Insight

Will the Year of the Fire Monkey Burn Corporate Australia's Ambitions in 2016?

The ancient Chinese belief is that the characteristics of the prevailing animal and element in a lunar year will heavily influence people’s behaviour and wider events in that year.

Australia's Ambitions
Stephanie Daveson

Stephanie Daveson

November 22, 2016 12:00 AM

CHINESE PROVERB: THE WIND SWEEPING THROUGH THE TOWER HERALDS A RISING STORM IN THE MOUNTAIN (山雨欲来风满楼)

The rapid growth of China has been a blessing for Australia. A strong demand for resources, an inflow of student and tourist revenue, and a giant consumer prepared to buy almost anything that grows. But what can Australia expect in the next 12 months now that its largest trading partner – a country that places great emphasis on superstitions and omens – has entered ‘the year of the fire monkey’?

THE SIGNIFICANCE OF THE FIRE MONKEY

The ancient Chinese belief is that the characteristics of the prevailing animal and element in a lunar year will heavily influence people’s behaviour and wider events in that year.

A monkey year is believed to reflect monkey traits such as curiosity, cleverness and playfulness. But the combination of the monkey with the fire element this year increases the potential for hot behaviour, making the monkey volatile, aggressive, impulsive and reckless.

Here are our thoughts on what we can expect from China’s year of the fire monkey and what this could mean for Australia.

OUR PREDICTIONS

1. Expect increasing volatility on Chinese stock markets – for better or worse

The rollercoaster ride on Chinese share markets over the last nine months has given us a glimpse of what we can expect this year – volatility, and plenty of it.

The Chinese Government’s attempts to support its markets in 2015 through stock trading restrictions, abridged trading days and the buying of shares by government entities appears to have had the opposite of its intended effect – eroding confidence and placing further downward pressure on stock prices.

How the regulators deal with any increased volatility in the year ahead will be vital on a number of fronts. While a key priority for Chinese regulators will be avoiding any negative social implications that could arise from significant market falls, the reality is that allowing a harder landing may ultimately be necessary to rebuild confidence in the market from the ground up.

2. Global Chinese outbound M&A will be more strategic, and Australia may benefit

We expect President Xi Jinping’s continuing anti-corruption drive – which in late January brought down the head of China’s National Bureau of Statistics, Wang Baoan, just hours after he released China’s 2015 GDP figures – to continue to have an effect on Chinese outbound investment patterns.

Those businesses with key management or directors placed under investigation will seek to maintain a low profile and avoid significant outbound M&A opportunities – particularly in higher risk regions such as Africa – that could attract further unwanted attention.

For other firms not tainted by investigations, outbound M&A will continue to be targeted at opportunities to move up the value curve by acquiring access to technology and foreign know-how (rather than raw resources only). To use an analogy, the monkey will look to pick the tastiest looking fruit which may not be the largest or lowest hanging.

Chinese expectations of a more significant devaluation of the yuan may well prompt increased outbound investments in the early part of the year. It may also encourage more Chinese companies to raise capital and list their shares in Australia, a trend we have been observing in the agriculture sector.

The offer by Chinese SOE ChemChina to buy Swiss agribusiness and biotechnology conglomerate Syngenta for almost A$60 billion on the eve of the new lunar year is the biggest gamble so far by a Chinese company on the global stage. While we don’t expect this to spawn a return of Chinese mega-deals to Australian shores, it may encourage other Chinese investors to use the early part of the year to lock in acquisitions before their foreign exchange costs increase.

We think Australia’s metrics will continue to be attractive to Chinese investors throughout 2016. Click here for our thoughts on opportunities in the construction, innovation and tourism sectors.

3. South-East Asia will be the centre of China’s attention

China’s manufacturing base has migrated south and west in recent years to regional mega-centres such as Chengdu and Chongqing, while countries such as Thailand, Vietnam and Bangladesh that offer lower cost operating environments have become attractive locations for Chinese manufacturers to export excess capacity. Expect China to continue its manufacturing drive in this southerly direction as emerging markets such as Myanmar and Indonesia – key pillars of the ASEAN Economic Community – become new centres for Chinese manufacturing interests.

And with the Asian Infrastructure Investment Bank ready to lend up to US$15 billion a year to support infrastructure projects, and President Xi keen to leave a lasting legacy through the One Belt One Road initiative, 2016 may well be the year Chinese companies begin to unlock the potential of South-East Asia by complementing manufacturing investment with significant infrastructure projects.

With this trend in mind, we see Chinese companies which have acquired Australian targets with operations in South-East Asia using the year of the fire monkey to leverage from their target’s existing footprint. (The China Communications Construction Company-owned John Holland Group, which has deep operating experience in South-East Asia, has already indicated that it will use 2016 to leverage its PPP experience to bid for projects in South-East Asia and beyond.) Similarly, Australian companies with operations in the region – particularly in infrastructure – will be attractive to Chinese acquirers and Chinese companies seeking a joint venture partner with local expertise.

WHERE TO FROM HERE?

While we believe the mixed currents described above are, on balance, positive for Australia, the real elephant in the room is the geopolitical flashpoints which have the potential to cast a dark cloud over China’s relationships with its near neighbours, the US and Australia.

Each of North Korea (recent nuclear and ballistic missile tests), Taiwan (recent election of pro-democracy leader Tsai Ing-wen as President-elect which may herald a cooling in the Beijing-Taipei relationship) and the South China Sea (with the Chinese military poised to begin test flights from the artificial – and disputed – Fiery Cross Reef in the first half of the year) present a number of challenges and risks for China which have the potential to impact Australia’s relationship with China. The message is clear: all players need to tread especially carefully this year to contain the fire monkey within.

With the China-Australia Free Trade Agreement now in effect and Australia’s metrics providing a solid foundation for a strengthening relationship with China, we believe Australia is well placed to weather the storm of challenges presented by the fire monkey year.

Related Articles

Announcing The Best Lawyers in Australia™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

Celebrating Lawyers From Around the World: Annabel West


by Rebecca Blackwell

We are honoring the achievements and career of Annabel West, lawyer and wife of South Australian Premier Peter Malinauskas.

Accomplished Australian Lawyer Annabel West

Contracts and Translations


by Christian Ray Pilares

Working with manufacturers in China can be profitable but challenging. Third party services like law firms and translation services can be helpful.

Safeguard Working with Chinese Manufacturers

Checks and Balances


by Michael Sullivan

Ensuring probity and above-board behaviour in both the public and private sector is always important—and that importance can be particularly stark during a major crisis like the pandemic. An overview of a year’s worth of commissions and inquiries.

Australian Commission Governance Structure

Blurred Lines


by Andrew Kirby

Where does responsible lending end and unconscionability begin? Australian courts have come to vastly different conclusions. An overview of current case law.

Australian Courts Assess Loan Repayment

The Partnership Opportunity


by David Harley, Shaun Whittaker, Tony Rutherford and Troy Lewis

Doing well and doing good need not be mutually exclusive. Housing developments that provide both solid long-term returns and positive social outcomes, often through public-private partnerships, are an idea whose time has come throughout Australia.

Housing Developments in Australia

A Climate Duty


by Lara Douvartzidis and Samantha Daly

Converging trends in Australia and the Netherlands: reasonable foreseeability in climate change law and other novel developments.

Climate Change Law in Australia

The Great Debate Between Agriculture, Mining and Environment


by Rebecca Hoare

Can we really have it all?  The pursuit of the harmonious intersection of Australia’s agricultural and resources industries and the environment.

Australia Agriculture, Mining & Environment

Announcing the 2022 Best Lawyers™ in Australia


by Best Lawyers

The results include an elite field of top lawyers and firms.

Announcing the 2022 Best Lawyers™ in Australi

What Does It Take to Join The Best Lawyers in Australia?


by Best Lawyers

We asked The Best Lawyers in Australia: What advice would you give your younger self?

Nominate a Lawyer in Australia

Working With Changes


by Best Lawyers

Carolyn Pugsley, the Joint Global Head of Practice for Corporate, Australia at Herbert Smith and Freehills, discusses policy changes affecting the M&A market in Australia as well as the impact of the pandemic on the practice.

An Interview With Herbert Smith and Freehills

Can Your Option to Purchase Get Lost in a Franchise Agreement?


by Alicia Hill and Benjamin Caddaye

With the changing of a contract in a franchise agreement, certain rights you thought you were entitled to might get lost in translation.

Franchise Agreements and Purchase Options

Accessorial Liability in the Fissured Workplace


by Rohen Cullen and Caroline O’Connor

The wilfully blind beware.

Accessorial Liability

Compliance Confidence


by Jeffrey E. Stone, John Huang, and Michelle Gon

Turning risk into opportunity.

Compliance Confidence

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Announcing the 2022 Best Lawyers in Canada™


by Best Lawyers

The results include an elite field of top lawyers listed in the 16th Edition of The Best Lawyers in Canada™ and 1st Edition of Best Lawyers: Ones to Watch in Canada.

Announcing the 2022 Best Lawyers in Canada™

Caffeine Overload and DUI Tests


by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

The Real Camille: An Interview with Johnny Depp’s Lawyer Camille Vasquez


by Rebecca Blackwell

Camille Vasquez, a young lawyer at Brown Rudnick, sat down with Best Lawyers CEO Phillip Greer to talk about her distinguished career, recently being named partner and what comes next for her.

Camille Vasquez in office

Announcing the 2022 "Best Law Firms" Rankings


by Best Lawyers

The 2022 “Best Law Firms” publication includes all “Law Firm of the Year” recipients, national and metro Tier 1 ranked firms and editorial from thought leaders in the legal industry.

The 2022 Best Law Firms Awards

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

All Eyes to the Ones on the Rise


by Rebecca Blackwell

Our 2023 honorees recognized in Best Lawyers: Ones to Watch™ in America tell us more about how their path to law formed, what lead them to their practice areas and how they keep steadfast in their passion to serve others.

Person walking between glass walls towards window

Announcing The Best Lawyers in Australia™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

Announcing the 2022 Best Lawyers™ in Australia


by Best Lawyers

The results include an elite field of top lawyers and firms.

Announcing the 2022 Best Lawyers™ in Australi

The Key to Success? Be Prepared to Walk Away


by Sara Collin

Oatley Vigmond partner and The Best Lawyers in Canada awardee Brian M. Cameron discusses his illustrious career and techniques for trial and negotiation that have led to his success.

Man with grey hair and red tie