A new report shows the central role that Australian financial services could play in the country’s booming relationship with China.

Experts say Australia is on the cusp of a new kind of economic relationship with China, one dominated by services rather than resources, where its greatest asset is its people, their skills and their ideas.

In a new joint report from Finsia and the University of Sydney's China Studies Centre - 'The Development of Financial Services in China: The Role for Australia' - researchers argue that it is crucial for Australia to place itself as a finance partner for China.

While exports of financial services are on the rise - from AUD2.6 million in 2000 to AUD8 million in 2013 - China still only accounts for four per cent of the financial services export market for Australia.

Report author and director of the China Studies Centre Professor Kerry Brown says: “The opportunities are vast, but under-exploited”.

“This is despite the many advantages that Australia has as an exporter of financial services - including robust governance frameworks and an attractive business environment,” he said.

As China's middle class grows to a projected 750 million, its appetite for services will similarly expand.

The emerging middle class across the country will need insurance, investment products, financial planning and more sophisticated services overall.

The Sydney Uni report says Australia is in a unique position to capitalise on the opportunities presented by China's growing middle class.

But it also identifies a number of challenges that need to be addressed before Australia can capitalise on opportunities presented by the financial services sector in China.

Those challenges include:

  • Licensing and regulatory challenges in China
  • Perception issues around the financial sectors in both countries - Australia's financial sector is perceived as too small and conservative by China, whereas Australia is concerned about the risk profile of some Chinese institutions.
  • Bureaucratic hurdles in China remain high; with documentation for foreign banks 15 times more time consuming than for Chinese banks operating in Australia.

The full report is accessible here.