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Thank you Paul.
And firstly, I would like to take this opportunity
to thank ABARES for the opportunity to speak to
you today.
It is a privilege for me.
While I understand that you represent many different
areas from the Australian different industries my
presentation today will focus majorly on wool.
The reason I have come from Shanghai to speak to
you today is to give you an insight into the rapid
change in Chinese market, and especially the
domestic consumer market which in my 10 years for
working for AWI has evolved greatly.
I will try to explain how this evolution towards
affluence presents real opportunities for
Australian wool in this instance.
So who is AWI?
For those of you who don't know I would say that
firstly AWI is the research development and
marketing arm of the Australian wool industry.
We are not-for-profit and exist to serve the
interest of over 22,000 wool growers, shareholders.
Our intent is to build industry competitiveness,
sustainability and profitability.
To do this we invest along the wool supply chain from
farm to retail seeking to promote wool's position as
a premier natural fibre.
A key element of our business is that we own
the "Woolmark," the most well-known world fibre mark.
So why China?
As everybody knows China is the world great
powerhouse of the manufacturing heart for years.
For textiles China has become the processing
heart of the global industry and this is
especially the case for the wool textile industry.
China has more processing capacity than the rest of
the world combined.
You can see that more than 50% of the whole world
textiles are processed at some stage in China.
Further, China's exports of textiles and garments
exceeds 30% of the world's textile and apparel trade.
The wool industry is especially dependent on China.
China is the world's largest supplier of wool products.
So this is especially the case for Australia.
In fact, the future of Australia and China's wool
industries are interdependent.
China is now the most important partner for the
Australian wool industry but also Australia is the
most important supplier of wool to China.
This chart shows how China's share of
Australian wool exports which has grown rapidly
since 1990.
So that now China purchases around 70%-80% of
all Australian wool.
It also shows how Australia's wool totally
dominates Chinese wool imports,
represents also around 70%-80% of all wool imports
into China.
But China is changing and all of Asia is also changing.
China now is no longer just a low-labour cost and
manufacturing hub but an increasingly affluent
consumer market.
The 14 countries from the Asia-Pacific region now
dominate the global GDP, so firstly China is a
bigger economy than Japan and will in the coming
decade be larger than the Eurozone.
Secondly, economic weakness in Japan,
Europe and North America is accelerating these trends.
And this rapid growth in consumer expenditure is
being seen in the very rapid growth of China's
affluent market.
The fastest growth luxury market in the world.
You can see from this chart that market research
suggest that China's luxury market will reach
$180 million RMB by 2015, which will exceed Japan to
become the world's number one largest luxury product
market in the world.
Also the BCG group reports that China will have over
140 million affluent consumers by the year of 2020.
In the next five years over 30% of global clothing
consumption increase will be driven by the Chinese
domestic market.
So just near our Shanghai office we're along the Xu Hui Road.
I believe some of you may have been to Shanghai some may not.
Everyday we sell more than 10 luxury brand flagships
just along this road which include LV,
Zennia, Hermes, Katia, so these pictures show just
on the Xu Hui Road these flagships.
And why, because of the fastest growth of the
premium and luxury market in China.
So it is important to remember that this
evolution is occurring in a centrally planned
economy, which is typically our Chinese
economy, and the government is actively
supporting this transition.
The latest 12th Five-Year Plan,
what is Five-Year Plan, maybe some of you know
maybe not, which has just been released last April
is by our central government,
which is to focus on ensuring a smooth
transition from manufacturing and export
driven economy to an affluent domestic market
driven economy.
So on these slides I have extracted some of the key
elements of this latest Five-Year Plan.
For textiles the emphasis is to up-value in industry,
encouraging companies to compete not only on price
but also on add-value.
This is the rise of BRAND IN CHINA,
and as such in the investment on to research
and development, branding and design,
have increased enormously.
In other words, to transition from the
capital driven to innovation driven is from
MADE IN CHINA to BRAND IN CHINA.
So what we are doing--because this
transition represents a major challenge and
opportunity for AWI in China as we have had to
reposition our business from the simple technical
transfer focus of the 1990's to an integrated
marketing for that innovation and education approach.
These trends and the latest Five-Year Plan
which recognizes them provides an excellent
platform for the Australian wool industry
through AWI.
AWI now are deeply integrated with the industry.
We utilize AWI's investment in research,
productivity development, and marketing to inspire
and educate industry to demand more Australian
wool which has been shown through this slide about
our business model.
In China we are deeply integrated with the
Chinese industry and working with two major
trends in China based on this new government
centralized direction.
First is a new generation of consumers looking for
brands, design and in many cases, luxury.
And secondly, a new generation of manufacturer
looking to see how they can up-value their business.
We use this investment in research development and
marketing coordinated out to our Sydney headquarters
to provide value-adding services to our key
customers in China which are made up of over 400
Woolmark licencees covering from industry and
also the brand product.
We inspire our key accounts to work with wool.
For example with the Wool Trend Release of Product
Innovations et cetera, and then educate them as to
how they can work with wool.
So for example, on technical transfer:
marketing assistants and sourcing guidance et cetera.
These pictures are all the activities we have
conducted in China based on these two trends by
working with the new generations of consumers
and the new generations of the Chinese manufacturers.
A key element of this inspiration and education
comes also from the delivery of the
information and advice to our Chinese brands and partners.
For example, we have a very sophisticated trend,
which is a collection of fabrics and yarns themed
to show the infinite versatility of Australian wool.
There is, you know, remember there is no other
authority in China who could provide such inputs
into the Chinese industry and Chinese manufacturers
and brands are looking to upgrade themselves as per
the Five-Year Plan.
And then they will have access to our sourcing and
trend education service like this allows them to do so.
So through this conduit of Australian wool and the
"Woolmark" we are doing things which they will
feel appreciated and we are trying to upgrade them.
Our beautiful Shanghai office is also used as a
hub of where these services are delivered to
our partners, and of course,
we also travel to their factories for the
technical transfer trend presentation, et cetera. Also I
have brought some of these toolkits here.
If you are interested just come and have a look if
you would be interested after the session.
And similarly, our innovation suitcase and
product development capacity can also be
utilized by partners who wish to upgrade their
product collection utilizing Australian wool.
Manufacturers draw from our globally conducted
product research and commercialize it through
their own operations.
AWI also runs promotional platforms that are aimed
not only at educating consumers on the value of
wool but giving them a clear call to action and
allowing them to buy new wool products.
From Woolmark program in 2010 featuring men's wear
luxury market to 2011's beauty mission program
which we are featuring luxury women's wear market
in China we integrated from manufacturers to
designers and then targeted the new consumers
by providing them a new experience wool.
That's to educating, informing,
promoting Australian wool to new generations of
consumers by giving inspiration to the new
generations of manufacturers and designers.
In addition to the fashion category we have different
categories of market promotion which include
baby's wear, sports, interior textile and also
apparel care programs.
This slide slows the Woolmark co-branded
promotion and campaign with Les Enfants which is
the biggest infants wear brand with over
2,000 sales channels in China.
So as a wrap up, I want to point out that China has
an extremely important and rapidly evolving position
in the global textile industry.
China is making a transition from low-cost
manufacturing hub to affluent consumer market,
the world's largest luxury market.
And the transition is from MADE IN CHINA which is
capital driven to BRAND IN CHINA and this is
innovation driven.
AWI is working to position wool advantageously,
building demand for our fibre by working with
firstly, consumers looking for brand design,
and in many cases luxury.
Secondly, manufacturers looking to innovate and to
"up value." I feel so fortunate to be in this
industry at this time and I'm confident that in near
future we will see this period as a golden era for
our industry where we have added our new
relationships with Chinese brands and consumers to
our existing relationship with Chinese manufacturing
sector and the rest of the world.
Thank you.
[applause]