David Thomas, China Expert and BRIC specialist, empowers business leaders, entrepreneurs and investors to thrive in the Asian Century.
He believes that Australia is well positioned to become the new Gateway to Asia and that SMEs can play a vital role in changing the conversation from the International Diplomacy stage to opening up new business opportunities for Australian and New Zealand businesses.
David shares his observations about how our two nations may be perceived by our nearest trading partners and provides practical takeaways that you can deploy in your business to demonstrate your openness to access new markets and talent pools.
Stephanie: Welcome to TEC Live. Stephanie Christopher here, CEO of The Executive Connection. We connect leaders with a trusted network of people who help them succeed.
Stephanie: Ni hao, Leah.
Leah: Wo hen hao, That's as much as I know, but I have suspicions we'll be learning a lot about China in this episode.
Stephanie: And that's the plan with our guest, David Thomas, who is a Keynote speaker, a thought leader, an entrepreneur, a published author. David equips business leaders with the knowledge and tools to navigate the cross-cultural challenges involved in doing business in the Asia Pacific. And he helps those businesses develop their own strategy for success in the region. As a well known China expert, David is going to share with us his ideas about how we really can position Australia as the gateway to Asia. David Thomas, welcome.
David: Thank you. Lovely to be here.
Stephanie: Good to have you back because two years plus we last had this conversation on TEC Live and, well, the whole world has changed certainly very much, and a lot has changed in our region. We'll get to the positioning of Australia along the way. How has the last 12 months, geopolitical changes, COVID, economic changes, how has that shifted the way you're working with businesses?
David: Yes, well, quite a bit has changed in the last year, and I guess the biggest change of all is the fact that we can now see quite clearly that America and China are in a major contest for global supremacy. And this is something we've never seen in our lifetimes, a incumbent superpower being challenged by a rising superpower. And that often doesn't end very well actually. If you look back in history, there's many examples where that transition hasn't worked very well. And we're now facing some fairly difficult periods ahead, where America and China sort out their differences.
In my view, Australia needs to stay well out of all that. That's nothing to do with us. We're in the region, these are all our neighbours, we trade with all of them, but there's no question that what we've seen in the last 18 months with this COVID period is China becoming a lot more assertive, a lot less willing to put up with being criticized by the west and by America. And of course, Donald Trump was a particular style of president, who certainly started some of this increased rhetoric. And so, we do see a very different China now to where it was even 18 months ago.
Stephanie: 18 months ago, and maybe in the four years before that, you were talking about the five-year plan. Was it China's five-year plan? And it was in and out.
David: Yes, and it's a lot less out these days.
David: And in fact, many countries in the world is starting to refuse Chinese investment. The going out strategy, which was basically a 10 to 15-year program that we all benefited from as they went out and did business and invested overseas. Our mining sector was propped up through the GFC by Chinese investment. So, we're probably seeing the end of that in the short term. We've certainly seen foreign investment drop off rapidly here in Australia and in other countries. So, yes, the in and out is not so much there now. It's more the in.
Stephanie: Because that was an explicit plan, wasn't it? You could talk to that plan explicitly.
David: Yes, that's right.
Stephanie: Has that been updated, like any organisation updates their strategy?
David: Well, the three priorities for China now is, I guess at a macro level, they want to become a lot less dependent on the rest of the world. I think that's clear because they don't want to get into this geopolitical economic wrangling with countries. They want to be self-sufficient. So, the two things they're mainly focused on are innovation. So, the 'Made in China' vision, 2025, which has been around for a while now, they want to be able to create and manufacturer and design everything themselves, become a lot less dependent on the west to supply them with smartphones and electric vehicles and the things they've relied on us for in the past, and domestic consumption, so that their local economy can survive external shocks because of the strength of the country going to the shops and creating economic growth that way.
Stephanie: Okay, that is really interesting because that's a significant shift. In light of that, what's your vision then for how we can work with China?
David: Well, I think we've seen some unusual activity in the last 12 months. I've been through a bit of soul searching myself because I haven't always agreed with how our government has dealt with China from a diplomatic point of view. I think at times it was quite strong. It could have been a bit more nuanced and maybe a little bit more skillful. But anyway, we have withstood economic and geopolitical pressure from China and we've created an interesting position for ourselves in the region, which has now given me to think that we could become the gateway to Asia, and China particularly, because China is the financial engine of Asia. And Australia actually is in quite a unique position to become the gateway. And I'd like to just flesh that out a bit with you.
Stephanie: I was just about to ask you to do that, David. Yeah, break it down a bit. What do you mean by that?
David: Firstly, every Asian country is dependent on China. China is the number one trading partner of every Asian country. Vietnam is very dependent on China. Malaysia, Thailand, Indonesia, Singapore, all dependent on China. And unlike us, they don't have the east-west connections that enables them to stand up to China quite the same way that we can.
Stephanie: Tell me about the east-west connections. What do you mean by that?
David: We have, in Australia, a long history of east west connections. We have our colonial past with Britain, we have a lot of European families here through European migration, and of course, we have a very strong Alliance to the US and Canada. We're part of the Commonwealth. So, Australia actually has a very strong capability to bring lots of different countries together to do business in the region. Asian countries don't have that history, and many of them are actually Chinese themselves. Many of the residents that are of Chinese origin. So, it's quite hard for Thailand and Malaysia to stand up against China in the way that we can do that because we can rely on some of our broader connections.
As a result, a more assertive China in the region is playing quite a strong role in placing some influence, control power on many Asian countries. I was with a founder of a startup last week and he said to me that he's planning to set up his holding company in Singapore. And I said, ‘Oh, okay. Well, why is that?’ And he said, ‘Well ...’
Stephanie: It's the gateway to Asia.
David: Gateway to Asia. And he said, ‘We used to think of Hong Kong as the gateway, but that's all changed now because of the national security laws in Hong Kong. We don't feel so comfortable about Hong Kong now. But Singapore, we feel is safe and we can be outside China's influence. And of course, we can benefit from their low tax rates.’ And I said, ‘Well, let's just play that out a bit over a few years. What happens when the Chinese government goes to the Singapore government and says, 'We'd like to see a list of all the Hong Kong millionaires who've moved their money from Hong Kong to Singapore in the last three years to get it outside of China. We'd like to see that list. We'd like to see the names, the dates, the families, the companies that are all involved.' Do you think that the Singapore government would have the strength to withhold that kind of pressure, because I don't think so.’
And I think Singapore, like most Asian countries, will over time become strongly influenced by China because China is the number one economy in the region, and it's their region and they will dominate this region. And therefore, most Asian countries will fall under China's control over the coming years. Not going to happen this year, but it's going to happen in the next few years.
Stephanie: That has a sinister or a threatening tone. Let's see if we can shift a little when you've said about Australia with our east-west connections, let's talk about it more as the opportunity then.
David: Right. Well, I see it only as an opportunity because we're the only Western country in the region.
David: So, we're in the same time zone as all the others.
Stephanie: Will we count New Zealand?
David: We do count New Zealand, absolutely. Australia and New Zealand.
Stephanie: Great, good. Just thought we'd do that.
David: We are in the time zone and that's important. Perth is in the same time zone as Asia, two or three hours different depending on what time of year. So, Australia is the Western country in the same time zone. But most importantly, and this is the bit that we all forget, is that have a very strong multinational, multilingual, multicultural working population in Australia. We have over a million people in Australia who speak Mandarin as their first language.
Stephanie: Yes, yes.
David: And these people are, to some extent in my view, languishing a bit in the lower levels of organisations, but over time, my hope is that we can empower and motivate and create opportunities for young Asian Australians who, let's face it, have had a pretty tough year. They've been accused of some pretty bad things and their families have been accused of these things.
David: It's very important that we empower them to play a greater role in our politics, in our media, and of course, in our organisations. And I'd love to see that be accelerated now.
Stephanie: A couple of really strong points there from you. We are the only Western country in the greater Asian region.
David: With New Zealand.
Stephanie: With New Zealand, absolutely, Australia and New Zealand together.
Stephanie: That's great. The second thing about our population with a significant multicultural population, as you've said, I'm surprised it's only actually a million of our residents here with Mandarin as their first language. What opportunity does that practically create? I love the vision about where we could sit. I love the impact that could have perhaps ultimately on diplomacy and what have you, but practically, what could that do for business?
David: Well, at the moment, we project a very limited view of Australia to the rest of the world. I think we can agree on that, that our politics, our media, and to some extent, the senior leadership of our businesses project, generally, a white, male, monolingual rather 1980s style Australia to the rest of the world and to Asia in particular. So, we look like a white Anglo country because of our leadership.
Stephanie: And not the smartest in the world either.
David: Well, we can debate that. We're a smart country.
Stephanie: I believe we are too, but we don't necessarily portray that.
David: Or project that. And so, we need to find a way quickly in the coming years to empower, motivate, and promote Asian Australians into higher levels of our businesses, into our politics, into our media so that we start to project what actually you see on the streets in Sydney and Melbourne particularly of a very multicultural, multinational workforce. I find just in Sydney alone, which is where I live, that we have two halves to Sydney. We have the Anglo end, the mainstream end of Sydney, which is the north end, Circular Quay and up there, and then we have the China end or the east end, which is the Chinatown and the Southern part of the city.
And actually, the Chinatown people would love to do business with mainstream people. The mainstream people would love to do business with the Chinatown people, but actually they don't meet, even in Sydney. So, we have to start, I think, local and start making sure that we start making that happen at our local level, because until we can do that, we have no chance of projecting that into Asia.
Stephanie: Potentially that's true at a business level, but as far as at a societal level, it's a multicultural society. Any school in Sydney is going to be a multicultural school.
David: Yeah, that's right.
Stephanie: I'm a mid-sized business owner, and two years ago, you would have said to me, ‘Potentially come with me to Shanghai and let's talk about getting something started then.’ Well, that's off. That's not possible.
David: Can't travel right now.
Stephanie: Not right now. And two years ago, you told a fantastic story about a mate of yours who owned at the duty free store at the airport and employed a Mandarin speaking employee. Well, that's not going to make a difference right now either because not a lot of people coming through buying your whiskey. So, what would really practically make a difference for a mid-sized business owner right now that is going to allow them to be part of this opportunity your visioning?
David: Yeah, well firstly, if he or she buys the vision of Australia as a gateway, we need to become more what I call 'Asiable.'
David: We need to have Chinese language websites, we need to have Chinese language brochures, materials, we need to show that we at least understand that people need to read a material in their own language. And there's many companies that don't have a Chinese website, even though they may even be servicing the Chinese community in some way or hope to service the community. So, I think we can start on the exterior front, but most importantly, we need to hire these young graduates coming out of university, Asian Australians, into our businesses and promote them quickly.
My son graduated from Sydney University two weeks ago in law, and I went to the graduation ceremony, which was fantastic at Sydney U. And there were 300 in the cohort of law graduates, and I would say 80% of them were Asian. And of course, they'll all end up in the legal professional, or maybe not, depending on how they go, but somehow, we need to get them to the top of the legal profession and the business environment as quickly as we can, because these are smart kids. They've been educated here, they speak languages, they have language capability. They could be your translator, they could be your sales person, and they're part of Australian culture. They've lived here, worked here and studied here and their families are here. They see themselves as Australian, but when they read a newspaper or they watch the news or they look at our parliament, they wonder sometimes whether they're actually part of this or not.
Stephanie: I saw a beautiful thing that relates to this on Master Chef last night. It was a moment when a contestant was introducing his dishes in Mandarin. He's a young guy and one of the judges, Melissa Leong, said to him at the end when he got knocked out, and that was good that they showed this bit of behind the scenes. She said, ‘It's so good for people like us to hear you doing that, to see you doing that on TV.’ And I applauded in my head the show actually showing that behind the scenes moment. There's a message here that's really landing, David, you'll be pleased to hear, and that's that the small steps that we could take. I'm thinking of my own website. None of it's in Chinese. However, none of it's in any other language, either. It's all in English. Why would I pick Mandarin?
David: Well, because we're in the Asian century, we're in the Asian region, and we're trying to empower and connect to the Chinese Asian community in Australia, because Australia has, for the last five or six years, encouraged business with China, we signed a free trade agreement in 2015, Austrade spent millions going around the country, running seminars, taking delegations to China, persuading us all to do business with China. It's a bit tough for them to now say we should be more diversified, but because that was direct China policy of the Australian government, China policy was the focus.
And the other thing over the last five to 10 years is we have deliberately looked to bring Chinese migrants to Australia. The significant investment visa, the five million dollar visa was called Triple Eight for a reason because they knew it would attract Chinese migrants. It's been a deliberate policy for us to engage with China. So, yes, there are Indonesians, there are Vietnamese. They're all very important too. And I'd love to see your website in eight different languages, but if you're going to start anywhere, I would start with Chinese because that's been our policy for the last five or six years.
Stephanie: Okay. And I can really see ways that, as business owners or business leaders, we can all contribute to the way that we portray ourselves as a nation.
Stephanie: And I think that's very interesting. Give us another tip then for perhaps something even more strategic. If this is the gateway to Asia, if you've talked about the superpowers of America and China and what's going on right now, how could an Australian business see that as an opportunity?
David: Well, let me discuss another point, which I think is a tip to think about. Next time you're hiring somebody, you're hiring an operations manager or even a junior marketing person into your team, what would normally happen is you'd go out on seek.com or something and you'd get a thousand CVs. And so, somebody in your office would have to do the first level of filtering. And I bet you it's the receptionist that does that, or somebody at a relatively lower level, probably not up at the decision-making level. They would do the first cull to get you from a thousand to maybe 50, which is a manageable number to start going through a more rigorous process.
My guess is that the receptionist, if it was that person, would probably rule out most of the Asian names on their CVs, probably because it's a name that doesn't sound very familiar or they haven't written their CV particularly well because they're not very good at expressing themselves, written English. And they would probably get culled in the very first process for that job. By the time that the last 10 or 15 candidates reach the senior levels of the organisation, who might be listening to this podcast, they might think, ‘Actually, I'd be interested in bringing those kinds of people into my business,’ my fear is that they never see them because they don't get past the first post for various reasons. We don't need to go into those reasons in detail. They just get filtered out.
And so, I think there should be a deliberate attempt when you're hiring somebody, in whatever role ... I'm not talking about an Asia-facing role ... any role HR, operations, IT, whatever, is to deliberately go out and bring in more Asian Australians into your business so that your business could start to look a lot like Australian society as a whole. And I know there are many Asians in the IT department. I know they're in the accounts ...
David: ... and finance department, but I want to see them in the sales department, in the marketing department, in the customer relations or business development area. That's where we need them because that's where they can express this Asian face in Australia to potential Asian customers, investors, businesses.
Stephanie: I love it. Another practical idea. Unconscious and conscious bias is a real challenge.
David: Yes, and it is unconscious sometimes.
Stephanie: Yeah, it is.
David: We all do it. I do it.
Stephanie: Yeah, yeah. Okay, back to the bigger picture then. How can an Australian business strategically work with the US or with China or whatever, how can an Australian business make a difference?
David: Yeah, being the gateway, if we buy into that idea, we can work with American, European, Canadian, British, New Zealand businesses and encourage them to come and establish their regional headquarters for Asia in Sydney or Melbourne to hire local Mandarin speakers into their business and to use Australia as the jump off point to do business in Asia, and run their headquarters from here. Traditionally, they would have done that in Hong Kong or Singapore or some other. Now, they should be doing it in Sydney or Melbourne because we've got everything that they need here.
Now, we have to improve a few things to do this. The tax system needs a bit of work because we don't treat foreigners very well from a tax point of view. So, there's a few things that we need to do to be competitive as a gateway, but that can all be done once we have this vision and once we start working towards it. The other thing we can do is encourage Chinese companies and Asian businesses to set up their Western business out of Sydney. A good example of that is DiDi, which is a ride sharing app. You probably know they compete with Uber. In China, they're the biggest ride sharing app. In fact, they knocked out Uber. One of the few countries in the world Uber couldn't compete was in China because DiDi effectively knocked them out.
And so, every Chinese person uses DiDi when they go traveling around. So, DiDi decided to set up an office in Australia because they could see a lot of tourism coming here. But what they found, tourism of course, has now come to an abrupt end at the moment, but DiDi now regard Australia as their takeoff point to the rest of the world. They're learning how to work with Western governments, they're learning how to work with Western regulators, and they're learning how to work with Western consumers here in Sydney and Melbourne.
And once they've learnt all of that, they can then take what they've learned to Europe or America or Canada or other markets, because Australia is quite a good testing ground for that. So, not only can we be the gateway going in, but we can also be the gateway going out. And that I think is a very exciting possibility as a vision for the future.
Stephanie: That's really interesting. Very interesting. I have one last question for you. What's your favorite place in Shanghai?
David: I love going to the Yu Gardens in the old part of Shanghai, where there is a bridge, which goes from the gardens to the tea house, the Huxinting Tea House, which is the beautiful cups of tea that they serve. But the bridge has nine bends to it. It's a zigzag bridge. Unlike many bridges in China and Asia, the bridge is in a bendy, zig-zaggy time of fashion. And people say, ‘Why do they have these bends?’ And the answer is because they believe that it keeps out the evil spirits because the evil spirits go in straight lines. And so, to keep the spirits out of the tea house, you need to have a zigzag bridge because that's how it happens.
Other people say the reason for the zigzagging bridge is that it slows you down and it causes you to look at the beautiful view around you, and of course, potentially into the beautiful lake below you, where the colorful fish are. But whatever the reason for that, it's a very good analogy for doing business in Asia because it takes time and there are bends and you need to bring people along with you and you need to build the relationships so that you can withstand the difficult challenges that come along the way. I was talking to the wine industry earlier this week, and they're struggling at the moment.
David: The tariffs that China impose are really bad and some of the bigger companies can survive this, but the smaller mum and dad type businesses, really hard for them right now. And I said to them, ‘Look, this is the first bend in the zigzag bridge. Don't jump off now. You've just started. There are going to be many challenges ahead. Now, you'd need to zig when everyone else is zagging, because this is a long-term proposition doing business in Asia. It's not straight lines. We build our bridges in straight lines, like the Harbour Bridge. There are bends and challenges along the way. So, build good relationships around you to help you when it gets difficult, take your time, and watch what's happening around you because it's difficult. It's difficult. And we can't expect it to be easy.’ The wine industry has had a great time. They've come up against a brick wall, if you like. Now, they've got to zig a bit and we all need to be aware that that's how it works.
Stephanie: Thank you, David. This has been such a different conversation from our last one. It was a straightforward message. ‘Everyone get on board, follow this plan, and off we go.’ I like that there's been so many layers to this discussion. There's some serious, big picture stuff here at international diplomacy level that's very interesting. And yet, at the same time, you've painted a picture of how business can play a part in shifting that by making ourselves more open to the opportunity and to the way we present ourselves as two nations in Australia and New Zealand.
And as always, the practical tips are food for thought, and you have always been such a strong advocate for young Australian-born Chinese graduates and what we all should be open to as employers across our two countries. David, thank you and for your beautiful picture of the tea house. It's almost lunchtime here and I'd love a cup of tea from there, but thank you very much for joining us today. It's been great to have the conversation.
David: Always my pleasure, Stephanie. Thanks for having me.
Stephanie: Discover more about TEC at tec.com.au.