing a range of manufacturing, medical, IT, service and property development sectors. They are anxious to make investments in real assets in Australia. Chinese private investment in Australia is still to develop real momentum, despite what is happening in other western economies. With an eye on Chinese overseas real estate investment - compare Sydney or Melbourne with the activity in London. In 2011 Chinese buyers accounted for 28% of all prime London property sales and 54% by sales value in the prime central London area, where houses go for 5 million pounds ($8 million) on average, according to a recent report by Savills research. “If the money from China were to start flowing into London at the same rate it does from billionaires in other countries, we would expect the value of ultra-prime London properties to grow by as much as 15%,” Yolande Barnes, head of Savills residential research told China Daily. Putting the billionaires to one side - China's middle-class population (defined as those with annual income of at least US$17,000) has reached more than 100 million as of 2011, while the number of HNWI's worth more than 10 million yuan (US$1.5 million) is estimated to be 825,000, according to Hurun Report (2011). Classifications come and go, but the wealth marches on. In recent visits our clients have shown great interest in real assets in Australia. The real assets attracting particular interest include commercial and residential real estate, agricultural land and to a much lesser extent, precious metals and commodities. They are buying selectively and typically have a long term view.

Learning to Read

Whatever commercial skills serve you well in the west do not necessarily translate across to life, doing business in the Middle Kingdom - often, nothing survives this transition between anz and sino cultures. Yes guanxi (relationship/connectedness) is important and of course, this is not gained by flying in and out, nor spending weeks on the road, being wined, dined, presenting and being presented to. All this does is fill your bags on your return (to blue sky and fresh water) with business cards and 'business cases' - but you are no clearer as to what is compelling, profitable, right or wrong for your particular circumstances. Opportunities abound, prospects overwhelm; never enough time to consider, question, evaluate, - weeks need 10 days, but each week wouldn't be long enough....doing business in China it as if you were looking into a barrel of squirming, seething eels....each entity constantly writhing, sliding, improvising - rarely is one stationary. You may or may not speak Mandarin - I dont think that is important - but - you do have to learn to read people and situations FAST. It will save you time, money and the need to drink appalling alcohol, gambei'g your way unnecessarily through another liver or two. Our years living and working in China since 2003 have allowed us to run the gambit, continue, learn, adapt and break through into real opportunity, maintaining guanxi with significant investors. Now, confidence and anticipation.