Moore Stephens Update - ChAFTA

Moore Stephens welcomes the long awaited China-Australia Free Trade Agreement (ChAFTA). The agreement paves the way for a range of benefits that under the agreement are currently only available to Australia.

Australian businesses have been given a significant opportunity to capitalise from this agreement. ChAFTA offers Australia an exclusive agreement that allows for the removal and reduction of tariffs and greater flexibility for Chinese/Australian investment. Agriculture, mining/energy and resources, investment, trade in services and financial services are all set to benefit from ChAFTA.

So how does ChAFTA benefit you? Let’s break down the benefits by industry.

Agriculture:

  • Significant cuts or removal of tariffs for agricultural exports including dairy, beef, sheep, wine, seafood and horticulture.

This is great news for those in agriculture as the trade barriers are lifted for the greater flow of goods. Most of these changes are set to take place within 4-9 years, however with some tariff cuts taking effect from day one of ChAFTA, including the export of barley and some grains.

Mining/energy and resources:

  • Tariffs on all resources and energy products including aluminium oxide and  coking coal to be removed on day one of ChAFTA
  • Removal of tariffs on resources such as thermal coal, refined copper and alloys, iron ore, gold and liquefied natural gas are also part of ChAFTA
  • A wide range of Australian manufactured goods including pharmaceutical products will have tariffs removed.

This is a welcome reprieve for mining, energy and resource companies who will gain significant benefits from these tariff cuts. Within four years of ChAFTA being ratified we will see around 99.9% of China’s imports of resources, energy and manufactured goods entering tariff free.

Investment:

  • Foreign Investment Review Board (FIRB) screening threshold will be increased for private companies from China investing in non-sensitive areas from $248 million to $1.078 billion
  • The Australian government will screen investment proposals by private investors from China in agricultural land valued from $15 million and agribusiness from $53 million
  • Inclusion of Investor State Dispute Settlement (ISDS) mechanism to allow Australians to invest in China with greater confidence
  • China and Australia have agreed to review bilateral taxation arrangements including

The relaxation and greater flexibility between Australian- Chinese investments unlocks the door to unprecedented investment opportunities between the two nations. The Australian government has maintained protection of certain industries including sensitive sectors consistent with all FTAs.

Trade in services (tourism, health care and education):

  • Ability for wholly owned Australian tourism and health providers to build and operate hospitals, hotels and other facilities in China
  • Growth opportunity for Australian education sector to add a further 77 institutions to the existing 105 Australian education providers that can take overseas students
  • Australian law firms will be able to establish commercial associations with Chinese firms in the Shanghai Free Trade Zone.

We have seen a fundamental shift in Chinese economics and culture over the years especially in the demand for education, tourism and health care. ChAFTA opens up significant opportunities for Australian providers to invest in the Chinese market.

Financial Services:

  • Establishment of a Renminbi clearing bank in Sydney allows Australian financial institutions to invest Chinese currency in Chinese financial products, including securities.
  • Australian securities brokerage and advisory firms will be able to provide trading accounts, custody, advice and portfolio management to Chinese investors allowed to invest offshore

ChAFTA gives Australian banks and financial service companies access to one of the most powerful economies on a more level playing field. We also see a greater working relationship established between ASIC and the Chinese Securities Regulatory Commission as they identify a range of areas for further cooperation in their frameworks.

Moore Stephens Australia has demonstrated experience in supporting bi-lateral business arrangements with China.  In addition, being part of the Moore Stephens International network, we have access to specialists globally including mainland China and Hong Kong.

To understand what the implications of ChAFTA means to you and what opportunities may exist for your business, please contact your Moore Stephens partner at your earliest convenience.