The Conversation

China’s leaders have been vocal in their support of a new growth model, one where consumption leads the way. Economic commentators fret about what this means for Australia.

One view is that economic pain lies ahead. As the rate of resources and energy-hungry investment in China falls, commodities such as iron ore and coal will not fetch anything like the prices they did a few years ago. Investment in the natural resources sector will dry up.

As a result, in Dog Days: Australia after the boom, Ross Garnaut warned that without urgent policy attention Australia faced the prospect of a prolonged period of declining real wages and living standards.

Similar fears have since been expressed in Andrew Charlton’s Quarterly Essay, Dragon’s Tail: the lucky country after the China boom.

For good measure, The Economist picked up on the same theme and said that we are the country in Asia most exposed to the risks.

Australia has a clear stake in China’s economic rebalancing: the latest trade data reveal the annual value of our merchandise exports to China now exceeds $100 billion. This is more than double the value to our next most important customer, Japan.

But are the risks of China shifting towards consumption-led growth really so dire?

Sometimes even serious commentators can discount substantial bodies of research. In fact, other data suggests that any negative implications of rebalancing in China will be modest, and overall it is likely to be distinctly positive.

In 2011 and 2012, economists at the International Monetary Fund modelled the international impact of Chinese rebalancing. They found the consequences for Australia would be negligible. Once again, it was our flexible exchange rate, the standout reform from the 1980s, that would buffer the Australian economy.

On the key point of commodities prices, the IMF and our own Bureau of Resources and Energy Economics are in agreement: while prices may come off the boil, there is no bust in sight.

Consider iron ore, our largest export earner. Both expect prices out to 2019 will remain stable at around $90-$100 a tonne. Remember, the historical average is $20-$30.

In May, a detailed analysis by Treasury concluded our overall terms of trade (the ratio of export to import prices) will decline by 16 per cent between 2012-13 and 2017-18, and then stabilise. Bad news at first blush, but factor in the exceptional increase of 80 per cent in the previous decade and things don’t look drastic.

Investment in the resources and energy sector will fall as current projects are completed – BREE notes that committed project investment is already down from a peak of $268bn in April 2013 to $229bn a year on.

Yet these falls are going to be offset by the extra output that new mines have made possible. BREE forecasts that in 2018-19 the value of our resources and energy exports will be up $108.4bn. They add that while the investment phase of the commodities boom lasted for roughly five years, the output and export phase will last decades.

And there’s a bonus argument. China’s rate of investment is only one factor that determines its demand for resources and energy.

Another is its growth rate. Andrew Charlton raised concerns about it falling away but the best estimate of the World Bank continues to be that growth will remain solid at around 7 per cent until 2020 and 5-6 per cent in the decade after.

The 300 million new residents arriving in cities over the next 15 years will underpin it.

This feeds directly into demand for iron ore, coal and LNG.

Despite some commentary suggesting otherwise, rebalancing in China is unlikely to be sharp or sudden.

In each of the last five years, the rate of investment has been stuck at the the same level. There was some excitement in the first quarter of this year when consumption made almost double the contribution to growth that investment did. But by the end of the second quarter the two were again close to level pegging.

Any trend to greater consumption will accelerate the rise of China’s middle class.

Research by the Brookings Institution indicates the middle class will grow from 10 per cent of the population in 2009 to more than 70 per cent in 2030. That is, an increase of around 850 million people. This is six and half times the entire population of Japan, our second most important export destination. In a scenario where the rate of consumption is higher, the forecast rises by a further 100 million.

The opportunities for Australia will be golden - as nearly one billion new middle class Chinese demand their share of our non-resources sectors: agriculture, high-end manufacturing and services.

The real worry for Australia is that China will fail to rebalance. The dangers of a continuation of investment-led growth have been on ample show this week. After embracing the concept of consumption-led growth for a decade, let’s hope China’s leaders are finally up to the task.

This article was originally published on The Conversation. Read the original article.

Australian entrepreneur Dean Flintoff runs a clothing business with his wife Madeline out of Adelaide. It’s a roaring success of a small business; it provides clothing to nine fashion labels and distributes to over 20 countries.

To keep his costs down, Dean produces his goods in China and then ships them around the world. He has a stake in the rise of globalisation and in the government's ongoing efforts to broker new free trade agreements -- especially with China.

But there’s a hitch: Dean is perplexed by Australia’s existing FTAs. All 10 of them. 

"I was reading a few last night and I thought 'wow'," Flintoff said. He piled through agreements in anticipation of a media briefing on the matter.

"It’s the non-tariff things that gets very complicated and that’s more of a benefit to us," he added.

Most traders understand the basics of FTAs: They offer certain goods exemption from trade-related taxes and allow for cheaper and more (hopefully) profitable trade. But that’s just the surface of these rather labyrinthine documents.

The problem is that Australia’s ignorance of FTAs extends far beyond Dean’s fashion outfit. Recent HSBC research has established that the majority of businesses fail to harness these agreements in their dealings, simply because they don’t understand them. Australia ranked below the APAC average, and second last to Malaysia in HSBC’s study.

The research highlighted a crucial weakness in the trade treaty process. The government may be keen to negotiate FTAs as a means of bolstering economic activity, but HSBC's findings hint that it may be failing to educate the market on their various benefits. Director of the export council of Australia Andrew Hudson says we need to find ways to make our current FTAs more “user-friendly”; be it through short courses, or FTA tutorial apps.

But there’s another problem on the horizon -- one that wasn’t bridged by HSBC’s research.

Trade agreements are growing in complexity, and they are beginning to cover more countries and more than just tariffs. Case in point: the looming Trans-Pacific Partnership agreement, which is aimed at tackling a raft of legally complex issues such as copyright law and intellectual property.

All trade agreements are drafted in secrecy; so we are yet to fully see just how intricate the TPP will be. However, sections of the draft version have been leaked by Wikileaks.

"What has been leaked thus far has been incredibly complex," says Australian research council future fellow and IP law specialist Dr Matthew Rimmer. He’s concerned that if the current drafts are indicative of the end agreement, a lack of understanding of the TPP may hamstring businesses. That is, unless they are able to afford a small army of lawyers to pour through it.  

“The TPP is very regulation intensive,” Rimmer explains.

“In certain areas, trade agreements are not cutting red tape; they are creating swathes and swathes of it. And also locking countries in sometimes into very restrictive positions,” he says.

“In his state of the union address, Obama tried to argue that the TPP would be good for small-to-medium businesses, but from my perspective, the agreement is so detailed, complex and voluminous that really you need to be a major company to make good use of it.”

The future of the TPP is up for debate. The Obama administration has been pushing to finalise the agreement since January, but a lack of support from US congress and the increasing complexity of the document may lead to a stalemate between the negotiating countries.

But the TPP is just one example of a new breed of documents that are attempting to mandate the state of play for our increasingly globalised world. And as it stands, Australian businesses can’t even decipher the rulebook. 

Got a question? Let us know in the comments below or contact the reporter @HarrisonPolites on Twitter.

The Commonweath Bank will today open a new county bank in rural China as its attempts to build an extensive network to capitalise upon the nation’s next phase of regional economic growth.

The Handanxian County Bank in the Hebei province, which surrounds the Beijing municipality, will specialise in small-to-medium businesses and agricultural lending and is the 15th bank of its ­nature that CBA has opened in the past three years.

CBA, Australia’s largest bank by market capitalisation, also has two sub branches in the Henan and Hebei provinces as well as its two major branches in Beijing and Shanghai.

Head of international financial services Simon Blair said CBA was focusing its Chinese expansion plans on regional areas where it believes future growth would remain strong, despite ongoing concerns over the economy.

Lending growth in the county bank network increased by 137 per cent in the past year, while deposit growth was up by 97 per cent.

Under the current structure, CBA owns the first five county banks outright and holds 80 per cent of the remaining 10 located in provinces that specialise in farming and agricultural production.

“We have focused our strategy on areas where there is size — there are 75 million people in the Hebei province — and areas where there is strong economic growth,” Mr Blair told The Australian.

“We have also specifically looked for areas where we thought we could add value. We already do small-business lending very well and that is why we have focused on that and agricultural lending.”

County banks have been developed in China over the past nine years, specifically to concentrate on agricultural lending in rural provinces.

The Chinese government set a target that the national economy would grow by 7.5 per cent this year. However, there are ongoing concerns among investors and ­financial market economists over the growth rate in cities and provinces outside of Beijing and Shanghai.

There are concerns over Hebei, given that the province is the largest steel-making region in China and the government had ordered steel production be drastically reduced to help solve the nation’s pollution crisis.

“The provinces where we are located now have been performing very soundly,” Mr Blair said.

“If you take away the past year and look at the previous four years, both Hebei and Henan were very strong in terms of growth. The cities are developing very rapidly and you have to say today that both don’t look anything like they did four years ago.”

Mr Blair said CBA had put in place the same loan approval systems in China as it did in Australia, especially for small-to-medium business lending.

China’s banking system is tightly controlled by the state, which regularly directs banks and offers incentives to increase lending to particular sectors to support economic growth.

However, Mr Blair said CBA’s county banks were never pressured to approve loans. “The credit quality and the non-performing loan rates we see in China are very similar to Australia, especially for small-to-­medium business. I can tell you no one has ever pressured us to lend to anyone.”

Mr Blair said the county bank network was keen to grow its retail deposit base to fund future loan growth.

China is remembering the 110th anniversary of the birth of Deng Xiaoping, the Chinese political leader who has largely been credited with setting the country on its path of economic reform and modernisation after decades of Maoist madness.

Deng had a foreign mentor. His name is Lee Kuan Yew, the founding father of Singapore and one of the few surviving elder statesmen from the cold war era. Lee has also provided counsel to every US president from Richard Nixon to Barack Obama.

One of the biggest questions that confront Australia and the rest of the world is the rise of China. Will China replace the US as the dominant power in the world? Is it possible for the country to continue to grow at such a fast pace? Will China ever become democratic?

Thanks to Harvard scholars Graham Allison and Robert Blackwill, who interviewed Lee Kuan Yew extensively last year about the future of China, we can tap into the experience and insight of the grand master. The interviews were captured in Allison and Blackwill’s book, The Grand master’s Insights on China, the United States and the World and give a fascinating insight into China’s future.

Lee is confident that it is only a matter of time before China displaces the US as the most powerful country in the world. “They have the manpower to do things cheaper in any part of the world economically. Their influence can only grow and grow beyond the capabilities of America,” he says.

The former Singaporean Prime Minister says the chances of something going wrong in China are about one in five. Lee believes China’s strategy of becoming the number one country in the world is largely an economic one.

“The Chinese have concluded that their best strategy is to build a strong and prosperous future, and use their huge and increasingly highly skilled and educated workers to outsell and outbuild others,” he says. Beijing does not want to repeat the mistakes of Japan, Germany, and the Soviet Union, and understands that it cannot match the military power of the US.

“I believe the Chinese leadership has learnt if you compete with America in armaments, you will lose. You will bankrupt yourself. So, avoid it, keep your head down, and smile, for 40 or 50 years,” he told the Harvard professors.

Though Lee is generally upbeat about China’s economic prospects, he has a unique takes on the hurdles in front of the country. Lee, a Cambridge-educated barrister, believes the country’s notoriously difficult language will be the biggest hurdle to attract and integrate talent from other countries.

Lee’s belief in China’s inability to attract international talent due to its language barrier has been shaped by his experience in running Singapore. When he was the prime minister, he implemented and enforced vigorously an English-first policy in Singapore, including shutting the only Chinese language university in South East Asia.

He deliberately turned his back on the Chinese language to make Singapore an internationally competitive place so it could attract and assimilate talent from other societies in the world. Lee believes it is next to impossible to engineer a similar cultural change in China, a country with 5,000 years of history.

“We could do that in a small city-state with strong leadership. While I once advised a Chinese leader to make English the first language of China, clearly that is not realistic for such a great, confident country and culture. But it is a serious handicap,” he says.

China’s governance system, which has been marked by tight control, is under increasing pressure from the onslaught of technology. The proliferation of smartphones, social media, the internet, and satellite TV will result in Chinese citizens being more informed.

Lee says it won’t be possible to govern them the way they are governed now, because their numbers will be so large.

One of the biggest questions for foreign policymakers is whether China’s rise will be peaceful? On this point, Lee has no clear answer and says Singapore is not sure. Many Southeast Asian countries are suspicious of a rising China, which has been taking a hardline approach in territorial disputes in the region.

“They [ASEAN countries] are uneasy that China may want to resume the imperial status it had in earlier centuries and have misgivings about being treated as vassal states having to send tribute to China as they used to in past centuries,” he says.

Conventional political theory suggests that a rising middle class will bring about democratisation. And will China follow the same path? Lee feels strongly that China is not going to become a liberal democracy. “If it did, it would collapse,” he said, “where are the students of Tiananmen now? They are irrelevant. The Chinese people want a revived China.”

Lee, a well-known defender of so-called Asian values, does not believe it is possible to impose on foreign standards that are alien to China’s own history and past. “So to ask China to become a democracy, when in its 5,000 years of recorded history it never counted heads,” he said, “all rulers ruled by right of being the emperor, and if you disagree, you chop off heads, not count heads.”

In essence, Lee thinks China will continue to grow and surpass the US in absolute size, but cannot match it in creativity and innovation. Beijing will become more assertive but it is unlikely to challenge America’s military supremacy, at least for another 50 years.

For a man who has managed to turn a third-world country into a first-world country in a single generation, and who survived and prospered in a hostile regional environment, his advice is worth listening to. 

The iron ore price has slumped to its lowest level in more than two months and dropped below the $US92 threshold as investors fret about the strength of the Chinese economy.

Benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US91.90 a tonne, down from its $US92.30 in the previous session.

At the current price point, iron ore is at its lowest level since June 18, when it traded at $US90.30.

Earlier in June, the iron ore price dropped to as low as $US89 a tonne, but despite a minor rebound since then year-to-date falls are still over 30 per cent.

Yesterday, the HSBC flash China manufacturing purchasing managers' index was at 50.3 in August, down from 51.7 in July, a three-month low.

HSBC chief China economist Hongbin Qu said the data suggests the country's economic recovery is still continuing but its momentum has slowed again.

"Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path," he said.

When Wang Qishan, China's top graft-buster, dispatched a dozen investigators to this south China river town last summer, his message was clear: The investigators should inspire "shock and awe" among local officials, according to an account posted on a government website.

Mr. Wang's inspectors told local media they had settled in at a government-owned hotel. Within days, hundreds of residents lined up to give evidence about what they viewed as wrongdoing by corrupt local officials. Complaints also flooded in via the Internet, according to officials with knowledge of the matter.

Yang Peng, a restaurateur, says he told investigators he was jailed and tortured because of his association with an enemy of an important local mandarin who was accused of rigging the sale of a steel mill in exchange for kickbacks.

"Those were seven hellish months in my life," he said in an interview with The Wall Street Journal. A year later, the official he identified was fired and put under investigation by Mr. Wang's team for graft.

China's Communist Party is carrying out its broadest assault on corruption since the country opened its economy to the world in 1978, a step that lifted millions of Chinese out of poverty but also enabled party members to amass fortunes through political connections. The crackdown--which was launched in late 2012--is being overseen by Mr. Wang, a 66-year-old member of China's ruling seven-person Politburo Standing Committee who has been friends of party chief Xi Jinping since both were banished to the Yan'an countryside during the Cultural Revolution.

The choice of Mr. Wang, who is known as one of China's most savvy and efficient senior leaders, is an indication of how seriously Mr. Xi is taking the crackdown. A closer look at how Mr. Wang is executing his mandate shows just how wide-ranging the dragnet has become, even as concern spreads within the party that anticorruption efforts may be overreaching--and may damage China's economy.

Mr. Wang already has an impressive bunch of scalps. He has fingered for investigation Zhou Yongkang, a one-time head of state security and member of the Politburo Standing Committee; Xu Caihou, one of the army's top-ranking generals; and Jiang Jiemin, a top executive in the Chinese state-owned oil industry. All three have been detained but not charged. They couldn't be reached for comment.

Since the corruption drive started, about three dozen officials with the rank of vice minister or higher have been detained on corruption allegations. In 2013 alone, about 182,000 party members were investigated, according to a count by Peking University law professor Jiang Ming'an, compared with roughly 10,000 to 20,000 graft investigations a year before Mr. Xi took power in 2012. So far, those efforts appear to be popular in China. Fifty-three percent of Chinese view corruption as a "very big problem," according to a 2013 poll by the Pew Research Center in Washington, up from 39% in 2008.

"The leadership realizes that if they don't stop massive corruption, the regime will collapse," says Huang Jing, a China specialist at National University of Singapore.

But the crackdown isn't without its critics. Observers point out that it is helping Mr. Xi sideline powerful figures who could emerge as rivals or otherwise limit his authority, while burnishing his reputation with the public at large. What's more, some human rights groups have raised concerns that those investigated are being held incommunicado, without access to lawyers or family members. Tactics used to coerce confessions have come under criticism as well: In the harshest example, six Chinese investigators--including five from Mr. Wang's agency--were convicted of intentional infliction of harm last year when they drowned a local official during an interrogation.

"The procedures raise questions about denial of human rights," says Maya Wang, China researcher at Humans Rights Watch. In response, Chinese officials say Mr. Wang is encouraging his team to rely less on confessions and more on analysis of data.

Certainly, not all of the thousands being investigated are facing serious charges, and the offenses can be mundane. According to Prof. Jiang, about 25,000 people have been punished for "extravagant lifestyles," such as using public funds to buy luxury cars or pay for extravagant funerals. Prof. Jiang says those aren't considered criminal offenses; punishments include warnings, reprimands, demotions or firing. Those facing criminal offenses could be sentenced to jail, and in the more serious cases life imprisonment.

Efforts to reach Mr. Wang for comment weren't successful. Press officials at the Communist Party's central discipline commission, which he heads, and the State Council, the Chinese government's top decision-making body, declined to comment.

The extent of Mr. Wang's reach does risk stoking a backlash among party officials who worry about the toll on China's economy and the party's reputation. Former party leader Jiang Zemin and several other prominent retirees have warned Mr. Xi that Mr. Wang has gone too far, according to a party official with ties to the leadership. Mr. Xi defended his ally, saying he has done "a lot of hard work" and more needs to be done, according to the official.

Lu Ting, a China economist at Bank of America Corp., estimates that the crackdown is shaving somewhere between 0.6 and 1.5 percentage points off China's gross domestic product growth this year, as sales plunge of luxury goods, high-end apartments and other baubles of the rich that could attract the attention of Mr. Wang's investigators. Government investment has also slowed because local officials fear that putting projects out to bid could open them to accusations of kickbacks.

Over the long run, economists argue, tackling corruption produces economic gains because government funds are spent more productively. Jailing powerful officials in state-owned firms may also make executives wary of trying to block Mr. Xi's plans to introduce more competition in state-dominated fields. But all of that can take years.

People familiar with Mr. Wang's thinking say they believe his goal is to fundamentally change the ethos of the Communist Party to return to a perhaps idealized version of the past, in which party members were seen as serving the people for little remuneration.

Shortly after taking over the party's main disciplinary agency, the Central Commission for Discipline Inspection, in late 2012, he required his staff to read Alexis de Tocqueville's history of the French Revolution and had them write up their views on why the monarchy fell, according to Chinese officials, a reminder of the stakes involved in efforts to revitalize the party.

The goal, he told his associates, is to make sure that party members "don't want to be corrupt, can't be corrupt and dare not commit corruption," according to the officials.

Other Chinese anticorruption drives have petered out after bagging one or two officials. But Mr. Wang has sought to institutionalize this one, requiring local investigators to report their findings to his office in Beijing as well as to local authorities, so the investigations won't be quashed locally, say Chinese officials. He also relies on public resentment to fuel his work, starting a Web-based hotline for complaints.

Mr. Wang has fielded a dozen investigatory groups and fanned them out around the country. Many are headed by a retired official of ministerial rank who hails from provinces outside the one being inspected.

In Shanghai, his investigators settled in at prestigious Fudan University in late May. They installed mailboxes in the university's campus for tips and collected nearly 2,000 within a month, according to people with knowledge of the effort. Three months later, Mr. Wang's agency criticized Fudan for lax oversight of research funds and referred evidence of corruption to government investigators for follow-up.

Fudan officials declined to comment. But in a statement posted on its website, the university said it is in the process of addressing the problems uncovered by Mr. Wang's team. The government hasn't taken further actions.

In rural Guizhou province in southwest China, local party officials who said they were influenced by national efforts chose a different tactic. In a kind of Chinese version of "Scared Straight," the U.S. program in which teenagers are taken into prisons to see the lives of convicted criminals, a local prison in the city of Kaili now opens its gates to local party officials so they can meet people who were jailed for corruption.

The climax of the program is a show staged by prisoners who sing plaintively about how they ruined their lives by their greed, say two Kaili hospital officials who viewed the performances. "It was touching," said one of the officials. "A lot of people cried." Kaili prison officials wouldn't comment on the program, which is now being replicated by a Beijing ministry, according to Mr. Wang's agency.

Mr. Wang's teams are also expanding efforts to comb through financial records domestically and abroad to look for hidden assets and other evidence of wrongdoing. Recently, he formed a new department to work with foreign governments to hunt down corrupt Chinese officials overseas.

Mr. Wang, square-jawed with a trademark comb-over, is called "the fireman" by the Chinese media for his long career of handling emergencies. His fans have posted messages on social media sites likening him to Justice Bao, a Song Dynasty official who became a symbol of justice because of his willingness to punish powerful people guilty of crimes. They also routinely note that Mr. Wang, who is married, is childless, and thus, by local logic, has less incentive to steal to enrich his family.

In the late 1990s, Mr. Wang was put in charge of handling China's largest bankruptcy, which involved facing down angry foreign creditors. In 2003, he was summoned to Beijing to stem the spread of the severe-acute-respiratory syndrome, or SARS, epidemic there. He helped contain panic by having state television film his walks to markets and hospitals. Then, as Beijing mayor, he helped organize the 2008 Olympics.

Promoted to vice-premier in charge of economic relations in 2008, he assured the U.S. and Europe that China would continue to buy their bonds during the global financial crisis, an important confidence-boosting measure. U.S. officials also credit him with convincing senior Chinese leaders to let the yuan start to float somewhat, beginning in June 2010, a longtime U.S. aim.

He continues to meet with top U.S. and international economic officials in what Mr. Wang calls "old friends" sessions. The rules: no ties, few aides and discussions about the broad contours of the global economy, say those involved. He also sometimes uses the time to explain the anticorruption drive, which some U.S. officials worry could derail the Chinese economy if not handled adroitly.

Dealing with him can be maddening, say Western officials, because of his sharp tongue and high-handedness. During one meeting with European business leaders during the financial crisis, he told them their complaints didn't make much difference because he knew they would invest in China anyway, says a participant in the meeting.

Mr. Wang has also made clear in public remarks to party officials that he considers the crackdown a temporary expedient until China figures out a way to improve its investigatory and legal system. For now, though, he and his investigators continue to focus on individual cases of graft.

One of the cases centered on the partial sale in 2009 of a large, state-owned enterprise, Nanchang Steel Co., and the man who oversaw it, Su Rong, until recently a vice chairman of China's top advisory body and former party secretary of Jiangxi Province, where the mill is based. The sale--for nearly 60% of the company to a manufacturer run by a local billionaire--was lauded in the local media as a reform measure because it opened the sector to private capital. But some of the steel company's employees suspected wrongdoing.

They stood in line to see Mr. Wang's investigators and shared evidence that Mr. Su and his allies rigged the bidding process in favor of the manufacturer, in exchange for kickbacks, according to several of the employees and province officials with knowledge of the matter.

Mr. Wang's agency found enough evidence to place the 66-year-old Mr. Su under investigation in June for suspicion of violating party rules and state laws, say officials close to Mr. Wang's agency--Chinese code words for suspected graft. The political advisory body also fired him from his vice chairman post. The anticorruption drive felled the billionaire too, who, while not being charged, was fired as representative to China's parliament.

Although no charges have been filed against Mr. Su, he hasn't been seen in public since June 10 and couldn't be reached for comment. "Wang Qishan really means business," says Yang Peng, the restaurateur who informed on Mr. Su to Mr. Wang's team. "I celebrated that with fireworks on the day when Su Rong's investigation was announced."

One dreams of making bathroom scales offering fitness advice. Another hopes to sell devices that track and analyze bat swings to players on Major League Baseball teams. A third wants to make bracelets for tracking missing children.

In laboratories and startups across China, tinkerers with big dreams are pushing what many in the industry see as a potential new wave of Chinese innovation. They see smart gadgets--wearables and other devices that connect to the Internet or interact with users--as an opportunity to create a Chinese-designed product for a global audience.

To get there, they are tapping China's massive electronics supply chain, which is building increasingly sophisticated products ranging from iPads to Xboxes. Proximity to that supply chain lets inventors tweak their pet projects at the factory itself, giving them greater control over the finished product.

"China will be one of the most advanced research-and-development centers for the new convergence between hardware and software, given it's the world's factory," said Annabelle Long, a director of venture capital for Bertelsmann Group.

The Bertelsmann fund has invested in a company called Zepp Labs, which makes a motion sensor that can be strapped to the end of a baseball bat. The company was formed by Robin Han, a student at Microsoft Corp.'s China engineering Ph.D. program, who was working on sensors for videogame controls but saw the potential to use them for real sports. The sensor can be attached to the end of a bat with a rubber mount. It tracks data like swing speed and arc to help coaches and players accurately tweak their technique. The sensors can also be used for tennis and golf.

The company, with offices in China and in Silicon Valley, said it has about 150,000 active users and is pushing to build a brand in the U.S. In 2013 Zepp said it raised $20 million, and it currently has teams of more than 20 employees in both China and the U.S.

In China, the company has "a team on the ground to develop and manufacture its products," said Jason Fass, Zepp's chief executive and a former Apple Inc. product manager. "Having that coverage has been enormously helpful."

China has long sought innovation as a way to develop a more sophisticated economy and to shrug off its reputation for succeeding by merely copycatting. But the new wave of gadget makers is attracting both foreign and local investors, drawn by the success of Chinese startups like its numerous mobile-app makers and smartphone maker Xiaomi Inc.

China is betting heavily on innovation as a way to help its economy develop beyond its traditional reliance on factories, exports and government spending. At a meeting of lawmakers in March, top Chinese economic planning officials called for development of a new generation of smart gadgets as part of a broader effort to emphasize cutting-edge technology. China has invested in areas to help that process, such as a pledge this year to spend 120 billion yuan (nearly $20 billion) over an unspecified period to build its nascent semiconductor industry.

Already some Chinese companies are showing greater ability to compete in relatively new areas such as smartphones. Lenovo Group Inc. and Xiaomi are making phones with competitive features and pricing and are pushing into overseas markets. Some analysts say they expect leading smartphone makers like Apple and Samsung Electronics Co. to begin ceding global market share to Chinese companies like Xiaomi and Lenovo.

By contrast, Lenovo launched its first personal computer in 1990 but didn't become an international competitor until it bought International Business Machine Corp.'s PC business 15 years later.

Jason Krikorian, an investor at venture-capital firm DCM and co-founder of Sling Media, said that the production expertise and growing quality of manufacturing in China is driving innovation in the country.

"Location is critical," he said. "That can absolutely serve as a benefit to the market and spur local innovation."

Zach Smith, a co-founder of a 3-D printer company that Stratasys Inc. purchased last year for $403 million, moved to the southern Chinese city of Shenzhen in 2012 to be closer to major manufacturers like Apple assembler Foxconn Technology Co. "Shenzhen is pretty much paradise for a maker/engineer-type geek like me," he said.

Chinese companies outside the hardware world are also exploring it. Search-engine and antivirus company Qihoo 360 Technology Co. has released a smartwatch for children, designed to track children's movement to address China's persistent child-kidnapping problem. The colorful watches also allow parents to communicate with their children and track the time they spend in different locations.

But success isn't always ensured. China is still grappling with rampant piracy, which can be a major challenge for a new company worried about losing its ideas.

"It's a great market, but how is the execution going to work?" said Wallen Mphepö, an entrepreneur who originally chose Beijing as the place to work on a pet project: wearable screens that allow clothes and shoes to change colors with a touch to a smartphone app. This year he shifted his R&D work to Lithuania to assuage potential venture-capital investors worried about idea theft, as well as for tax breaks.

"They understand the complexity of the Chinese market," said Mr. Mphepö, who kept much of the electronics work in Beijing.

Industry analysts say China still struggles to nurture its entrepreneurs. Capital can be hard to find in a country where the biggest banks tend to favor large state-owned companies, they say. Chinese corporate culture also isn't usually open to new ideas.

Some in China are trying to change that. Taiwan's Foxconn, which makes gadgets for Apple, Sony Corp. and many others in its Chinese factories, has set up a new platform called Kick2real to provide support for entrepreneurs looking to make wearable devices and mobile accessories. The site provides expert opinions on ideas for new hardware products before Foxconn eventually selects projects that it will help to manufacture.

In Zhongguancun, the northwest part of Beijing known as the home to many of China's new startups, the local government subsidizes one laboratory for gadgets called the Beijing Makerspace. On a recent visit, the laboratory was littered with 3-D printers, laser cutters and piles of circuit boards. A number of tinkerers were working on everything from screens that can be attached to shoes to sensors that track the movement of crowds in bars and clubs.

Its founder, Justin Wang, said a number of local officials became particularly gung ho about helping out after they visited the MIT Media Lab in the U.S. "They see there is cross-boundary, cross-disciplinary innovation from the grass roots," he said.

"They say 'OK, let's help you,' " he said. Mr. Wang said he plans to cooperate with the local government and Foxconn to create a small factory where aspiring hardware startups can build prototype products before they are sent elsewhere in China for mass production. The new space will feature a library of chips, sensors and material for their use.

Ken Xu, a partner at Chinese venture-capital firm Gobi Partners, said his firm began investing in hardware startups in China in 2012. In addition to investing in the Beijing laboratory, it has also bet on one company that creates small devices to monitor air quality in Chinese homes and a second that has made a smart scale that gives diet and exercise recommendations.

"People care a lot about their weight," he said. "They may not do a lot to change it, but they want to know it."

Domestically, a few companies have generated big buzz. One startup called Tomoon Technology announced plans to make a smartwatch last year after Samsung announced plans for its Galaxy Gear line of smartwatches. It featured an aluminum band and a screen that uses an e-ink screen to increase battery life

An ad for Tomoon went viral on Chinese social media. In 24 hours it got more than 28,000 preorders for the watch, which it sold for 499 yuan ($81), a discount from the Samsung watch's 2,499-yuan price tag in China.

The rush proved a challenge, as the company then had only about 30 employees, said Wang Wei, a Tomoon founder. Many of the orders melted away--out of a total of 70,000 preorders, only about one-tenth paid. Of that group, about 1,000 are still waiting for their watch.

Tomoon is undaunted. Mr. Wang said that the company is already at work on a second smartwatch, with an expected release date of September. The watch will monitor the wearer's health, and take steps like reminding the person to stand up after sitting for too long.

"I am sure that we can surpass the big international companies in innovation," he said.

One hundred young innovators from China will travel to Sydney’s VIVID festival of ideas next year to be matched with 100 young Australian counterparts for an ambitious five-day program of old-school peer-to-peer networking.

The China Australia Millennial Project (CAMP) is a crazy-brave undertaking. It's an entrepreneurial engagement project on a scale that just might make a difference in filling in some of the blanks in the trade relationship between the two countries.

For the local tech sector - particularly for some of the start-up leaders and future leaders - the project can start to fill in the vast gaps in our industry’s knowledge about China. This is a long-term, soft power initiative: Introducing young leaders and future leaders to each other and getting them to collaborate on a short-term project.

CAMP is the brain-child of Andrea Myles, an over-achieving Sinophile with an out-sized passion for Australia-China engagement.

Having grown up in a tiny Blue Mountains community, Myles says her mind expanded during her first trip overseas - to China - after she completed her undergraduate degree in psychology at Sydney University.

On returning to Australia, Myles completed an international studies Masters program on Chinese culture and politics that included learning Mandarin and an exchange at a University in Yunnan province in China southwest, and then an MBA that looked Asia-Australian relationships and Chinese politics and included an university exchange in Taiwan.

She has spent time at the Australia China Business Council in management roles, and has conducted a series of other China engagement activities. But the CAMP will be the most ambitious.

Myles believes for all the economic value of the China - Australia trade relationship, it is transactional in nature. Most Australians will tell you that the China relationship is important, and yet too few have a deeper understanding of Chinese people, its culture, or its market.

Focus on soft skills

While Australian priorities have put focus on developing the transactional trade relationship, there has been little focus on the soft skills that will enable a deeper, diversified relationship.

This has certainly been true of the broad tech industry and the startup sector in particular. There are exceptions (Seek and James Packer’s Zhoapin.com is a spectacular example), but generally, China is a great unknown.

The transactional relationship will not quickly underwrite the development of friendship, and it a friendship relationship that will create commercial opportunities - because of the better intuitive understanding of needs that friendship creates.

The China Australia Millennial Project (or CAMP) will be held during Vivid Sydney, in collaboration with the Vivid Ideas festival. It has the backing of the Department of Foreign Affairs and Trade. And it has a handful of large corporate sponsors on board and is still recruiting others.

The CAMP model is simple enough. A call for delegates to apply will go out through corporate, government and diplomatic channels in both countries. The 100 best and brightest applications from each country will be selected, and divided into collaboration teams and delegated mentors for the duration of the program.

Each team will work in a cluster on challenges common to both countries over a three month period, through online collaborative channels. They will then come together for a kind of five-day accelerator program in Sydney - where each team will ultimately present their project outcome and commercialisation ideas and prototypes to selected corporate partners, angels and investors.

These cluster challenges broadly map to Millenium Development Goals - areas like education, food security, energy, health and urban development.

While CAMP's goals are not start-up or technology sector specific the program should create huge interest from the start-up community. It’s focus is on entrepreneurialism and ideas. But it is the tech-enabled solutions that should drive many of the projects.

The value of the program is in the relationships, and in its potential for their ongoing development. This is where commercial outcomes get built.

The chief instigator

Myles calls herself chief instigator at CAMP. Co-founding is former University of Wollongong corporate relations manager Aimee Zheng, who has been been a driving force at the helm of UoW China engagement. The program’s other co-founders are Five-fold Happiness author Vivien Sung and management consultant Jun Zhang.

Julie Bishop has spoken in the past week of the supremacy of “economic diplomacy” in her government’s foreign relations policies. This kind of economic diplomacy can take many forms, but soft-power and soft-skills have got to be considered critical to its success.

If the tech and the start-up sector are in agreement about the potential importance of Chinese partnerships to future, then as an industry we need to better develop our soft power engagements.

The Australia - China trade in IT goods and services (outside of consumer electronics) is a rounding error in the overall value of the relationship. It is well past time to build on the goodwill that exists, to diversify the relationship and to create commercial and trade opportunities outside of transactional commodities.

The China Australia Millennial Project at Vivid in Sydney next year is a great start. And we hope it is followed by a reciprocal event that involves 100 young Australian innovators to China.

James Riley has covered technology and innovation issues in Australia and Asia as a writer and commentator for 25 years. Read more from James Riley at www.InnovationAus.com or follow him @888riley on Twitter.

China Petroleum & Chemical Corp., or Sinopec, is in talks with numerous Chinese companies, including Tencent Holdings Ltd., about either selling a stake or forming alliances in its gas-station-to-convenience store business, as part of the state-owned oil giant's moves to reform itself.

Sinopec is seeking to sell at least a 10% stake in Sinopec Sales Co., a $56 billion business it refers to as its marketing operation, and to form marketing partnerships, people familiar with the matter said. It has already signed an agreement with Shanghai-based conglomerate Fosun Group, one of the people said.

Sinopec Sales has more than 30,000 gas stations and 23,000 convenience stores across China.

Sinopec said earlier this year that it is seeking domestic and foreign investors to help make Sinopec Sales "market-oriented" and to facilitate innovation.

But people familiar with the matter said that Sinopec's plan for Sinopec Sales could also include alliances. Sinopec plans to finalize the terms of its tie-ups in coming weeks and then restructure Sinopec Sales by the end of November before preparing for an initial public offering of the unit, one of the people said. No decision has been made about where the IPO would take place.

Other companies in talks about Sinopec Sales include state-owned insurer China Life Insurance Company Ltd., ENN Energy Holdings Ltd., which distributes gas to people's homes, and private-equity firm Hopu Investment Management Co., people with direct knowledge of the matter said.

Sinopec recently signed a partnership framework agreement with Fosun, one of the people said.

Sinopec declined to comment.

Unlike in the U.S., in China most gas stations are owned by three state companies: Sinopec, China National Petroleum Corp., China's largest oil company, and China National Offshore Oil Corp.

Sinopec's efforts with Sinopec Sales are part of a broader push by the Chinese government to inject entrepreneurialism and vitality into its bulky state-owned firms.

In recent months, other Chinese state-owned companies have announced reform plans. They include conglomerate Citic Group, which has been absorbed by its Hong Kong-listed unit, giving foreign investors easy access to it. Shares listed in China are subject to quotas for foreign investors, but Hong Kong has no such limitations.

China's State-owned Assets Supervision and Administration Commission, a government agency that manages state firms, also announced last month that six state companies, including food trader China National Cereals, Oils and Foodstuffs Corp., or Cofco Corp. will be subject to reform.

Sinopec has seen its returns decline in the past seven years, as it made a big push to expand overseas.

Shares of Sinopec have risen 25% since it announced in February that it would restructure Sinopec Sales by allowing outside investors to own no more than a 30% collective stake.

Sinopec Sales recorded a net profit of 25.1 billion yuan ($4 billion) in 2013. Total assets stood at 342 billion yuan ($56 billion) as of the end of April, Sinopec said.

Sinopec could use proceeds from the divestiture to invest in businesses with higher returns, such as exploration and production, some analysts have said.

Mainland investment banks China International Capital Corp. and Citic Securities Co., as well as Deutsche Bank AG and Bank of America Corp., are managing the asset sale for Sinopec.

Comments about China as an "aggressive, anti-democratic, totalitarian foreign power" have reportedly caused a buzz about Palmer United Party's Jacqui Lambie with some of her constituents.

Tasmanian honey producers have soured on their PUP senator, claiming they stand to lose out on vital export contracts.

Tasmanian Beekeepers Association spokesman Lindsay Bourke told the Mercury newspaper Sen Lambie's comments could hurt their industry.

Mr Burke says he also fears she has a poor understanding of Tasmania's clean and green credentials by advocating the use of bumblebees to pollinate tomatoes in the state's north.

"Bumblebees steal honey from hives and will act as a carrier if devastating varroa mite lands," he said.

"Our honey sells for 40 per cent more than mainland honey, one of the reasons (is) because we are GM-free and (it) comes out of rainforests."

Chinese authorities have shut down an independent film festival on its opening day on Saturday, a rare venue for the showing of films that may be critical of the government in a country with tight controls, organisers say.

Festival artistic director Wang Hongwei and executive director Fan Rong, both of Li Xianting Film Fund that has organised the 11th Beijing Independent Film Festival, said that the event was forced to close.

Li Xianting, founder of the film fund and a film critic, has posted memos in social media over the last week saying that state security personnel have been pressuring him to cancel the festival and that he has come under police surveillance.

Both Wang and Fan verified the authenticity of Li's posts but declined to speak further.

Police in the Beijing suburb of Songzhuang, where the event was supposed to open, said on Saturday they were unaware of it.

Started as a film forum in 2006, the festival over the years has grown to be one of the most important events for China's independent films but also has attracted the attention of authorities eager to regulate free speech.

In 2012, electricity was cut off shortly after the festival opened, but organisers still managed to show some new movies. Last year, the festival went on, although public screenings were cancelled.

In his memos, Li said police put him and the fund's office under surveillance August 18, when this year's festival's poster and schedule were released online.

He said local authorities initially agreed to have the festival moved to a town farther out in neighbouring Hebei province, but that the management of the hotel where reservations were made informed the fund on Friday that police did not allow the hotel to host the festival.

Li said both Fan and Wang were taken away by Songzhuang police on Friday afternoon and forced to sign a letter of promise to cancel the festival before they were freed five hours later.

Li said employees of the fund were also informed that the electricity to the office would be cut off starting on Saturday.

Beijing has dismissed the Pentagon's accusations that a Chinese fighter jet flew too close to a US military aircraft off Hainan Island, blaming "massive and frequent" surveillance for dangerous mid-air confrontations in state media.

US Rear Admiral John Kirby had said on Friday the armed Chinese warplane came close to the American surveillance aircraft three times, flying underneath the American plane, at the P-8's nose and then in parallel with the wingtips, less than 30 feet (nine metres) apart.

In approaching the P-8 Poseidon, the Chinese jet at one point performed a barrel roll, apparently to display its weapons, in what Kirby called a "very dangerous" intercept.

China's defence ministry spokesman Yang Yujun called the claims "totally groundless" in a statement on Saturday cited by the Xinhua state news agency, lashing out at the American military for conducting surveillance operations close to Chinese waters.

Yang said the fighter jet pilot was a safe distance away and making regular checks on the surveillance aircraft during Tuesday's confrontation in international waters about 135 miles (220 kilometres) east of Hainan island.

It was the United States, and its "massive and frequent close-in surveillance of China" that endangered air and marine security, Xinhua quoted Yang as saying.

The episode this week has raised tensions and underlined the growing rivalry between the United States and China, with Beijing building up its military and asserting its territorial claims across the Pacific.

The move also threatened to jeopardise longstanding US efforts to bolster relations with China's military, at a time when officials have touted progress in forging a dialogue with Beijing's top brass.

The skies over Hainan Island were the scene of a major international incident in April 2001, when a Chinese fighter jet collided with a US Navy EP-3 spy plane.

The collision left one Chinese pilot dead and forced the American plane to make an emergency landing on Hainan. Chinese authorities initially detained the 24-member American crew for more than a week until both governments worked out a face-saving deal for their release.

Washington and Beijing have long disagreed over aviation and maritime rights in the strategic South China Sea, with the Americans insisting the area is part of international waters and airspace.

China argues it is part of the country's "exclusive economic zone."

Property price falls in China could benefit mineral sands miner Iluka Resources as it continues to cut production.

Managing director David Robb said investment in Chinese real estate and construction was important in the long-term, but the focus in the near-term would be on housing completions and housing sales.

"I can think of a scenario where price corrections incentivise developers to offer better deals to get occupants into their properties and make it easier for people to become home owners," Mr Robb said.

"That would be good for us."

Iluka's mineral sands products, including zircon, rutile and synthetic rutile, are used in a range of products, including home building products, from pigment production for paints and plastics, floor and wall tiles and chemicals.

Mr Robb's comments come after home prices fell in 64 of 70 surveyed cities in China in July, the third straight month of declines.

Iluka blamed lower product prices for a 66 per cent fall in first half net profit to $11.7 million.

The company said it will continue cutting production until conditions improve.

The fall in profit reflected a 13.8 per cent fall in prices and 3.5 per cent fall in sales.

Despite difficult trading conditions, Iluka says the zircon and titanium dioxide markets it serves are improving and the company is looking at future growth options.

Iluka also increased its dividend to six cents a share fully franked, from five cents in 2013.

Shares in the company rose 29 cents, or 3.4 per cent, to $8.88 at 1456 AEST due to the positive outlook and increased dividend on Friday.

Morningstar Resources analyst Mathew Hodge said Iluka had been suffering for several years as it continued to operate near the bottom of the cycle.

"The price is too low, you've got potential for improvement in demand in the short to medium term and if things don't improve new mines won't be built so supply would remain tight," Mr Hodge said.

The company's shares had risen on signs of improved demand for titanium minerals and rutile while zircon looked pretty stable.

He said the company benefited once people had moved into their homes.

Mr Hodge added that the company had maintained a solid balance sheet, kept costs down and paid a dividend while trying to develop options.

ILUKA CONTINUES TO CUT PRODUCTION

* Half year net profit of $11.7m, down 66 pct from $34.3m in previous period

* Revenue of $343.2m, down 10.1 pct from $381.7m

* Interim dividend of 6.0 cents a share, up from 5 cents full franked

Chinese regulators said Friday that Qualcomm is willing to make efforts to resolve a dispute that prompted an investigation by Beijing into the company's pricing practices there.

The National Development and Reform Commission, China's economic planning body, said in a statement on its website that it met on Thursday with a delegation from the wireless-technology company, including President Derek Aberle. "Qualcomm expressed its willingness to make improvements," the statement said.

The statement didn't provide further details. The NDRC didn't immediately respond to requests for comment. Qualcomm said in an emailed statement that executives met with NDRC officials, discussing "several topics in an effort to reach a comprehensive resolution." The company is cooperating with the commission, the statement said, adding that the company declined to comment further.

Chinese regulators have been investigating whether Qualcomm holds monopoly power over important technology.

Qualcomm is one of several multinational companies under pressure in China, where regulators are tightening enforcement of antitrust law.

The Qualcomm investigation has attracted attention as China has prepared to roll out a new fourth-generation telecommunications network that relies on the San Diego company's technology. Officials have told state media the probe is nearing a conclusion.

The NDRC regulations the parts of China's antitrust law that pertain to pricing.

Chinese state media said on Saturday that eight convicted terrorists were executed in the far western region of Xinjiang, where ethnic conflicts have left dozens of people dead this year.

Among those executed were three men convicted of plotting a deadly assault in the heart of Beijing last year in which the attacker--with his mother and wife as passengers--drove a sport-utility vehicle through crowds, killing themselves and three bystanders, the government-run Tianshan Net news portal said. The incident was a sign that the ethnic violence was spilling out of the ethnic region of Xinjiang.

The others who were executed were convicted of offenses including police attacks, bomb making, murder and arson, the news portal said.

The report didn't say when the executions took place.

Xinjiang is home to the Muslim, Turkic minority of Uighurs. Beijing has blamed the ethnic violence on terrorism with overseas ties, but human rights groups say the Uighurs are suffering from repressive policies and practices.

All eight people executed have Uighur-sounding names.

China is in a one-year campaign to strike hard against terrorism in Xinjiang, following a series of attacks that left scores of people dead earlier this year. The authorities have vowed swift action and severe punishment against terrorists, but Uighur rights groups have said the harsh measures would only further alienate the Uighurs and cause more resentment.

It is not often that you get to spend a week observing a business culture different from your own. In just seven days of breakfasts, lunches, presentations, workshops, cocktail functions, a writer’s festival and a birthday party, I noted some unexpected tension between different groups living in Singapore. These were contrasted, weirdly, with mutual enthusiasm for building a future together.

Relations between expats, skilled migrants and local Singaporeans were different from when I first lived and worked in Singapore in the early 1990s. Back then, the population was around 3.5 million, comprising 10 per cent expats. Now it is estimated to be 5.5 million with around 38 per cent expats. With the birth rate at 1.2 per cent pa, this huge population increase is largely attributed to expats and immigrants, which has had an impact on the local business culture.

Changes to the business culture in Singapore present challenges for foreign companies wanting to do business there. Singaporeans I spoke with understandably expressed feelings of being somewhat overwhelmed by the influx of foreigners, but added that it was good for the economy. Australian expats expressed comfort at living in this city-state and conveyed a sense of being very ‘at home’.

The interest and enthusiasm of many Australian expats I spoke with was dampened by the lack of humility of others. I witnessed some conversations that left me very concerned about the reputation of this great nation -- remarks by Australians who considered themselves superior to their Singaporean colleagues and who made judgments that were never going to win friends or help influence people.

There are both challenges and opportunities for leaders of Australian companies with interests in Singapore or other Asian nations to consider. Here are a few that come to mind.

The challenges

1. The notion that ‘Singaporeans lack problem-solving skills’ and ‘they need to be told what to do’ is an outdated and limiting proposition upon which to enter the market. Singaporeans are significantly more capable and ‘knowing’ than some foreigners give them credit for. To go there with a fixed view of what you will find will take you on an uphill journey. An open mind will help you to see the possibilities and increase your chances of success.

2. To arrive in Singapore believing that you are in some way superior to local workers will almost certainly be detected and considered arrogant. Singaporeans are extremely welcoming and open to you when treated with respect. If you discover barriers to getting the support and cooperation you seek, you are probably failing to appreciate the cultures and values of your colleagues.

3. Starting your sentences with ‘they’ when referring to people belonging to another ethnic group immediately separates you and can communicate to observers that you are judging them. You would do well to try to convey more about ‘what you want’ and less of ‘what they can or cannot do’.

4. Expats who fail to inquire and listen to the ideas of local employees or peers are perceived as arrogant and insensitive, and local people might respond with behaviours that feel controlling. Worryingly, overt ‘them versus us’ exchanges are more evident today and the tenuous tolerance between groups raises flags that we need to watch.

5. In the 1990s, Singaporean leaders looked to expats to bring technical skills and know-how. Today, in the more advanced Singaporean economy, local leaders express a desire for expats to bring greater strategic and leadership capability to help maintain the nation’s regional competitive advantage.

The opportunities

6. Singaporeans understand that an expat’s tenure in the country is temporary, yet their presence is welcomed and their work appreciated. If you approach your ‘stay’ as an opportunity to improve the lives of people in the region and boost their economy, at the same time as growing your company’s presence and profits, you will leave a legacy that is good for all involved.

7. Singaporean society is highly sophisticated, its people are well educated and the pace of change and development phenomenal. There is much you can learn from the diversity of race, religion and culture of the resident population and you can use this opportunity to develop greater cross-cultural understanding that will add value to your career and business.

8. The country is growing at 4.5 per cent, which in contrast to Australia’s 2.5 per cent, is obvious in almost every way. Investment in commerce, infrastructure, housing, transportation systems, culture and entertainment is immediately evident and there are opportunities in every direction. The government incentivises foreign business to operate there and limits non-residents’ tax on employment income to 15 per cent.

9.  ASEAN nations are growing at between 4 per cent and 7 per cent and collectively they are home to 600 million people. They are Australia’s closest neighbours and most are in the same or similar time zone. Once you are established in Singapore, doing business with other ASEAN countries is a small step and most have strong trade relations with many Western nations.

10.  Your greatest personal development and business success will grow from your ability to adapt to the many global cultures, customs and practices you find there; if you insist on ‘being western’ in Asia you will almost certainly miss opportunities that arise from the blending of ideas from East and West.

There has never been a better time to be an expat in Asia. To make the most of it, you need to go there believing that you have something to learn from the incredible blend of people and cultures you find there. You also need to be prepared to alter the way you work to fit in -- for you will not get 5.5 million people to alter ‘their way’ to fit in with you.

Pamela Young is Author of Stepping Up and Managing Director of growthcurv

For years after China opened its doors to the world in the late 1970s Beijing has been careful to cultivate a peaceful and friendly image, securing a stable external environment that is crucial for its economic development.

Beijing is now drumming up its economic reform credentials but policymakers also need to reflect on the strategic moves of a past leader for more inspiration.

The country is celebrating the 110^th anniversary of the birth of leader Deng Xiaoping -- the man credited with bringing the country out of the shadows with a reformist legacy based on pragmatic and conciliatory foreign policy. He was instrumental in healing and developing fractured relationships with Japan and the US and credited for opening up China to the world after decades of Maoist extremism and autarky. New Chinese leader Xi Jinping wants to be seen as the inheritor of Deng’s reformist tradition.

However, in recent years Beijing seems to have become more and more assertive in its foreign policy, which has created tensions in the region. Last week, a Chinese fighter jet attempted to intercept a US surveillance aircraft near Hainan Island and it flew dangerously close to the Americans. Not to mention, China’s run-ins with Japan, the Philippines and Vietnam.

Beijing’s increasingly tougher foreign policy stance is not only unnerving diplomats and military planners from Washington to Canberra, it is also making some of Deng’s former advisers and associates anxious about where China is heading.

Zhou Ruijin, a former senior editor at the People’s Daily, who penned a series of influential pro-reform editorials under pen name Huang Puping has warned about the risk of rising tide of nationalism in China in an opinion piece celebrating Deng’s legacy.

“Our task is to comprehensively deepen reform and we need a good external environment. I am very concerned about the rise of nationalism. Yes, we must defend our sovereignty but we need to resolve territorial disputes through political negotiation and not through creating war-like tension,” he wrote in an opinion piece for Caixin, a pro-reform publication.

Though it is common to view China’s current foreign policy in bellicose light, it is instructive to look at Deng’s foreign policy legacy. When he was coming back to power for the third time in the late 1970s, the country was isolated with few friends. Though Nixon made a historic visit to Beijing, Washington was still allied with the exiled Chinese Nationalist government in Taiwan.

Deng made a herculean effort to bring China out of isolation and laid the foundation for the country’s economic reform. The former leader needed to mend fences with two former arch-enemies: Japan and the US. The animosity towards the former was deeply rooted in history and the latter was a bitter ideological foe and strategic rival.

It took great courage for Deng to reach out to Japan. Many Chinese who were more than 40 years old in 1978 could still recall the horrors of Japanese invasion during the World War Two II. He had to convince Chinese patriots it was necessary to shelve historic grievances and embrace Japanese technology, capital and management know-how.  

Deng was the first Chinese leader to visit Japan since the end of World War II. “Deng came with a spirit of reconciliation and he brought the hope that the two people could live together in a new era of peace and goodwill,” wrote Professor Ezra Vogel, one of the most prominent Asia scholars in the US in Deng Xiaoping and the Transformation of China.

He downplayed the horrors of war when he was in Japan and instead focused on the shared cultural heritage of both countries. The former military commander who had fought against the Japanese Imperial Army in the 1930s and 40s also managed to defuse one of the most contentious issues between two countries: the territorial dispute of the Chinese-named Diaoyu Islands (also known as the Senkaku Islands in Japan).

Deng told Japanese reporters at a press conference that because the Chinese and Japanese held different views and used different names for the islands, the issue should be put aside so that later generations, who would be wiser than those present, could solve the problem. 

It seems that his successors are not really wiser than Deng’s generation; Diaoyu Islands have become the lightning rod for Chinese nationalists who thirst for revenge. These rocky outcrops are arguably the most dangerous flash point for the region.

China’s return to the international stage would not be possible without normalising its relationship with the US. Deng, the pragmatist also sacrificed one of his most cherished goals of reunifying Taiwan within his lifetime to secure the diplomatic recognition of Washington.

He reluctantly accepted the American demand that the US would continue to supply weapons to Taiwan after it switch its diplomatic recognition from Taipei to Beijing. Vogel wrote that Deng knew that normalisation of relations with the US would make it far easier for China to have access to the knowledge, capital and technology that China needed in its drive for modernisation.    

Deng’s willingness to put aside most contentious issues in favour of cooperation had earned China crucial support and stable environment for economic development. Though China has emerged a great power after decades of miraculous economic growth, it is still fragile superpower with few friends. As the world’s greatest trading nation, it is in the country’s own interest to follow Deng’s example. 

Newly-listed anti-counterfeiting business YPB has won a contract to provide tracer products and scanners to the Chinese government.

China's Ministry of Public Security, which regulates the country's police force and border security operations will carry out a trial of YPB's invisible tracer products and scanners.

The contract comes less than three weeks after YPB debuted on the ASX through a backdoor listing through the shell of former sapphire explorer AUV.

Chief executive John Houston said the contract with the MPS was part of YPB's aggressive growth strategy.

"The contract for the PRC's (People's Republic of China's) Ministry of Public Security forms part of the first stage in this process, and we continue to be excited by the level of interest in our unique anti-counterfeit technology and its potential applications," he said in a statement.

YPB is explicitly targeting potential clients in Asia and especially China as it looks to capitalise on growing demand for anti-counterfeit technologies in the region.

The company's produces invisible tracers that are hidden and indestructible particles fused into a product during or after the manufacture process and are detectable by YPB's scanners.

Chinese local government debt grew 3.7 per cent during the first six months of 2014 as Beijing takes a tougher stance on local governments racking up more debt.

The National Audit Office released its latest local government debt survey on Sunday, which showed the debt growth rate during the first half of 2014 had slowed seven percentage points compared to the same period last year, according to Xinhua News Agency.

China’s National Audit Office revealed late last year that local government debt had surged 20 per cent every year for the last three years. The collective debt of local governments had increased nearly 3.9 trillion yuan (S720 billion) to 10.6 trillion yuan by June 2013.

Chinese local governments also explicitly guaranteed 2.7 trillion yuan worth of debt. In addition, they are also expected to shoulder at least part of the 4.3 trillion yuan liabilities incurred by other corporate and semi-government entities.

The total size of government debt including official debt, explicit and implicit loan guarantees amounts to 19.6 trillion yuan, or about a third of China’s GDP.

BOC Aviation, the Singapore-based aircraft leasing arm of Bank of China, on Monday said it has ordered 82 aircraft from Boeing.

According to list prices, the planes are valued at US$8.8 billion, according to a Boeing executive.

BOC Aviation is buying 80 single-aisle Boeing 737 jets, 50 of which will be the latest "Max" model, which offer better fuel efficiency. The planes will be delivered from 2016 through 2021.

The order also includes two Boeing 777-300ER wide body jets. BOC Aviation has already found a customer for the two 777-300ERs, according to a company statement, which didn't disclose the customer's identity.

Customers typically receive discounts of between 30 per cent and 40 per cent on list prices of airplanes; the exact price at which the jets are sold isn't made public.

This is the first direct order for the "Max" jets by BOC Aviation, said Dinesh Keskar, Boeing's senior vice president for sales for Asia Pacific and India.

"The Boeing 737 is a very liquid asset and competition for sale and lease-back deals is very high," said Mr. Keskar.

Aircraft leasing companies either buy planes directly from manufacturers and then place them with customers, or they buy planes from airlines under sale-and-leaseback deals that allow the carriers to sell the ownership of their planes and to keep them off their own balance sheets.

BOC Aviation said it had 251 planes in its fleet as of June 30, which included 118 Boeing planes that are currently flying with 27 airlines.