With all the doom and gloom forecast for 2009, Australian companies should keep business opportunities in China in perspective says Austrade’s Country Manager for China, Christopher Wright.

In China it is called the financial tsunami – the global financial crisis. It has rolled from the US across Europe leaving damp and damaged institutions in its wake. And now everyone is looking at China. Will China likewise be submerged in the boiling turmoil of broken financial markets and an economy in recession?

The good news is China will not be a member of the recessionary club. But it would be useful to pause for a moment and consider just how the current financial crisis and recessionary trends in many of the world economies will affect China. More importantly for an Australian business that is either already in China or contemplating China, what bodes for China in relation to their plans and expectations?

For nearly three years I have been exhorting companies across Australia to seriously confront the question of China. For me the challenge is a simple and stark one: what does a resurgent China mean to your business? This is a challenge that companies cannot afford to ignore. Failure to address it directly and come up with a robust response can leave a company vulnerable on several fronts.

But as the world goes into a recessionary cycle and China’s growth slows from double digits to 8 percent, is the challenge still relevant? Let’s look at it.

2008 has been a year of contrasts for China – from the highs of the Beijing Olympics to the trauma of the Sichuan earthquake, from the roar of an overheated economy and threatening inflation to a sudden drop in growth and rise in company closures. But much of what we see on the economic front is quite separate from the current global crisis. China’s government has been deliberately slowing the economy for some time now, cooling the property sector, tightening credit and capital controls. The policies are working.

The government is also looking to see some structural adjustment in some areas of the export sector, where firms are less efficient or the outcomes in environmental and other grounds are less desirable. This is also happening. However, it would be reasonable to say that the current crisis has sped up some of the affects of this, and that recent government policy announcements are a direct response to the sudden slowdown and impacts.

China has announced a major expenditure program to maintain growth at around 8 percent. Much of this program includes the bringing forward of plans and projects already on the books, and herein lies a key to understanding what the current crisis really means when it comes to China and your business aspirations here.

Let’s go back to basics. China has been growing at around 9 percent per annum averaged over the past 30 years – not a bad record, I hear you say. This has taken the nation from a relatively small economy to the world’s fourth largest. Growth is currently slowing – but it is still growth at four times the OECD average! That means that China’s aggregate supply and demand next year will be bigger than it was this year. Doesn’t sound like a contraction, does it?

As China implements its existing infrastructure and other economic programs, bringing some elements forward in response to the crisis, China’s growth pattern continues. More importantly, the basic fabric of the Chinese economy continues to develop, deepen and mature.

I was recently asked by a journalist for one of China’s economic dailies about iron ore. Does the current slow down, the current price situation mean the end of Australia’s resources boom with China? My answer is simple, and again I draw from the basics – look at the amount of steel China needs to deliver its highway plan, its railway plan, its ports and airports plan, its forecast total newly constructed floor area – and you have your answer. This is not the end. China is but half way on its journey to full economic maturity and strength.

The case for resources is unassailable when you look at the medium and long term. The current financial crisis will be tough, but it does not mark a watershed in regard to the ongoing development of China.

For all businesses, now is a time to be prudent. While markets are in reverse and economies in recession, cash flow is king. But China does not go off the radar. It is time to take stock, maybe delay some plans, maybe bring forward others. I have been surprised by the increased number of firms contacting me with a view to entering China, seeing the current crisis as both an opportunity and an incentive, as markets elsewhere show less promise. I encourage this response, but as is customary, counsel all firms to adopt a few proven strategies as they consider an entry into China.

Companies need to do their research well and seek broad-based advice, not just from the 'experts', but also from the thousands of other Australian companies that are already doing business here. Companies need to adopt a commercially sound, ‘due diligence’ approach to their China business plan. Check out your partners, suppliers, buyers; identify your risks and develop a risk mitigation plan; be conservative in your estimates and forecasts.

You might be surprised at how many problems can be overcome simply by following common sense. There is no ‘black magic’ to doing business in China, it is just business. And the current crisis is no reason to doubt the China story will continue to dominate our business headlines, if not our collective futures.

*Christopher Wright is the Australian Trade Commission’s Senior Trade Commissioner in Shanghai and China Country Manager.