aust primed to come playground for china elite

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    Australia primed to be the playground for China's jet set
    DEMOGRAPHER: Bernard Salt From: The Australian January 20, 2011 12:00AM


    I HAVE a theory about the possible trajectory of Australia over this decade.

    I call it the Dubai Effect. My argument is that regions of remarkable wealth creation require nearby safe havens in which to spend that wealth.

    In the decade leading up to the global financial crisis, the United Arab Emirates city of Dubai fulfilled just such a role.

    Following the 1972 oil crisis, the Middle East evolved as the world's leading source of export oil. Countries such as Saudi Arabia, the UAE, Kuwait, Qatar, Iraq and others were suddenly cultivating individuals, businesses and institutions that created vast amounts of wealth.

    But the problem was that the countries that created the wealth did not always offer the quality of life, the personal security, or the lifestyle that was demanded by the new oil rich.


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    London was quickly favoured as a destination for the showcasing of new wealth.

    Oddly enough, Russia's billionaires created in the 1990s by the privatisation of Soviet enterprises also preferred a London address.

    And you don't have to be an oil sheik or a Russian billionaire to understand why. If you have millions of dollars at your disposal, the place to spend it is not in a Moscow or Riyadh suburb, no matter how prestigious. Rather it is in what is arguably one of the world's most connected, safe and consumer-orientated cities: London.

    New York and Paris would also be good options, but the former is located in another continent and the latter doesn't have the business connections of English-speaking London.

    Part of the argument is that homeland cities in new wealth-creating regions have not had sufficient depth of wealth over sufficient time to build up a retinue of consumer shops, consumer culture and institutions to fully sate the market for spending.

    If you have made millions of dollars in the Middle East or Russia, or China for that matter, splashing out in the smartest suburb of Moscow or Beijing doesn't really deliver the desired outcome.

    What does deliver the desired outcome is showcasing accumulated wealth in a global Western city where the audience for success is broader (because of access to global media) and is more culturally attuned to celebrating (or envying) success.

    That's why Arab sheiks spend millions on London real estate and maintain an apartment in Dubai.

    The latter's a weekender; the former showcases success.

    Australia can be a weekender for China's rising wealthy elite.

    Make your money in Shanghai, but buy consumer goods, buy an apartment, educate your kids, have a medical procedure, spend part of the year in a safe, secure, Western global city such as Sydney or in a "branded" lifestyle region such as the Gold Coast or possibly Port Douglas.

    And if neither of the latter are to your liking, there's always Singapore's Sentosa Island or any number of other intervening options only too willing to provide the market with precisely what it wants.

    This decade, globally significant wealth will continue to be created out of China's manufacturing sector.

    Some billionaires, lots of millionaires and even more simply well-to-do Chinese will want to spend recently accumulated wealth in nearby consumer-orientated cities.

    This was the logic that underpinned Dubai in the decade leading up to the global financial crisis.

    Here was a safe haven in a troubled region. (China isn't so much troubled as lacking in a consumer base that is commensurate with middle-class wealth.)

    Switzerland fulfilled the same role for Western Europe in the first half of the 20th century.

    Make your money in France, but spend part of the year in a spa resort in the foothills of the Jungfrau.

    And I also suspect this ultimately led to Switzerland's policy of non-alignment: prosperity depended on the ability to remain a safe haven in a highly volatile region.

    This, of course, raises the question of what will be China's Dubai during this decade? While Australia naturally has a lot to offer in this regard, such as education, lifestyle and property services, there are geographically intervening destinations that will also compete for a share of China's rising consumer wealth.

    The island of Macau, for example, offers gambling services that could be a substitute for Melbourne's Crown.

    And which is why Crown establishing a casino in Macau is such a strategic move.

    It projects Australian services closer to the core market.

    Sentosa Island, off the coast from the Singapore CBD, offers resort-style residential property within convenient access to world-class shopping and gambling.

    Both Macau and Sentosa are within a three to four-hour flight, as opposed to an eight-hour flight, from Shanghai.

    And who knows what other retail, residential, lifestyle, gambling, education, medical-type developments could also pop up off the coast of Vietnam or Thailand this decade to take a share of the Chinese weekender market that would otherwise have found its way to Australia?

    But this is not to say that Australia does not have strategic advantages over these intervening Dubai-like destinations. We offer Western security and, importantly, connectivity into the English-speaking global community.

    That's why the Chinese want to educate their kids here.

    But they want to do so from a branded university just as they want branded shopping and possibly branded lifestyle holidays and property.

    Perhaps this is the natural order of things: new wealth from developing regions wants to showcase success with known brands and in markets that recognises and therefore amplifies that success.
 
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