It is apposite in a number of ways that the Turnbull government’s Trade and Investment Minister Steve Ciobo — the effective member for the Gold Coast — has been on the road in the past week or so, trying to drum up more business for Australia’s booming tourist sector in China.

For one thing, his electorate is a prime beneficiary of taxpayer-funded tourism campaigns. In another, better world, this might be seen as a conflict, but these days, it hardly rates.

It’s also a handy diversion from the dramatic collapses in the shares prices of former market darlings Blackmores and Bellamy’s, which have exposed the government’s unbalanced hyper-bullishness over the China-Australia “free trade” agreement these past 18 months.

Yes, there is certainly opportunity in market the gargantuan size of China’s, but the rules — and business culture — is very, very different. The one-party state has its tentacles everywhere, and things change in the blink of an eye. In addition, very few Australian businesses that deal with China have any experience with Asia at the board level. It’s an exercise worth doing but, at a guess, I reckon one could count on one hand the number of Chinese-speaking directors around ASX 200 companies.

Most concerning for hopeful Australian businesses, there is nil chance of any legal redress if things go wrong. Just ask James Packer. Beijing, Shanghai and Guangzhou are littered with the corpses of Australian businesses that have misread the tea leaves, jumped into bed with the wrong Chinese partner been too successful at the expense of connected locals or been sideswiped by rule changes with no warning. So Australian companies need to tread far more carefully than government propaganda would have them believe.

Frantic to make sure the flow of Chinese dollars to Australia continues, the government has cooked up something called China-Australia Year of Tourism (isn’t every year, Steve?). But already, plenty of industry folks are warning about Chinese tourist (and student) overload, as noted recently by Crikey. 

Still, while tourism is undoubtedly on the boil, and will continue to be for the foreseeable future, other businesses caught up in the China hype have seen their forecast sales growth go awry. Investors who bought in on the way up hoping for easy gains are now paying the price.

Chief among these are companies in the health supplements and dairy sectors led by last year’s stock market darlings Bellamy’s and Blackmores.

The latter has long been Australia’s market leader in health supplements and, in 2015, kick-started a joint venture to make milk powder, a product in high — and blue-sky — demand from Chinese consumers, especially working mothers with infants.

Milk powder from the antipodes has been the bedrock of the rollercoaster ride of New Zealand’s most valuable company Fonterra and of Bellamy’s itself. But unlike Fonterra, which has investments in Chinese dairies, the Australian company depended on the so-called suitcase market. This meant that its “China sales” were in fact Australian sales by enterprising Chinese students and tourists buying up big Down Under and hauling their booty home to flog in the world’s biggest and most pervasive e-commerce market.

About 80% of Blackmores’ “China sales” were suitcase sales, and it probably couldn’t last — a sharemarket price that soared into the stratosphere during 2016, exploding by 600% on the back of a tumescent forecasts of sales to China.

Since peaking at $203 per share in June last year, the company’s market value has been cleaved in two, and on Friday, February 24 it was was less than 50c within its lowest point since those dizzy heights, closing at $102.75.

But markets by their very nature always over buy and oversell — share price is the promise of future, not of earnings, and the chief executives of Blackmores, Christine Holgate, has the backing of the board who hired her and shareholders are still better off than they were 18 months ago.

Things are not so settled at Bellamy’s, where the share price damage had been more extreme with its stock closing on Friday. The so-called “carnage” for the share price of Bellamy’s — like Blackmores it was simply a coming-down to something closer to earth — has been more pronounced, collapsing form $14.72 to close at $4.75 on Friday and going nowhere

Unlike at Blackmores, the Bellamy’s board wobbled, and when that happens executives get ousted, like Bellamy’s chief Laura McBain who built the company to where it is today. Boards hold the whip hand and either split or agree it was all in the execution (pardon the pun) and fire the CEO. (We wait with infinite patience for the board that will sack itself.)

Bellamy’s biggest shareholder is Jan Cameron, who holds about 30% through various entities. Cameron made a mint on the outdoor clothing and gear group Kathmandu, so she knows a thing or two about building global sales, and has since proven herself a keen investor in Australian companies and an active shareholder.

She is attempting to roll the company’s board after disagreeing with its prognosis on the problems in an extraordinary general meeting in which she will try to introduce, shock horror, an actual Chinese director. This, in the mainstream Australian media, is termed “controversial”.

There’s a class action afoot against Bellamy’s — the cynic would say on behalf of investors who somehow believe they are guaranteed a free lunch. Slater and Gordon senior class action lawyer Mathew Chuk is quoted in The Australian explaining the case:

“Mum and dad investors placed their faith in the Bellamy’s story and have been horrified by the revelations of the past few months.”

“Our investigation has confirmed our initial view that Bellamy’s made misleading statements about its continuing growth in circumstances where it had no proper basis to do so, particularly given the likely impact of regulatory reform in China.”

And there’s the rub: just two years ago Bellamy’s shares were just $1.75. There’s a lesson here for all Australian companies — and shareholders — who want to chase the huge Chinese market. Understand that where there are possible outsized gains, there are also outsized risks.  And maybe get some real Asian experience on board.

Regulatory “reform” in China? Your guess is as good as Bellamy’s, their promoters or their Australian directors. Sure director Michael Wadley is Shanghai-based lawyer who makes deals in China, but Chinese he is not. Welcome to the stock market, where you pays your money and you take your chances, especially in China.