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Experts outline China risks

01 May, 2006

Australian businesses should wait a year before setting up business in China, one of the world's leading experts on the Chinese economy told Ai Group's Economy 2006 Forum.

Australian Industry Group

Dr Jim Walker, the Hong Kong-based Chief Economist of stockbroker Credit Suisse Lyonnais Securities Asia, said commodity prices were nearing their peak and the costs of skilled labour and quality control were galloping ahead in China.

An explosion in the number of Chinese businesses meant thousands were competing for the same market, resulting in manufacturing activity stagnating and investment slowing.

"My first advice would be to wait for a year," he said.

"The present is exactly the wrong time to be getting into China because resources are very tight, especially management resources."

Dr Walker said it was becoming increasingly difficult to secure and retain quality skilled labour in China, particularly for managerial roles. In addition, labour costs in Shanghai were currently three times higher than in Bangkok.

Gary Turner, a partner at PricewaterhouseCoopers in the United Kingdom and world expert on global supply chain management, said business needed to recognise it was impossible to protect their intellectual property if they decided to operate in China.

"IP is a huge concern. You just have to accept that you are going to lose it," Turner told the conference.

China's GDP was forecast to grow by 5-7% in 2006, down from a growth rate of 9.98% in 2005, and was expected to slow further in 2007.

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