PM-led Trade Mission to China - May 2013

  • Date Added: 3 May 2013 from BusinessNZ

  • By Catherine Beard, ExportNZ

    The PM led trade mission to China took in Guangzhou, Shanghai and Beijing.  On that trip the ambitious goal was set to double two-way trade between NZ and China to $20billion by 2015 and there were predictions that China would be New Zealand’s number one export market within the next 3 years.

    On our return from China, Statistics New Zealand announced that the first quarter trade statistics for 2013 showed that China has surged to our number one trading partner already.

    So clearly China is hugely important to New Zealand’s economy, as if that was ever in doubt; and we are fortunate in the good relationships we have developed at both the political and the commercial level over the years.  Having a free trade agreement with China has given us a window of opportunity ahead of other countries, which has been very beneficial for our agricultural exports.

    The trade mission showed off the quality of that political relationship with the high calibre of political and business people that engaged with the New Zealand delegation over the course of the week.

    Key take outs for me were:

    • A huge amount of political goodwill between China and New Zealand and complementarity of economies
    • Scale of opportunities due to China’s size and growth are significant, in particular big demand for New Zealand protein
    • New Zealand quality and food safety reputation is high and must remain so. Brand NZ for food and beverage = gold brand.

    China is not for the faint-hearted. It is big, sophisticated and very competitive, with all the major global brands in evidence in the big cities. To be successful, exporters need to:

    • be in market (strong local relationships with trusted partners are essential and these take time and investment to develop)
    • know your customer (need to understand the local consumer wants and needs)
    • understand that tier 3 and 4 cities will be an easier place to start rather than the very competitive mega cities
    • go niche – what is your x factor?

    Officials organised a business seminar one afternoon on the trade mission and I have summarised some of the key points below without attributing them to the various speakers.

    “Old China Hands”

    • China/NZ relationship has never been better
    • Change is happening at a fast rate in China and NZ companies/sectors need to be more strategic when coming to China and try to enter China with more scale; collaboration on greenshell mussels by a number of companies is a good example.
    • China’s growth has continued through the global financial crisis, and if it is at a slower pace, it is also a more manageable pace for China.
    • On-line shopping will be a major force (and already is) Ali Baba – online trading is already doing US$19billion in a day.
    • Protection of intellectual property is getting better in China because they are developing their own.  IP can be respected in joint ventures if it benefits both parties.
    • China is a long term proposition and it is difficult (apart from language and cultural differences, lack of transparency and corruption are business risks) – it needs significant investment and relationship building commitment.
    • The transition to the new leadership was a smooth transfer and the new leadership is highly competent, well -educated and part of the new thrust is financial sector reform.
    • The economy is changing from an investment led growth, to consumption growth and some economies like Shanghai are increasingly services based as opposed to manufacturing, which has moved to other geographic areas.
    • There is still lots of investment yet to be done and there will be continued growth due to rural/urban migration (300m people over next 15 years) and higher labour productivity.
    • Continued investment in transport infrastructure will see dedicated freight and passenger lines and better transport will open up internal trade and allow regions to gain better productivity by specialising on areas of comparative advantage.
    • China can use the best technology in the world; such as fast trains – and the best brains.
    • The aging population is a headwind, but the people entering the workforce will be more productive (better educated) than those leaving it.
    • They want the Chinese Yuan to be a global currency and while this will take time it is about improving the capital account and making China more open to the free flow of capital. It will mean Banks need to be more commercial and better allocation of capital will improve productivity.
    • It is predicted that within 20 years the Chinese economy will be 4 times bigger than today.

    Business Commentator trading in China

    • Penetration of on-line shopping already exceeds that of the US
    • Free delivery is attractive if you live in an apartment and there are no lifts
    • Not a market for the faint-hearted, daily product recalls, fines and standards not faced by local companies
    • Need strong corporate affairs function in China
    • Corruption is challenging
    • Scale matters, otherwise go niche
    • Focus geographically – build out a business in concentric circles
    • Build a team of local executives in China, need people who can speak the language and understand how to navigate the system.
    • The number one Chinese customer concerns are –
      • Fake products
      • Food safety
      • Scales in fruit and veg shops (are they correct or have they been tampered with?)

    The Chinese consumer wants products that are real and safe.

    In addition to the above, there were very good presentations from ANZ on the Chinese economy and from Mainfreight on its key tips for doing business in China.