May 29, 1993

THE ASIAN INVESTMENT TRAIL: 55 G'DAYS IN PEKING

Eric Ellis in Beijing Travelled Last Week With A Group of Australian Fund Managers Through China

IT wasn't so much the shorts, curious though they were, as the sockless sandals that puzzled the Chinese.

"Is this how Australians always dress for business meetings?" said the lady from the Shanghai ChlorAlkali group, casting a quizzical eye over her visitor

He looked as if he'd just stepped from the bar of Sydney's Cruising Yacht Club -even though he was part of a delegation of Australian fund managers on a business visit to China. As his appalled colleagues on the tour later realised, they were all tainted by association.

And - as so often happens - that spells a problem for Australia's business image in Asia.

As a Hong Kong-based invitee to the Chlor-Alkali factory tour commented: "It's embarrassing to be seen with some of this crew."

Indeed, at times it was difficult not to conclude some were more interested in - and better briefed about - the Sydney rugby scores than the extraordinary changes underway in a booming market they'd been invited to research and invest in.

The delegation was hosted through China by CITIC, China's largest foreign investment company.

CITIC has worldwide holdings, including a 12.5 per cent share in Cathay Pacific and 20 per cent of Hong Kong's telephone monopoly. In Australia it controls investments worth some $300 million, including 10 per cent of the Portland aluminium smelter - a portfolio it hopes to double in the next 12 months.

It has formed a partnership with Hambros to promote Australian investment in the emerging Chinese equity markets, the so-called "Great Wall Street".

The Australian fund managers, responsible for perhaps $A40 billion in assets, were afforded red carpet treatment by their hosts and were feted at every turn.

But their strikingly good access to decision-makers at the highest level of government was lost on some of the delegation.

The Beijing programme was impressive, opening with a meeting and banquet with the Australian Ambassador, Mr Michael Lightowler, and Mr Wei Mingyi, CITIC chairman just three months into the job and one of China's most important officials.

The next day came the high point, a reception with Mr Rong Yiren, China's Vice-President and former CITIC boss, in the Great Hall of the People.

Already a legend in China, Rong is a man who in 50 years' time will likely be accorded the same status in China's capitalist history as a Ford or a Rockefeller is in the US.

Rong chose the meeting to disclose a timetable for China's reform ambitions, while putting out the line that China's economic austerity program was actually a "re-structuring".

The significance was lost on some ... until they read it in the Western press the next day.

"Jeez, I didn't know he was that important," said one.

In Beijing, there were also frank meetings with the influential committee for re-structuring the economy, a body at the sharp end of China's reform programme, as well as the head of China's nominal securities commission, who approves new listings.

One trader was unmoved, literally. He "rested his eyes" through all the Beijing engagements, including that with Rong.

Usually, this group would be known for its sharp eye for investment opportunities. "This is the creme de la creme of Australian fund management,"said a Hambros analyst. "There's more intellect on this bus than in all of Sydney Uni. If this bus were to crash here, the All Ords would fall by 30 per cent."

But as the grandeur of Shanghai's Bund loomed from the bus windows, an eavesdrop confirmed these people did know what they were talking about - if the subject was Perth penny-dreadfuls and Palm Beach holiday homes.

Later, en route to Beijing airport, a discussion opened on how China has changed since the days of Mao. There were some funny, very Australian, moments. A CITIC official recounted an extraordinary story of how he spent the Cultural Revolution labouring 17 hours a day in a rice paddy. The discussion ended when one of the party piped up: "Jeez, that wouldn't have been much good for the tinea."

By mid-week CITIC's schedule was beginning to exact its toll.

After a good meeting with the Shanghai Stock Exchange chief and a couple of company visits, they reckoned they'd got the story: 5000 years of Chinese history, 44 years of communism, 18 months of a securities market and two days of looking at it.

The group leader made an executive decision and decided to forgo a group meeting with Shanghai's Vice-Mayor - the same official Prime Minister Paul Keating was eager to shake hands with not three weeks earlier.

Unaware that big city mayors rank at near Politburo level in China and make good contacts, a drink in the famous Peace Hotel jazz bar looked a more exciting proposition. Or as he put it to his Chinese hosts 'Mate, f... the Mayor, its been a long day and we'd rather have a beer."

While a million commuters biked past the pub, a bit of good-natured banter broke out between the banking and broking fraternities represented on the tour, the bankers referring to the brokers as "Dad's Army", the brokers describing the bankers as "hoity-toity types with their heads up their arse".

That'll translate well on the report CITIC has to write for its superiors on this trip.