China’s link to Australia’s wealthy

It is a fair bet that many of Australia’s richest entrepreneurs were watching Prime Minister Julia Gillard’s first visit to China very closely last week.

The talks, which ranged across free trade, defence and, to a lesser extent, human rights, were seen as Gillard’s opportunity to introduce herself to what has become Australia’s most important trading partner and the key driver of our economy.

China has also become a key driver of Australia’s rich list, with a large number of billionaire fortunes tied directly or indirectly to the continued growth of the world’s most populous nation.

Consider the following 10 fortunes as a starting point:

• Gina Rinehart, $9 billion. The stunning growth of Rinehart’s iron ore empire has been driven by China’s seemingly never-ending hunger for steel. Her next projects, including two giant coal mines, will also rely in part on Chinese customers.

• Andrew Forrest, $6.7 billion. Another iron ore miner selling boatloads of commodities to eager Chinese buyers. Future mine developments at Fortescue Metals Groups mines will rely on Chinese custom.

• Clive Palmer, $3.5 billion. Queensland coal baron Clive Palmer has built his entire fortune around the Chinese. They are his chief institutional investors, his main customers, his financiers and his mine builders. If he ever lists lists his company Resourcehouse in Hong Kong, the Chinese will also be his key retail investors.

• Harry Triguboff, $3.4 billion. Sydney’s apartment king has long relied on cashed-up Chinese buyers flooding into his developments. Unfortunately, the strong Australian dollar is hurting his sales at present.

• Chris Wallin, $2.6 billion. Chris Wallin shot to prominence when he sold 20% of a coal project in Queensland to Japan’s JFE Steel for more than $US500 million. But he also has Chinese group China Steel as an investor.

• Kerry Stokes, $2 billion. Inside Stokes’ Seven Group Holdings is the WesTrac business, which owns the Caterpillar heavy equipment franchise for northern China. Stokes also owns a stake in Chinese English-language newspaper Shanghai Daily.

• Angela Bennett and Michael Wright, $2 billion. Like Rinehart, brother and sister pair Bennett and Wright enjoy a steady stream of income from iron ore royalties. The cash flowing into their empires has soared in recent years thanks to China.

• Stanley Perron and Len Buckeridge, $1.1 billion. Perth entrepreneurs Stan Perron and Len Buckeridge are among those benefiting indirectly from the Chinese boom. As Perth’s mining-based economy booms on the back of China’s appetite for commodities, Perron and Buckeridge are lifted by the same tide.

• Chau Chak Wing, $1 billion. Property developer Chau made a stunning debut on last year’s BRW Rich 200 list with a fortune valued at $920 million, based largely on property holdings in southern China and other regions. Surging (many say overheated) Chinese property prices are likely to have pushed his fortune above $1 billion.

Much to the relief of these entrepreneurs, the talks between Julia Gillard and Chinese Premier Wen Jiabao went well, with both sides making the right noises about closer economic ties, more involved free trade discussions and co-operation in everything from research in renewable fuels to infrastructure construction.

Of course, for Gillard and this group of wealthy entrepreneurs, future talks don’t matter as much as China’s continued growth.

While China is trying to slow its growth rate from 9% to a more stable 7% between now and 2015, a sharper slowdown would be bad news for the Australian economy – corporate profits and government tax revenues would be hit and economic growth would likely fall.

The impact on the rich list would be severe too. Right now, Rinehart and Forrest look like building an unassailable lead over their rivals at the top of the list, but sharp falls in commodity prices would bring them right back to the pack.

The rich list would go from being dominated by Australians selling stuff to the world (Rinehart and Forrest) back to Australians selling stuff to each other (Frank Lowy and Anthony Pratt).

Given how important China has become to Australia’s wealthy, it’s probably fitting that Gillard should visit China on the week that a list of the richest Chinese entrepreneurs around the world should be released by local media organisation Forbes China.

The list, which includes a staggering 213 billionaires, is particularly interesting in that it includes Chinese entrepreneurs based around the world, including Hong Kong, Thailand, Malaysia and Indonesia.

The three richest entrepreneurs on the list are based in Hong Kong and all are prominently involved in property.

Li Kai-shing, with a fortune estimated at $US26 billion, beat out Thomas and Raymond Kwok and Lee Shau Kee for the title of the richest Chinese entrepreneur in the world.

But perhaps more interesting is the list of the wealthiest from mainland China.

This title was taken out by Robin Li, the founder of the popular Chinese search engine Baidu, which has been a huge beneficiary of Google’s decision to withdraw most of its operations from the Chinese market. He is worth $US9.4 billion.

Li was just in front of Liang Wengen, chairman and major shareholder of construction giant Sany Group (with a fortune of $US8 billion) and Zong Qinghou, the founder of China’s largest beverage producer, Wahaha (fortune of $US5.9 billion).

For the moment at least, the initial Chinese fortunes seem to be being built by domestically-focused players. It will be interesting to see whether over time this changes, as has happened in Australia.