Opening Doors to China : New Zealand's 2015 Vision - Te Puni Kokiri
Opening Doors to China : New Zealand's 2015 Vision - Te Puni Kokiri
Opening Doors to China : New Zealand's 2015 Vision - Te Puni Kokiri
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<strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 1<strong>Opening</strong> doors<strong>to</strong> CHINA<strong>New</strong> Zealand’s <strong>2015</strong> <strong>Vision</strong>01 Foreword from Prime Minister Key03 <strong>China</strong> in perspective07 <strong>New</strong> Zealand and <strong>China</strong>15 The NZ Inc <strong>China</strong> Strategy16 Goals and priority actions16 Retain and build a strong and resilient political relationship18 Double two-way goods trade21 Grow services trade25 Increase bilateral investment <strong>to</strong> levels that reflect the growing commercial relationship27 Grow high quality science and technology collaborations33 Doing business in <strong>China</strong>35 Preparing for <strong>China</strong>36 On the groundForeword fromPrime Minister KEY<strong>China</strong> is a country that has become very important <strong>to</strong> <strong>New</strong> Zealand. We want<strong>to</strong> expand our links further <strong>to</strong> grow trade and other opportunities betweenour two countries. So I am delighted <strong>to</strong> introduce the NZ Inc <strong>China</strong> Strategy– a vision for <strong>New</strong> Zealand’s developing engagement with <strong>China</strong>.It is fitting that the <strong>China</strong> Strategy is beinglaunched at the beginning of the auspiciousYear of the Dragon, and also the year markingthe 40th anniversary of <strong>New</strong> Zealand’sdiplomatic relations with <strong>China</strong>.The NZ Inc <strong>China</strong> Strategy is the second inthe Government’s series of centralised plans –developed <strong>to</strong> strengthen our economic, politicaland security relationships with countries andregions, and <strong>to</strong> encourage people-<strong>to</strong>-peoplelinks and two-way investment.Our strategy for <strong>China</strong> starts from an explicitrecognition that an excellent politicalrelationship is the foundation upon whicheverything else must be built. We can’t engagewith <strong>China</strong> just on the trading front – we need<strong>to</strong> work across all sec<strong>to</strong>rs <strong>to</strong> build the range oflinks that will enhance our understanding andfamiliarity with one another.The strategy is built around developing the tradeand economic links between <strong>New</strong> Zealand andthe People’s Republic of <strong>China</strong>. Both countriesunderstand that a strong export base andcomprehensive engagement in the internationaleconomy are key elements in achievingeconomic growth, and boosting the welfareand future prospects of our people.Trade with <strong>China</strong> has been one of the greatsuccess s<strong>to</strong>ries of the <strong>New</strong> Zealand export sec<strong>to</strong>rover the past decade or more. So much so that Ihad no hesitation in setting an ambitious futuregoal when I visited <strong>China</strong> three years ago.Premier Wen Jiabao and I agreed that we shouldaim for a doubling of bilateral trade by <strong>2015</strong>.We’re on track <strong>to</strong> achieve that goal.Goods trade is only half the s<strong>to</strong>ry. Our strategy hasa strong focus on services as well. To mention justtwo: <strong>China</strong> is already <strong>New</strong> Zealand’s largest sourceof foreign students, and our fourth biggest <strong>to</strong>uristmarket. We plan <strong>to</strong> develop these further, and wesee huge potential in other parts of <strong>New</strong> Zealand’sgrowing knowledge economy – design, informationtechnology, film and TV, food safety.Knowledge is in fact set <strong>to</strong> be a key driver of ourrapidly growing relationship. Clearly it is a twowaystreet – we want <strong>to</strong> work with <strong>China</strong> <strong>to</strong> driveforward science and technology linkages, and wewant <strong>to</strong> exploit the fruits of that collaboration <strong>to</strong>the commercial advantage of both countries.The NZ Inc <strong>China</strong> Strategy will help us buildon the successes we have already achieved.It is designed <strong>to</strong> promote a whole-of-governmentapproach. It is designed also <strong>to</strong> provide a basisfor more effective cooperation between thepublic and the private sec<strong>to</strong>rs.The <strong>New</strong> Zealand Inc <strong>China</strong> strategy articulatesthe vision of a relationship with <strong>China</strong> thatstimulates <strong>New</strong> Zealand’s innovation, learningand economic growth. It is for us <strong>to</strong> work<strong>to</strong>gether <strong>to</strong> turn that vision in<strong>to</strong> a reality.Rt Hon John KeyPrime Minister
<strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 7<strong>New</strong> Zealand and CHINA<strong>New</strong> Zealand enjoys a positive profile within <strong>China</strong> thanks <strong>to</strong> the ‘four firsts’.<strong>New</strong> Zealand was:• The first Western country <strong>to</strong> concludea bilateral agreement with <strong>China</strong> on itsaccession <strong>to</strong> the World Trade Organisation(August 1997)• The first developed economy <strong>to</strong> recognise<strong>China</strong>’s status as a market economy(May 2004)• The first developed country <strong>to</strong> enter in<strong>to</strong>Free Trade Agreement (FTA) negotiationswith <strong>China</strong> (announced November 2004)• The first OECD country <strong>to</strong> sign a high-quality,comprehensive and balanced FTA with<strong>China</strong> (April 2008)The FTA between <strong>New</strong> Zealand and <strong>China</strong>(NZ-<strong>China</strong> FTA) came in<strong>to</strong> force on 1 Oc<strong>to</strong>ber2008 and liberalises and facilitates trade ingoods and services, improves the businessenvironment and promotes cooperation in abroad range of economic areas.This early willingness <strong>to</strong> recognise and tradewith <strong>China</strong> is repaid with a level of engagementwhich is of substantial economic and strategicvalue <strong>to</strong> <strong>New</strong> Zealand.In the year <strong>to</strong> Oc<strong>to</strong>ber 2011, <strong>New</strong> Zealand’sexports <strong>to</strong> <strong>China</strong> grew 34 percent, from $4.3billion <strong>to</strong> $5.8 billion, imports from <strong>China</strong> grew13 percent, from $6.1 billion <strong>to</strong> $6.9 billion.<strong>New</strong> Zealand AND CHINA TRADE FIGURESEXPORT TOTAL: $5810 MILLIONDAIRY $2080mLEISURE $232mIRON GOODS $232mPLASTIC $240mWOOD $1244mWOOL $398mHOMEWARE $310mCLOTHING $993mSEAFOOD $268mWOODPULP $216mMEAT $210mMACHINERY $2561mIMPORT TOTAL: $6900 MILLIONSource: Statistics <strong>New</strong> Zealand (for the 12 months <strong>to</strong> Oc<strong>to</strong>ber 2011)Nighttime view of Kowloon Island, Hong Kong.
8 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong>Mayors of Chinese cities have significant politicalpower and influence, so <strong>New</strong> Zealand mayors canplay an important role in opening doors in <strong>China</strong>.A business delegation led by a high-ranking politicalfigure gets more traction.Total two-way merchandise trade has grownmore than 50 percent since the FTA, helping <strong>to</strong>partially offset the turmoil of the global financialcrisis. <strong>China</strong> is <strong>New</strong> Zealand’s second-largestmarket, accounting for over 12 percent ofexports, and the second-largest source ofimports, at 16 percent.<strong>New</strong> Zealand’s export trade with <strong>China</strong> overthe past two years has grown faster than with<strong>New</strong> Zealand <strong>China</strong> Trade Association<strong>China</strong>'s government has made it clear<strong>New</strong> Zealand is a worthwhile, significantlyvaluable and preferred business partnerfor Chinese businesses.Stuart Ferguson, chair of the <strong>New</strong> Zealand<strong>China</strong> Trade Association, says this statusshould not be squandered. It presents anopportunity for the well-researched entryof proven <strong>New</strong> Zealand products andservices, as long as opera<strong>to</strong>rs are willing<strong>to</strong> put in the necessary effort <strong>to</strong> maketheir Chinese venture a success.“Probably a lot of the low-hanging, ripefruit is gone. Those who wish <strong>to</strong> enter themarket will need <strong>to</strong> do considerably morework but all export is difficult.“The biggest mistakes among aspiringentrants <strong>to</strong> the market are a lack of researchand a reluctance <strong>to</strong> invest time or money. It’snot a market you can cut your teeth on. If youany other major nation in <strong>New</strong> Zealand’strading his<strong>to</strong>ry.In 2010, the <strong>New</strong> Zealand-Hong Kong, <strong>China</strong>Closer Economic Partnership Agreement (CEP)capitalised on Hong Kong’s status as a SpecialAdministrative Region of <strong>China</strong> with au<strong>to</strong>nomyin trade matters. Hong Kong is <strong>New</strong> Zealand’sninth largest export market worth $823 millionper annum.haven’t got something <strong>to</strong> trade, don’t bother.”Ferguson, who was chief executive of the<strong>New</strong> Zealand end of the Chinese nationalshipping lines for 22 years, says companiesshould not be <strong>to</strong>o proud <strong>to</strong> ask for help indeveloping a strategy <strong>to</strong> approach <strong>China</strong>.The NZCTA can help pair experienced<strong>China</strong> opera<strong>to</strong>rs with new entrants <strong>to</strong>form a men<strong>to</strong>ring relationship – be it aone-off catch-up over a cup of coffeeor a formalised, in-depth arrangement.Ferguson says the war s<strong>to</strong>ries, wisdom andexperience of those who have successfullybroken in<strong>to</strong> <strong>China</strong> are invaluable inpreparing newer opera<strong>to</strong>rs for thecomplexities of the market.“There is a market there for people willing<strong>to</strong> put in effort in terms of research andtenacity.”www.nzcta.co.nzOne of the most pivotal developments camewith the advent of direct flights from Auckland<strong>to</strong> <strong>China</strong>’s largest cities, initially through Air<strong>New</strong> Zealand which was joined in the pastyear by <strong>China</strong> Southern Airlines.Supported by direct air links, <strong>China</strong> has been<strong>New</strong> Zealand’s fastest-growing inbound <strong>to</strong>uristmarket for a decade and <strong>to</strong>urist numbers willnearly double in five years. By 2014, <strong>China</strong> isprojected <strong>to</strong> become <strong>New</strong> Zealand’s secondlargestsource of visi<strong>to</strong>rs.<strong>China</strong> is the largest source of internationalstudents – 300,000 have studied in<strong>New</strong> Zealand over the past decade. Thisbusiness generates not only money, but greatlinks and networks created while a Chineseperson is studying – and potentially settling– in <strong>New</strong> Zealand.<strong>China</strong>’s investments in <strong>New</strong> Zealand wereNZ$1.8 billion in early 2010, most of it in theforestry sec<strong>to</strong>r, followed by manufacturingand commercial construction.<strong>New</strong> Zealand Greenshell TM mussels.<strong>New</strong> Zealand or <strong>New</strong> Zealand-associatedcompanies such as ANZ, Richina and Fonterrahave major holdings in <strong>China</strong>. Investment in<strong>China</strong> is important <strong>to</strong> secure a long-term marketfor <strong>New</strong> Zealand products and assists in thepenetration of <strong>China</strong>’s enormous developingconsumer market.The trade relationship has a very strongcommodity base – primary products,dominated by milk powder and logs, accountfor 91 percent of <strong>New</strong> Zealand’s earnings fromexports <strong>to</strong> <strong>China</strong>.However trade is diversifying. The Governmentis working with industry <strong>to</strong> promote the growthof exports in higher-value goods such as wineand seafood, and the outlook is promising.Wine exports <strong>to</strong> <strong>China</strong> grew from $3 millionin September 2008 <strong>to</strong> $17 million in 2011– 456 percent growth.<strong>New</strong> Zealand is recognised as a world leaderin quality food production and <strong>China</strong> is agrowing market. Our reputation for science andinnovation could make a significant contribution<strong>to</strong> <strong>China</strong>’s food safety and food security.Some of the earliest Chinese migrants in<strong>New</strong> Zealand arrived for the 1860s gold rush.Today, Chinese <strong>New</strong> Zealanders are the fifthlargest ethnic group in <strong>New</strong> Zealand – 3.7percent of the <strong>to</strong>tal population at the last censusand the largest Asian ethnic group. There are 29sister city and sister port relationships between<strong>New</strong> Zealand and <strong>China</strong>, from Ashbur<strong>to</strong>n andPuyang <strong>to</strong> Welling<strong>to</strong>n and Beijing.Chinese <strong>New</strong> Zealanders enrich <strong>New</strong> Zealandcultural life with events like the LanternFestival in Auckland which attracted 240,000in 2011. While most are yet <strong>to</strong> visit <strong>China</strong>,<strong>New</strong> Zealanders are discovering Asia throughfood, clothing, electronics and hardware.
10 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 11Pure <strong>New</strong> zealand Greenshell MusselsOver a decade ago, the Greenshell musselindustry made its first foray in<strong>to</strong> <strong>China</strong> –with unpleasant results.Some Chinese distribu<strong>to</strong>rs duped consumerswith counterfeit products leveragingoff <strong>New</strong> Zealand’s strong reputation forquality and food safety. A small and muddylocally-grown green mussel was foundpackaged and sold in-market under theguise of <strong>New</strong> Zealand’s iconic Greenshell.Distribu<strong>to</strong>rs sprayed water over mussels andfroze them <strong>to</strong> add weight so they could sellfor more. Perhaps the biggest concern wasthe sale of cheap Chinese mussels under the<strong>New</strong> Zealand name and counterfeit brandingin<strong>to</strong> highly valued third markets, such as theUnited States.It was difficult for Kiwi companies <strong>to</strong> addressthese issues so, with the added complicationof intense competition between <strong>New</strong> Zealandexporters driving down the Greenshell saleprice, exporters walked away from <strong>China</strong> andrefocused on other markets.It was eight years before sizeable volumesof <strong>New</strong> Zealand Greenshell musselsmade a return <strong>to</strong> the Chinese market in2010 – and these days, it’s much betternews. As a market, <strong>China</strong> has more promisethan most. It offers strong economicgrowth, an emerging ‘consumer class’ witha desire for quality imported foods, animproved regula<strong>to</strong>ry regime (<strong>to</strong> limit thecounterfeiters) and a his<strong>to</strong>ry of appreciatingGreenshell mussels.The other significant difference is thatseveral of the leading mussel producersare now working collaboratively under onebrand – Pure. The shareholder companies inPure <strong>New</strong> Zealand Greenshell Mussels areSanford Limited, Sealord, Kono NZ Limitedand NZ Greenshell. This approach combinesresources and shares the risk and it is thefirst marketing initiative of this nature andscale among mussel producers.Chinese businesswoman Vivian Zhanghelped establish the company while onsecondment from <strong>New</strong> Zealand Trade andEnterprise and has since become PNZGM’sShanghai-based general manager. With along his<strong>to</strong>ry in business development forinternational <strong>New</strong> Zealand companies, Zhangbrings crucial Chinese business acumen<strong>to</strong> the task of re‐establishing a significantGreenshell mussel market in <strong>China</strong>.“This collaboration is a long-term businessmodel looking for long-term profit. We arevery confident in the future,” Zhang says.Pure is sold in<strong>to</strong> the food service sec<strong>to</strong>r,targeting western chefs familiar with theKiwi delicacy, and Asian chefs looking forinteresting new flavours.PNZGM is already a multi-million dollarexport venture and the target for 2012 is<strong>to</strong> double sales. The price paid for PNZGMproduct has risen from US$4.50/kg <strong>to</strong>US$4.85/kg in the past year. This is critical<strong>to</strong> maintaining export returns when the<strong>New</strong> Zealand dollar remains strong.Zhang says members of PNZGM visitcus<strong>to</strong>mers in <strong>China</strong>. She believes this isthe most important lesson for aspiringexporters: “People like <strong>to</strong> see Kiwi faces.It shows your commitment <strong>to</strong> the market.”Gary Hooper has worked closelywith PNZGM as marketing direc<strong>to</strong>r ofAquaculture <strong>New</strong> Zealand – the industrybody that represents Greenshell mussels,<strong>New</strong> Zealand salmon and farmedPacific oysters.“Chinese consumers love our product andassociate <strong>New</strong> Zealand with quality andfood safety. The economic growth andassociated consumption is phenomenal.”Hooper says the collaborative approachused by PNZGM has sparked interestin adapting the approach for channeland market development elsewhere.Other export sec<strong>to</strong>rs have also asked forinformation about the model <strong>to</strong> understandwhether it might be applicable and useful.www.purenzgreenshell.com“It’s not really a case of identifying the potential. Thepotential is huge. The question is how we best convertthat potential in<strong>to</strong> real economic growth opportunitiesfor our country.”Prime Minister John KeyAtraxKevin Maurice says no exporter shouldbe paralysed by the fear of intellectualproperty infringement in <strong>China</strong>. He’s hadhis intellectual property (IP) s<strong>to</strong>len orthreatened in Germany, Singapore andeven in <strong>New</strong> Zealand, but through goodmanagement and good luck, he’s yet <strong>to</strong>have problems in <strong>China</strong>.Maurice set up design and manufacturecompany Atrax about 25 years ago. Hisweighing and measuring products aresold <strong>to</strong> other businesses which then installthem in airports around the world. Atraxproducts – from the small scales whichweigh your check-on baggage <strong>to</strong> the largescales used <strong>to</strong> weigh cargo for air freight– are in 101 countries from Iraq <strong>to</strong> ThePhilippines. One example is Hong KongInternational Airport, where every piece ofbaggage, freight or mail passing throughthe airport is routed over an Atrax scale.The company is well-positioned in <strong>China</strong><strong>to</strong> take advantage of the surging demandfor air travel and resultant expansionof airports across Asia. Atrax beganmanufacturing in <strong>China</strong> about three yearsago, after Maurice sold off the domesticarm of his business <strong>to</strong> focus on exporting.There were a number of issues <strong>to</strong> resolvebefore Maurice was comfortable with hisChinese operation.He found it <strong>to</strong>ok substantial effort <strong>to</strong>document his processes so he could relyon them being made <strong>to</strong> his standardsoffshore. He has now developed thedocumentation <strong>to</strong> ensure a consistentlyhigh standard, but he has also employedan engineering manager who spendsaround half his year in-market.Maurice also had <strong>to</strong> find a fac<strong>to</strong>ry, andfor this he relied on his networks. Heand another <strong>New</strong> Zealand businessowner have collaborated <strong>to</strong> establish afac<strong>to</strong>ry in southern <strong>China</strong> which fulfilsboth their needs. The businesses havecomplementary technology but are inunrelated industries.Finally, Maurice had <strong>to</strong> tackle the issue ofIP infringement. While ensuring he hasall the necessary registrations in place,Maurice has also taken a much moresimplistic approach. He has segmentedhis business so that there is little contactbetween the design capability in<strong>New</strong> Zealand, the manufacturing plantin southern <strong>China</strong> and the sales centre inShanghai. He routinely ships bulk goodsback <strong>to</strong> <strong>New</strong> Zealand where the productsare then loaded up with the software. And,whenever he uses a sub-contrac<strong>to</strong>r in<strong>China</strong>, he will ask them <strong>to</strong> make a piece ofsteel or electronic part but never divulgewhat it is for.“Some of these things are in conflictwith Western management styles but I’mthe only guy who knows all the parts ofthe jigsaw.”Maurice encourages other Kiwi businesspeople <strong>to</strong> reconsider <strong>China</strong> if they’vepreviously dismissed it as <strong>to</strong>o hard.“It is a big market. It is close <strong>to</strong> other partsof the world. Meanwhile, we are a far-flunglittle dot in the South Pacific. You can onlydo so much business from <strong>New</strong> Zealand.You need <strong>to</strong> get amongst it.”www.atraxgroup.com
“Over half of <strong>China</strong>'s...1.35 billion...population now live in urban areas.”<strong>China</strong> National Bureau of Statistics, 2012
<strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 15The NZ Inc CHINA StrategyThis country strategy is part of a broader government strategy <strong>to</strong> increasethe internationalisation of the <strong>New</strong> Zealand economy which, in turn, is part ofthe wider Economic Growth Agenda. It supports the Government’s main goal<strong>to</strong> deliver greater prosperity, security and opportunity for all <strong>New</strong> Zealanders.The strategy is part of a whole-of-governmentapproach <strong>to</strong> growing exports and new markets.Developing and capitalising on <strong>New</strong> Zealand’srelationship with <strong>China</strong> is crucial in deliveringthe Government’s Economic Growth Agenda,including the goal of raising the level of ourexports <strong>to</strong> GDP from 30 <strong>to</strong> 40 percent by 2025.The NZ Inc <strong>China</strong> Strategy reflects <strong>China</strong> as animportant bilateral partner. It has a strong tradeand economic focus and sets out ambitious, highlevel,five-year goals and actions <strong>to</strong> achieve them.The strategy also provides an overview of thestrengths and weaknesses in <strong>New</strong> Zealand’sapproach in the market. The strategy hasbeen developed by ministers and governmentagencies with important input from industrygroups, businesses and organisations involved inbuilding <strong>New</strong> Zealand’s relationship with <strong>China</strong>.A central aim of this strategy is greaterefficiency and effectiveness across allgovernment agencies that work in and with<strong>China</strong>, and more targeted and cohesive services<strong>to</strong> help successful businesses develop and growin <strong>China</strong>. The strategy, however, goes beyondincreasing exports. It identifies issues thatimpact on <strong>New</strong> Zealand’s ambitions.<strong>New</strong> Zealand <strong>2015</strong> vision<strong>New</strong> Zealand and <strong>China</strong> have strong andresilient economic, political and people<strong>to</strong>-peoplerelationships which havestimulated <strong>New</strong> Zealand’s innovation,learning and economic growth.<strong>New</strong> Zealand’s ‘four firsts’ with <strong>China</strong> createa platform <strong>to</strong> achieve these goals.The challenge is <strong>to</strong> translate an excellentpolitical relationship and trading frameworkin<strong>to</strong> tangible benefits for <strong>New</strong> Zealand. Ourcompanies must be helped <strong>to</strong> harness valueas well as volume from the <strong>China</strong> market.Not only must we focus on what our businessesneed <strong>to</strong> succeed in this market, we also need <strong>to</strong>consider what we do in <strong>New</strong> Zealand <strong>to</strong> learnabout and work with <strong>China</strong> as a partner. Thisfocus would span investment and migration, andconsider <strong>to</strong>urists, students and business people.“<strong>China</strong>’s way of doing business is already having aninfluence around the world. World businesses willevolve <strong>to</strong> keep up with it.” McKinsey Global InstituteClockwise from <strong>to</strong>p left:Air travel expansion across Asia, Chinese student, Chinese cuisine,Chinese spice market, the Forbidden City in Beijing.
18 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong>It will build understanding of common challengesand opportunities for NZ Inc <strong>to</strong> balance andlead public discussion and support ministers.The Council will lead a high-level bilateralPartnership Forum with Chinese counterparts.Establish a bilateral financial andeconomic dialogue involving theReserve Bank and the Treasury.This will aim <strong>to</strong> build stronger mutualunderstanding of finance and economicpolicy positions and systems.Encourage more <strong>New</strong> Zealanders <strong>to</strong> learnChinese language skills, train teachers<strong>to</strong> run Chinese language programmesin schools and strengthen Asian studiesin universities.Strengthen and maximise areas ofcooperation between security and lawenforcement agencies in <strong>New</strong> Zealandand <strong>China</strong>.2Double two-way goods tradewith <strong>China</strong> <strong>to</strong> $20 billion by <strong>2015</strong><strong>China</strong> is <strong>New</strong> Zealand’s second-largest bilateraltrading partner with two-way trade worth $12.7billion in the year <strong>to</strong> Oc<strong>to</strong>ber 2011. Since theFTA came in<strong>to</strong> force in late 2008, exports from<strong>New</strong> Zealand have increased by 152 percent, thefastest growth with any major trading partnerin recent times. <strong>New</strong> Zealand’s annual tradedeficit with <strong>China</strong> has also reduced by nearly60 percent.Two-thirds of <strong>China</strong>'s population– an estimated 64 percent – will livein cities by 2025.McKinsey Global InstituteThis has been underpinned by growth incommodities, but there are encouraging signsof significant development in higher value,differentiated products and services. Thecompetitive advantages offered through theFTA are increasingly apparent and will growsignificantly in the next few years.In addition <strong>to</strong> the FTA, there are environmentalfac<strong>to</strong>rs which present a significant economicopportunity for <strong>New</strong> Zealand. Among these are:<strong>China</strong>’s projected economic growth; continuedurbanisation; its role in global supply chains;demand for resources; and a growing middleclass of consumers who expect food safety andsecurity. There are many points of commoninterest between <strong>China</strong> and <strong>New</strong> Zealand, mos<strong>to</strong>bviously in the agritech and food and beveragesec<strong>to</strong>rs, but with growing opportunities intechnologies, natural products and specialisedmanufacturing and services.<strong>New</strong> Zealand’s challenge will be <strong>to</strong> realisethis potential and maximise the relationshipwith <strong>China</strong> in addition <strong>to</strong> our current globaltrade profile, maintaining a balanced view ofthe world. Interest amongst the <strong>New</strong> Zealandbusiness community is strong, but thereremains a great deal <strong>to</strong> be done <strong>to</strong> translate thatinterest in<strong>to</strong> market-ready, commercially-viablebusinesses capable of engaging in a sustainableand profitable way with <strong>China</strong>.Orion healthOrion Health has been active in <strong>China</strong>for nine months and is determined <strong>to</strong>not repeat its competi<strong>to</strong>rs’ mistakes.Orion is an Auckland-based healthinformation technology (IT) vendor, and<strong>New</strong> Zealand’s largest privately-ownedsoftware exporter. Its software is usedby clinicians in over 50 countries <strong>to</strong>quickly access patient records acrossa variety of sources.Executive vice president hospitalsolutions, Wayne Oxenham, says Orionstarted planning <strong>to</strong> enter <strong>China</strong> abouttwo years ago. It commissioned researchand developed a high-level marketentry strategy. A priority was a localChinese opera<strong>to</strong>r who had networksand local business understanding soOrion appointed a Chinese resident in<strong>New</strong> Zealand as <strong>China</strong> general manager,and it is now recruiting Chinese peopleTraditional Chinese fishing boat (left),Chinese fac<strong>to</strong>ry worker (right).who have studied in <strong>New</strong> Zealand <strong>to</strong> growwith the company and eventually return<strong>to</strong> <strong>China</strong> <strong>to</strong> work for Orion.Oxenham says Orion is moving slowlyand purposefully. Products have beenreworked <strong>to</strong> fit the market – from therefocusing of marketing collateral <strong>to</strong>highlight what is important <strong>to</strong> Chinesecus<strong>to</strong>mers, <strong>to</strong> the formation of qualitytranslation upgrades using Chinese textacross Orion’s software.<strong>China</strong> has commanded a lot of resourcesand effort but Oxenham says this market –where the military alone has 1,000 medicalcentres and hospitals – is worth it. “Thepotential is unbelievable. If we capturetwo percent of the market, we’ll generate$100 million in five years. If we’re not there,we’re not truly global.”www.orionhealth.com
20 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 21How will we achieve this goal?<strong>China</strong> high-growth companies projectA substantial group of <strong>New</strong> Zealand Trade andEnterprise’s (NZTE) cus<strong>to</strong>mers have <strong>China</strong>as a priority market in the short and mediumterm.NZTE has assessed the needs of thesecompanies and will implement a project <strong>to</strong>help them realise their full growth potential in<strong>China</strong>. Through this project NZTE is targeting50 or more successful, profitable and fastgrowingcompanies in <strong>China</strong> by <strong>2015</strong>.The project will help exporters <strong>to</strong> analyse andunderstand the market; develop products andservices for <strong>China</strong>; and identify appropriatepartners and business models. Expert advisorswill also be assigned <strong>to</strong> assist these companiesand, where appropriate, raise capital <strong>to</strong> supporttheir growth. These services will be tailored <strong>to</strong>cus<strong>to</strong>mers and will be additional <strong>to</strong> the suite ofadvisory services already offered by NZTE.Emphasis will also be placed on collaborativeinitiatives where market entry and developmentwill occur more effectively.Target priority sec<strong>to</strong>rsThere are some evident sec<strong>to</strong>rs of opportunityfor <strong>New</strong> Zealand businesses in <strong>China</strong> andstructured programmes have been put inplace or are in the process of being developed<strong>to</strong> realise their potential. Priority sec<strong>to</strong>rs arefood and beverages (notably seafood and wine);agribusiness (including food safety); high-valuemanufacturing across a number of sub-sec<strong>to</strong>rs“Companies must have both theflexibility <strong>to</strong> adapt and the skills <strong>to</strong>innovate <strong>to</strong> keep in step with theChinese market’s exciting development.”McKinsey 2011 Annual Chinese Consumer reportsuch as aviation, marine, commercial fit-out,food processing technologies, etc; informationand communication technologies; and naturalproducts and bioactives.Each sec<strong>to</strong>r programme will realise marke<strong>to</strong>pportunities for all <strong>New</strong> Zealand exporters andheighten the awareness of their capabilities andexpertise amongst Chinese cus<strong>to</strong>mers.During 2012, the ‘Chef-in Market’ programmewill be intensified based out of <strong>New</strong> ZealandCentral in Shanghai; a comprehensive winepromotion will be developed and implemented;further support will be given <strong>to</strong> collaborativeand individual initiatives in the seafood sec<strong>to</strong>r;a wide-ranging research programme will beundertaken in niche areas; and a programmeof business missions in<strong>to</strong> and out of <strong>China</strong> willbe implemented.Growing the base of <strong>China</strong>-ready exportersRecognising the need <strong>to</strong> grow the volume of<strong>New</strong> Zealand companies ready for the <strong>China</strong>market, NZTE will build on its successfultraining programme for businesses at the earlystages of their preparation for <strong>China</strong>. Thecourses have been offered nationwide sinceearly 2011 and their breadth and reach will beexpanded. These will assist companies with thebasics of doing business in <strong>China</strong> andwill identify training needs for furtherdevelopment for those wishing <strong>to</strong> intensifytheir engagement. NZTE will also work withother agencies and trade organisations <strong>to</strong>stimulate broader interest and awarenessof business opportunities with <strong>China</strong>.Representing <strong>New</strong> Zealand businessin <strong>China</strong>In close collaboration with other governmentagencies, NZTE will moni<strong>to</strong>r and communicatechanges <strong>to</strong> the business environment in <strong>China</strong>that may affect <strong>New</strong> Zealand’s commercialactivities. A key component will be <strong>to</strong> assistcompanies with the complexities of exporting<strong>to</strong> <strong>China</strong> and deal with the rapidly changingregula<strong>to</strong>ry environment. Where appropriate,NZTE will work alongside companies <strong>to</strong>accelerate their market entry and consolidatetheir position in the market.A close working relationship with counterpartChinese entities maintained across theNZ Inc network will also help companiesthrough a potentially complex and unfamiliarregula<strong>to</strong>ry environment.3Grow services trade with <strong>China</strong>(education by 20 percent, <strong>to</strong>urismby at least 60 percent, and otherservices trade) by <strong>2015</strong>High value, profitable non-commodity growthwill be essential <strong>to</strong> achieving <strong>New</strong> Zealand’seconomic goals. As with our goods trade, wehave scope <strong>to</strong> do better in our traditional serviceexports <strong>to</strong> <strong>China</strong> – education and <strong>to</strong>urism –and <strong>to</strong> develop other areas, such as design,architecture, consulting, IT, environmentand food safety services.Education: grow value of educationservices by 20 percentThe Government has set a goal of doubling theeconomic value of export education services <strong>to</strong>$5 billion by 2025. <strong>China</strong> is the largest source offoreign students in <strong>New</strong> Zealand with 21,000enrolments in 2010. Around 90 percent are inthe tertiary sec<strong>to</strong>r and it is estimated Chinesestudents add approximately $600 million <strong>to</strong>the <strong>New</strong> Zealand economy annually.With improved targeted promotion by the newCrown entity, Education <strong>New</strong> Zealand, andgreater cooperative promotional spend amonginstitutions, the Government hopes <strong>to</strong> increasethe market share of Chinese students, withoutcompromising the diversity and capacity oflearning institutions.<strong>China</strong> expects <strong>New</strong> Zealand <strong>to</strong> provide statebackedquality assured international educationservices for Chinese students. This is crucial ifthe value of the <strong>New</strong> Zealand education brandin <strong>China</strong> is <strong>to</strong> be protected and enhanced.<strong>China</strong> is also the main market for offshoredelivery of <strong>New</strong> Zealand education services. Ourcompeti<strong>to</strong>rs are establishing campuses in <strong>China</strong>.
22 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 23Universities <strong>New</strong> ZealandDerek McCormack, Vice-Chancellor ofAuckland University of <strong>Te</strong>chnology andoutgoing Chair of Universities<strong>New</strong> Zealand, says the export educationcrash of almost a decade ago showed that<strong>New</strong> Zealand could not rely on a mass ofstudents from a single source country.<strong>New</strong> Zealand needs <strong>to</strong> think smarter –looking at a much broader profile ofsource countries <strong>to</strong>gether withcollaborations which provide a richerexperience and greater benefit <strong>to</strong> thecountries we work with.With that in mind, he says, universitiesneed <strong>to</strong> focus on the development ofhigh-quality research and educationalpartnerships, from research collaborationsNgai Tahu HoldingsTrevor Burt spent five years living andworking in <strong>China</strong> before taking his positionwith South Island iwi Ngai Tahu.As chair of Ngai Tahu Holdings, he helpednegotiate the deal <strong>to</strong> develop a consortiumwith Singapore-based Agria and Chineseagriculture giant <strong>New</strong> Hope, which hastaken a majority stake in PGG Wrightson.Burt says there are similarities in theoutlook of Māori and Chinese businesses.Both take a long-term view and considertheir dealings <strong>to</strong> be those of a familybusiness. “When you enter in<strong>to</strong> apartnership, you need <strong>to</strong> align and thereis a similarity around the way Chinese andMāori think.”Māori businesses should make the most ofthis, he says, but not expect that they willresult in any advantage beyond some earlygoodwill. “It’s got <strong>to</strong> be commercially soundand sensible. You can’t broker a deal out ofgood feeling.”Burt’s experience is that there is no magic<strong>to</strong> dealing with <strong>China</strong> – businesses justneed <strong>to</strong> be forewarned about the role ofrelationship-building and anticipate the<strong>to</strong> student and staff exchanges and jointlyofferededucation programmes.Chinese students account for about 6000of the 17,000 international students in<strong>New</strong> Zealand universities and educatingthem will continue <strong>to</strong> be an importantsource of income. But McCormack sayssustainable, high-quality outcomes inbusiness, diplomacy and industry willgrow from postgraduate collaborations.In this way, <strong>New</strong> Zealand will be workingalongside and deepening engagementwith <strong>China</strong> in knowledge exchange.“That’s what we should be focusingon and growing.”www.universities.ac.nznegotiation process may take longer. Hesays, if you can source them, it’s invaluable<strong>to</strong> have people on your team who arefamiliar with Chinese business.All businesses should recognise that theirfirst partnership with a Chinese entity couldbe beneficial beyond the deal on the table.For example, <strong>New</strong> Hope has interests indairying which is an area Ngai Tahu is keen <strong>to</strong>develop so there is potential for the businesspartners <strong>to</strong> work <strong>to</strong>gether in other areas.Burt says a good portion of Ngai TahuHoldings’ earnings flow from <strong>China</strong>. It isthe largest export market for Ngai Tahu’sseafood business, and Chinese are thefastest growing client group for the tribe’s<strong>to</strong>urism ventures, which include Sho<strong>to</strong>verJet and Huka Jet.The partnership with Agria and <strong>New</strong> Hopewill help Ngai Tahu <strong>to</strong> better understandthe Chinese market so it can make the mos<strong>to</strong>f opportunities <strong>to</strong> increase the flow of<strong>to</strong>urists through its <strong>New</strong> Zealand businessesand maintain its lucrative position in theseafood industry.www.ngaitahu.iwi.nz“…companies trying <strong>to</strong> succeed in <strong>China</strong> need <strong>to</strong>remember that a number of Chinese cities are largerthan many European countries.”McKinsey 2011 Annual Chinese Consumer reportTwo thousand Chinese students are enrolledin <strong>China</strong>-based <strong>New</strong> Zealand programmes.There is potential <strong>to</strong> more than double thisnumber and <strong>to</strong> grow associated earnings fromconsultancy and training services.Chinese students have the second highesttransition rates <strong>to</strong> work and residence in<strong>New</strong> Zealand, and therefore make animportant contribution <strong>to</strong> our labour force,helping <strong>to</strong> lift productivity rates. <strong>New</strong> Zealandmust invest in thorough assessment andverification of applications <strong>to</strong> study and live in<strong>New</strong> Zealand, while avoiding the establishmen<strong>to</strong>f unnecessary barriers <strong>to</strong> bona fide Chinesestudents and migrants.international STUDENts by countryCHINASOUTH KOREAINDIAJAPANSAUDI ARABIA4.7%8.7%13.4%13.2%24.7%Distribution of international fee-paying students by Country of Citizenship (2011)Source: Export Education Levy Key StatisticsHow will we achieve these exporteducation goals?Complete an in-depth education marketanalysis and develop a targeted, <strong>China</strong>specificmarketing and promotioncampaign for <strong>New</strong> Zealand education.Explore and facilitate possibilities formutual recognition of professionalqualifications.This will enhance the attractiveness of NZqualifications for Chinese students in acompetitive market.Extend the number of NZ private trainingenterprises listed on the <strong>China</strong> Ministryof Education Study Abroad website.
24 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 25Tourism: grow <strong>to</strong>urism servicesby at least 60 percent<strong>China</strong> is our fastest growing and fourth largestinternational visi<strong>to</strong>r market. Chinese havetraditionally holidayed in <strong>New</strong> Zealand aspart of a <strong>to</strong>ur group under <strong>China</strong>’s ApprovedDestination Status (ADS) system. However,there has been an increase in the numberof independent and semi-independentholidaymakers. The focus is on ensuring thequality of <strong>to</strong>ur group travel and motivatingindependent or small-group Chinese travellers<strong>to</strong> visit <strong>New</strong> Zealand.Air <strong>New</strong> Zealand has direct flights fromShanghai and Beijing but there are capacityconstraints through other Asian hubs,especially during the peak summer period.Direct flights from Guangzhou by <strong>China</strong>Southern Airlines started in April 2011 andin November 2011 it moved <strong>to</strong> daily flights,bringing greater stability <strong>to</strong> air connections.On current growth projections, a new airservices agreement will be needed within thenext year <strong>to</strong> allow further expansion of services.Aviation talks will take place this year.<strong>New</strong> Zealand welcomed 141,000 Chinesevisi<strong>to</strong>rs in the year <strong>to</strong> November 2011. In the2010 calendar year, Chinese visi<strong>to</strong>rs madean economic contribution of $362 million.The goal is <strong>to</strong> grow this figure by 60 percent.The growth in visi<strong>to</strong>rs from <strong>China</strong> hasbeen significant in recent years. In the yearending November 2011, 141,000 travellersfrom <strong>China</strong> visited <strong>New</strong> Zealand. Averageannual growth of 8.4 percent is forecastbetween 2010 and 2016, increasing visi<strong>to</strong>rarrivals <strong>to</strong> around 180,000 per year.Tourism <strong>New</strong> ZealandHow will we achieve these <strong>to</strong>urism goals?Tourism <strong>New</strong> Zealand and otheragencies will develop the brand <strong>to</strong> tellthe <strong>New</strong> Zealand s<strong>to</strong>ry for specific keysec<strong>to</strong>rs in <strong>China</strong>, and will invest furtherin in-market promotion <strong>to</strong> supportairlines investment in new services.Meanwhile, Immigration <strong>New</strong> Zealand’sShanghai-based service, one of its four<strong>China</strong> operations, has expanded andhas an outsourcing agreement for thelodgement of applications.Other services<strong>China</strong> is maturing as a market for <strong>New</strong> Zealandideas and skills, as well as goods. The followingareas all have significant potential <strong>to</strong> grow:design and architecture; water management;film and television company production;green engineering; entertainment, includingadvertising; IT and educational resources.How will we achieve these service goals?Improved statistics on services trade wouldcapture a more accurate picture of the growth inthese areas and help identify possible areas forincreased service liberalisation under the FTA.4Increase bilateral investment <strong>to</strong>levels that reflect the growingcommercial relationship with <strong>China</strong>Bilateral investment flows relative <strong>to</strong> bilateraltrade volumes are low. There are a number ofreasons for this: Chinese inves<strong>to</strong>rs and businessesare unaware of <strong>New</strong> Zealand opportunities; the<strong>New</strong> Zealand deal size is relatively small for majorChinese inves<strong>to</strong>rs; outward Chinese investmentis subject <strong>to</strong> strict controls; and <strong>New</strong> Zealandinves<strong>to</strong>rs are inexperienced in Chinese markets.<strong>New</strong> Zealand would benefit from increasedForeign Direct Investment (FDI) from <strong>China</strong>,and Outward Direct Investment (ODI) in<strong>to</strong><strong>China</strong>. It would serve our country well if levelsof bilateral investment reflected our countries’growing commercial relationship.Inward investmentIt is estimated <strong>China</strong> invested approximatelyUS$60 billion internationally in 2010/11. TotalChinese investment s<strong>to</strong>ck in <strong>New</strong> Zealand is$1.87 billion; the comparative figure of FDIfrom Australia is $100 billion. Avenues forCommunications in CHINAMOBILE PHONE USERSINTERNET USERS WITH BROADBAND ACCESSTELEPHONE CONNECTIONSSource: <strong>China</strong>'s Ministry of Industry and Information <strong>Te</strong>chnology (2011).increasing investment in <strong>New</strong> Zealand includeChinese state-owned enterprises, which couldprovide investment capital for strategic resourcedevelopment and infrastructure funding. Majoroutward FDI bids from Chinese firms are subject<strong>to</strong> Chinese government vetting. Private Chineseinves<strong>to</strong>rs are showing increased interest in certainsec<strong>to</strong>rs of the <strong>New</strong> Zealand economy. Sec<strong>to</strong>rs ofdemonstrated or possible interest include food andbeverage, natural resources, cleantech, high-valuemanufacturing, IT, and infrastructure. Significantrecent investment by Chinese firms includesBright Foods (in Synlait), Haier (F&P Appliances)and Agria (PGG Wrightson).Policy settingsAcquisition by foreign inves<strong>to</strong>rs of <strong>New</strong> Zealandfarming assets is a sensitive issue for some.Over the last five years, sales of land <strong>to</strong> Chineseinves<strong>to</strong>rs have been less than 1 percent of <strong>to</strong>talsales <strong>to</strong> overseas inves<strong>to</strong>rs. The Government hasundertaken a review of the Overseas InvestmentAct <strong>to</strong> improve its operation and effectiveness.Officials are working on a detailed policyframework <strong>to</strong> assist in targeting, attracting952 MILLION150 MILLION288 MILLION
26 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 27From 1949 <strong>to</strong> 1978, 280,000 Chinese nationalstravelled abroad. In 2004, 22 million went abroad,rising <strong>to</strong> 57 million in 2010. Chinese officials anticipatethis will exceed 100 million in the next five years.Ministry of Foreign Affairs and TradeSteel mill (left), Chinese <strong>New</strong> Year dragon (right).LanzatechTwo years ago, Lanza<strong>Te</strong>ch co-founderSean Simpson made his first business trip<strong>to</strong> <strong>China</strong>.Today his cleantech company haspartnerships with five global Fortune 500companies in <strong>China</strong>, including a joint-venturewith Baosteel and a demonstration facilityat one of the Chinese state-owned iron andsteel company’s Shanghai steel mills.That is the speed with which your businesscan take off once you climb on board the<strong>China</strong> phenomenon, Simpson says.Lanza<strong>Te</strong>ch uses a unique microbe <strong>to</strong> turn gaswaste in<strong>to</strong> ethanol. The company’s researchand development arm is in Auckland and ithas offices in Shanghai and Chicago.Lanza<strong>Te</strong>ch’s swift entry <strong>to</strong> the Chinese markethas necessitated a swift education in Chinesebusiness. Simpson says the first rule is <strong>to</strong>focus on building relationships rather thantalking money.“It’s not a quick thing. One dinner is not going<strong>to</strong> do it. It’s more about time rather thanthrowing money at it. Relationships buil<strong>to</strong>ver time are important.”Many Kiwi businesses are afraid of losing theirintellectual property (IP) in <strong>China</strong>. Simpsonsays retaining your IP should be the bot<strong>to</strong>mline of any agreement.“If part of the deal is <strong>to</strong> own the IP, it’s thewrong deal, it’s the wrong partner. Get out.”Despite the hefty time investment <strong>to</strong> buildrelationships, and the need <strong>to</strong> mitigate thepotential for IP infringement, Simpson saysbusinesses considering entering <strong>China</strong>should go for it.“The people who are contemplating goingthere have got balls. It isn’t a scary place ifyou take precautions. Avoid the negativity:<strong>China</strong> is the future. We’ve got <strong>to</strong> look East.”www.lanzatech.co.nzand utilising FDI, which will underpin theinvestment goals of all NZ Inc strategies.This will create greater certainty for Chineseinves<strong>to</strong>rs and help in shaping future investment.How will we achieve greater inwardinvestment from <strong>China</strong>?More resources have been allocated <strong>to</strong>encouraging focused investment from<strong>China</strong> that creates new opportunitiesand capabilities.<strong>New</strong> Zealand officials have been working with<strong>China</strong>’s Investment Promotion Agency (CIPA)on the preparation of high-quality, up-<strong>to</strong>-date,Chinese-language information on the rulesand regulations of investment in <strong>New</strong> Zealand.Agencies will also prioritise work <strong>to</strong> finalise<strong>New</strong> Zealand’s FDI/ODI policy platform.Outward investmentTotal <strong>New</strong> Zealand investment s<strong>to</strong>ck in <strong>China</strong>is $541 million; this compares <strong>to</strong> $36 billionin Australia. The low rate of <strong>New</strong> Zealandinvestments in all key markets, except Australia,correlates with a lack of <strong>New</strong> Zealand investmentup the value chain and a predominant modelbased on production and export of raw materialsor primary manufacturing and export of goodsvia third parties, e.g. agents and distribu<strong>to</strong>rs.Lifting the level of <strong>New</strong> Zealand investmentin <strong>China</strong> is a priority. We need <strong>to</strong> build on thesuccesses of companies such as Fonterra, Rakon,Nuplex, Sanford and Richina, all of whichhave invested in their own, or joint venture,operations in <strong>China</strong>.5Grow high quality science andtechnology collaborations with<strong>China</strong> <strong>to</strong> generate commercialopportunities.<strong>New</strong> Zealand science has a world-classreputation, and <strong>China</strong> provides newopportunities for the commercialisationof science and international scientificcollaboration. <strong>New</strong> Zealand’s participationin cooperative research teams providesa means <strong>to</strong> share and protect intellectualproperty generated from research thatis commercialised.Until recently, the <strong>New</strong> Zealand scienceeffort in <strong>China</strong> could be characterised aspredominantly individual academic contactwith a developing <strong>China</strong> science sec<strong>to</strong>r, withlittle strategic or commercial impact. PrimeMinister John Key’s meeting with PremierWen Jiabao in 2010 identified science andtechnology as lagging behind other aspectsof the relationship and agreed <strong>to</strong> remedythis. Priority areas of collaboration are food,health and biomedical sciences, environmentalscience, and high technology platforms.<strong>China</strong> is also emerging as a possible test bedfor cutting-edge <strong>New</strong> Zealand technologies,particularly in the area of greentech andindustrial technology. Auckland-basedbiotechnology company Lanza<strong>Te</strong>ch has signeda partnership with the second-largest steelcompany in the world, Baosteel, and is testingits emissions mitigation technology in its mills.
28 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 29“The penetration of certain goods may be high in<strong>China</strong>’s more economically developed regions, butplenty of consumer-conversion opportunities remainin less developed ones.”McKinsey 2011 Annual Chinese Consumer reportHow will we grow science collaborationswith <strong>China</strong>?We will use the jointly-funded <strong>New</strong> Zealand<strong>China</strong> Strategic Research Alliance <strong>to</strong>facilitate more substantive bilateralresearch collaboration.The Alliance will nurture research opportunities,conduct research and commercialise research.The Alliance will identify a small number oflarge scale bilateral projects, supported by a JointFunding Mechanism worth around $2 millionover three years. The Prime Minister’s ChiefScience Advisor will continue <strong>to</strong> engage with<strong>China</strong>'s science leaders on new opportunities.<strong>New</strong> Zealand will also provide additional<strong>China</strong>-based science resourcing <strong>to</strong> help fosterstronger links between <strong>New</strong> Zealand andChinese researchers. This would ideally beaccompanied by significant investment inbilateral science projects.Supporting the goals: <strong>New</strong> Zealand’svalue propositionAchieving the strategy’s goals requires better<strong>New</strong> Zealand branding in <strong>China</strong>. We need<strong>China</strong> <strong>to</strong> understand the unique opportunitiesarising from collaboration with a smart, lean,innovative nation like <strong>New</strong> Zealand. We alsoneed more Kiwis who are literate in <strong>China</strong>’slanguages and culture.Maori culture offers a point of difference whichbenefits <strong>New</strong> Zealand companies offshore. In2010, Maori Affairs Minister Pita Sharples visitedthe large and fast-growing province of Guizhou.It’s believed this province is a good fit withMaori businesses both on a sec<strong>to</strong>r level (both arestrong in <strong>to</strong>urism, fisheries, animal husbandry,horticulture, and education) and culturally(Guizhou is home <strong>to</strong> large ethnic communities).Guangzhou also offers potential as a hubfor Māori commerce. A small Māori businessdelegation has recently visited Guizhou andGuangzhou, with <strong>Te</strong> <strong>Puni</strong> Kōkiri (TPK), MFATand NZTE officials. This was successful in furtherexploring a number of emerging opportunitiesin agriculture, education and <strong>to</strong>urism.How will we develop <strong>New</strong> Zealand’s valueproposition?In <strong>China</strong>, the <strong>New</strong> Zealand brand conjuresvaluable associations, such as safe food and worldbeating<strong>to</strong>urism. This brand will be developed <strong>to</strong>tell the <strong>New</strong> Zealand s<strong>to</strong>ry for other specific keysec<strong>to</strong>rs in <strong>China</strong>. A common set of messages isrequired for NZ Inc <strong>to</strong> use in engagement with<strong>China</strong> so that the value proposition is clear.Existing <strong>New</strong> Zealand and Māori brands willbe protected.TPK is working with NZTE and MFAT <strong>to</strong> focuson south/west <strong>China</strong>, <strong>to</strong> tap in<strong>to</strong> opportunitiesfor Māori businesses.Ways <strong>to</strong> build knowledge of <strong>China</strong> in<strong>New</strong> Zealand will be explored. This is important<strong>to</strong> help <strong>New</strong> Zealanders feel more comfortablewith engagement with <strong>China</strong> and are equipped<strong>to</strong> succeed, and <strong>to</strong> ensure <strong>New</strong> Zealand is awelcoming place for Chinese business people,migrants, inves<strong>to</strong>rs and <strong>to</strong>urists.<strong>Te</strong> <strong>Puni</strong> KŌkiriA number of high-level Māori businessdelegations have helped introducesuccessful and innovative Māori <strong>to</strong> thepotential of <strong>China</strong>.In September 2010, the Minister ofMāori Affairs Dr Pita Sharples led a verysuccessful Māori business delegation<strong>to</strong> Beijing, Guizhou, and Shanghai.It promoted cultural and businessconnections between Māori and Chinese.<strong>Te</strong> <strong>Puni</strong> Kōkiri Chief Executive Leith Comersays: “There are many similarities in cultureand cus<strong>to</strong>mary practices between Māoriand Chinese. Building relationships basedon the sharing of cultures has proved <strong>to</strong>be very effective at opening doors forcommercial engagement.”Similarities include a values-basedapproach <strong>to</strong> business, the importanceof building strong relationships and anintergenerational perspective whenconsidering investment.In 2011, Comer returned <strong>to</strong> <strong>China</strong> witha delegation of senior Māori leaders,visiting Guizhou, the cities of Guangzhouand Shenzhen and Hong Kong. This visitprogressed a number of Māori businessprojects and further strengthenedrelationships between Māori and <strong>China</strong>.www.tpk.govt.nzComer says both cultures value meeting“kanohi ki te kanohi” (face <strong>to</strong> face). “Thereis a strong cultural empathy and themeasured and respectful way in whichMāori firms conduct business in <strong>China</strong> isacknowledged and recognised.”Māori business assets align with<strong>New</strong> Zealand’s export success, namelydairying, <strong>to</strong>urism, meat, wood and seafood.Comer says Māori have an opportunity <strong>to</strong>drive <strong>New</strong> Zealand exports and trade.Comer says Māori goods and serviceshave a unique point of difference – thatis tikanga Māori (such as kaitiakitanga,kotahitanga, whanaungatanga) – whichis inherent <strong>to</strong> Māori goods and services,and Māori ways of doing business.“This is an under-leveraged global valueproposition, not only for the Māorieconomy but for <strong>New</strong> Zealand. Overseasmarkets are increasingly responsive <strong>to</strong>cultural distinctiveness such as Māoribranding. Branding is vital <strong>to</strong> tell the s<strong>to</strong>ryof the product/service, <strong>to</strong> explain itswhakapapa – this adds value and createsa niche product/service.”Comer says a number of successful Māoriexporters are paving the way for otherMāori enterprises.
“<strong>China</strong> could represent...35%of the world’s<strong>to</strong>tal growth…in GDP over the coming four years.This growth will raise disposable incomes<strong>to</strong> an extent never before seen in anyother market anywhere – pulling tens ofmillions of households in<strong>to</strong> the middleclass and beyond.”Bos<strong>to</strong>n Consulting Group
<strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 33Doing Business in CHINAMost <strong>New</strong> Zealand business leaders are well aware of the potential in <strong>China</strong>,but are less confident of how <strong>to</strong> enter and conduct business in the market.Clockwise from <strong>to</strong>p left:Bridge at night in Shanghai, Chinese student,Chinese lanterns, fresh fruit and vegetable market.Some are paralysed by the scale of a market wherea government housing project involves building36 million homes over four years. <strong>China</strong> is a farcry from the domestic <strong>New</strong> Zealand market – it is36 times the size of <strong>New</strong> Zealand, has a populationover 300 times larger and a growth rate that seesits economy double every seven years.The reality is <strong>China</strong> is several largeregional markets and many niche andmicro-niche markets. Compartmentalisingthe market makes <strong>China</strong> more accessible<strong>to</strong> <strong>New</strong> Zealand businesses.“Many companies have bet high stakes in<strong>China</strong> only <strong>to</strong> realise disappointing returns,often because of the complexity of <strong>China</strong>’smarkets.” Bos<strong>to</strong>n Consulting GroupWhile there are difficulties in doing business in<strong>China</strong>, companies already in <strong>China</strong> see problemsas fewer in number and of lesser importancethan those looking at <strong>China</strong> from <strong>New</strong> Zealand.The decision <strong>to</strong> manufacture in <strong>China</strong> shouldn’tbe made <strong>to</strong> chase cost reductions. As labourrates rise swiftly, along with tax rates and othercompliance costs, commenta<strong>to</strong>rs advise a movein<strong>to</strong> Chinese manufacturing should be based onother fac<strong>to</strong>rs, such as proximity <strong>to</strong> the market,scale, lead time and quality.<strong>New</strong> Zealand Trade and Enterprise’s website– www.nzte.govt.nz – has a vast array ofinformation about preparing for <strong>China</strong>.However, here are just a few tips:• Relationships are vital for success and, in spiteof what you may be <strong>to</strong>ld, genuine relationshipscan’t be bought. Foreigners should create theirown Guanxi (networks). Chinese will usuallyprefer <strong>to</strong> be introduced <strong>to</strong> you by a trusted (ienot paid) go-between. Although the issue ofrelationship-building is sometimes overstated,you must invest in building durablerelationships. Actively seek ways <strong>to</strong> deepenand broaden your network.• Seek local advice and lots of it. Then,always ‘calibrate’ that local advice usingyour own experience, personal instinctsand best judgment.• Ask lots of questions and seek clarification.Never assume there is mutual understanding.Leave nothing <strong>to</strong> doubt, interpretationor speculation. Clearly summariseunderstandings and expectations in writing.• Be realistic. While there are potentially hugegains <strong>to</strong> be made, there is no longer any lowhangingfruit. <strong>China</strong> will require hard workwith less certainty of significant gains.• Be patient. Getting started in <strong>China</strong> willbe time-consuming and take significantresources. Don’t expect Kiwi efficiencyand overnight results. Success is unlikely<strong>to</strong> come quickly or easily. It is a costly andunfortunately common mistake <strong>to</strong> assumeyou will seal a deal or come anywhere close<strong>to</strong> it on your first visit <strong>to</strong> <strong>China</strong>.
34 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 35Top FIVE business tips – John Cochrane<strong>New</strong> Zealand’s trade commissioner <strong>to</strong><strong>China</strong>, John Cochrane, spent severalyears operating in <strong>China</strong> with successful<strong>New</strong> Zealand business Commtest. Here,he summarises his five <strong>to</strong>p tips for buildinga base in <strong>China</strong>:tip number oneDo not enter <strong>China</strong> for a one-off deal, nomatter how appealing such a deal appears.• You must be in <strong>China</strong> for the long game.• Negotiations surrounding lucrativeone-off deals and the adjacent resourcedrain on your company can be enormous.The Chinese are experts at the game ofout-lasting the opponent.tip number twoDon’t assume you will be able <strong>to</strong>successfully run your <strong>China</strong> operation fromhome. You must make a <strong>to</strong>tal commitment<strong>to</strong> local presence – go in boots and all! Atthe very least, appoint a permanent <strong>China</strong>relationship person (bridge person) assoon as possible.• This person must love and embrace the<strong>China</strong> challenge.• This person should be comfortablespending lots of time in <strong>China</strong>.• They could be Kiwi or Chinese national,but in either case they must be culturallyadaptable.• Their presence is vital as new competi<strong>to</strong>rs– foreign and domestic – can appear‘overnight’. Nurture and prune – tend thegarden – of personal relationships.• Recognise that anonymity and absenceare the deadly silent assassins of bothrelationships and deals. In complexcorporate deals, the most trusted supplierwins the contract more often than not,even if they are more expensive, and theChinese are unlikely <strong>to</strong> trust someonewho is barely known or rarely seen.tip number threeProtect your intellectual property.• It is easier, faster and cheaper thanyou probably think.• This won’t s<strong>to</strong>p all IP problems, butwithout legal protection you are trulyinviting IP problems.tip number fourBe prepared <strong>to</strong> re-create and re-engineeryour original entry strategy.• The wisdom gained from the marketentry experience will strengthen yourlong-term strategy.tip number fiveRecognise that <strong>China</strong> will not change <strong>to</strong> suityour preferred method or approach. <strong>China</strong>has spent 5,000 years as a non-egalitariansociety. The Chinese are not like us, andthey don’t want <strong>to</strong> be, so get over it!• Chinese business is strongly hierarchical,with layers of complex loyalties <strong>to</strong>manage and navigate.• Family loyalty comes first, then true‘friends’, then the ‘village’, and strangersare on the far outside.• First-time suppliers are not consideredpeers of their desired cus<strong>to</strong>mers.Be prepared <strong>to</strong> approach potentialcus<strong>to</strong>mers as a subordinate would.• Pay genuine respect <strong>to</strong> pro<strong>to</strong>col andtradition. A begrudging or patronisingapproach will be easily detected bythe Chinese.“Asian growth is an undeniable, inexorable, megatrendthat is fundamentally and permanently changing theface of this world.” Service Success In Asia report, Vic<strong>to</strong>ria Universityand Ministry of Science and Innovation• Local decision-making can drag on ‘forever’,but in the end the action happens veryquickly, so expect spurts of frantic activityafter long periods of what appears <strong>to</strong> be‘analysis paralysis’.• Press hard for periodic metrics of progress.You must measure progress, not just activity.• Accept contradictions and last-minutechanges without frustration. These arean expected and accepted part of doingbusiness in <strong>China</strong>.• Be sociable. The real deals are done outsidethe office and outside normal business hours.<strong>China</strong> Business TrainingOver 400 people have taken part in NZTE’s<strong>China</strong> Business Training aimed at helpingbusinesses crack <strong>China</strong> and succeed.Participants came from a variety ofcompanies and gave the course a 100percent approval rating, with somecompanies booking cus<strong>to</strong>misedsessions for staff.The training offers extensive informationon cultural aspects of business conduct,key regulations relevant <strong>to</strong> <strong>New</strong> Zealandbusinesses and examples of how <strong>to</strong>overcome problems encountered.Preparing for <strong>China</strong><strong>China</strong>’s markets are very price sensitive.You need <strong>to</strong> have done the research <strong>to</strong>validate the potential and the investment.As with other markets, breaking in<strong>to</strong> <strong>China</strong>requires considerable funds. <strong>China</strong> is fullof hidden costs relating <strong>to</strong> language andcultural issues, the time you need <strong>to</strong> spendbuilding relationships and intellectualproperty protection.Think hard and seek advice about whether<strong>China</strong> is right for your business. If <strong>China</strong>wants your product, you’ll be there <strong>to</strong>morrow.While <strong>China</strong> is an exciting place <strong>to</strong> dobusiness it requires focus and commitment<strong>to</strong> succeed. <strong>New</strong> Zealand businesses arewell regarded and respected in <strong>China</strong>, buta gap in knowledge and understandingcan be a stumbling block for some.It’s critical that businesses learn fromthose who have in-depth knowledge andexperience in the market. NZTE is lookingat ways of developing the course for firmsventuring in<strong>to</strong> or already doing businessin <strong>China</strong>.www.nzte.govt.nz
36 <strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong><strong>Opening</strong> <strong>Doors</strong> <strong>to</strong> <strong>China</strong> 37"As Chinese consumers become more demanding aboutfood safety, the competitive advantage of internationalmanufacturers, and their ability <strong>to</strong> charge higherprices can only increase." Euromoni<strong>to</strong>rPOPULATION & GDPPopulation figures are for 2010.GDP (Gross domestic product) is per capita.LiaoningPopulation 43,746GDP 6,578If <strong>China</strong> is ambivalent about your product, you’llbe hard pressed <strong>to</strong> make the market profitable.A business visa is recommended for travel <strong>to</strong><strong>China</strong> and in most cases you will need a letterof invitation from a <strong>China</strong>-based company <strong>to</strong>get one.If you are going <strong>to</strong> be a regular visi<strong>to</strong>r <strong>to</strong> <strong>China</strong>,it will pay <strong>to</strong> get an APEC Business TravelCard which provides accredited businesspeople with streamlined access <strong>to</strong>participating APEC countries (including<strong>China</strong>). Go <strong>to</strong> www.dol.govt.nz <strong>to</strong> apply.Although <strong>China</strong> spans five time zones, thereis only one standard time – Beijing Time.<strong>New</strong> Zealand is four hours ahead of Beijingtime, or five hours ahead during <strong>New</strong> Zealanddaylight saving. There is no daylight savingin <strong>China</strong>.Make sure as many of your meetings as possibleare prearranged, you have addresses for themeetings and you have information on the peopleyou are meeting with. Reconfirm meetings a dayin advance, get a map <strong>to</strong> the company or officeyou are visiting and have the address writtenin Chinese characters for the driver.While Chinese generally prefer <strong>to</strong> be formallyintroduced <strong>to</strong> someone new, cold calling(self-introduction) is becoming more common.If you decide <strong>to</strong> make a cold call, it’s useful <strong>to</strong>first contact the company in writing – both inChinese and English – outlining the reasonyou would like <strong>to</strong> meet. Be flexible and don’t besurprised if last-minute changes take place ormeetings are cancelled.On the groundWhile the use of English in business and tradecircles is increasingly common, you shouldhave a Mandarin-speaker or paid MainlandChinese interpreter on your team. You mustunderstand exactly what is being said, andmeant, particularly in negotiations.A qualified interpreter will cost $100-$200a day. They are more expensive (and usuallybetter) in the main cities. In Beijing or Shanghaia good simultaneous interpreter (one whointerprets at the same time as you or yourChinese counterpart speaks) can cost about$2,000 a day.Take the time <strong>to</strong> learn a little Mandarin beforeyou go – it will go a long way <strong>to</strong>wards impressingyour hosts.You may be met on arrival at the airport or atthe first meeting by the main participant on theChinese side, with other participants followingin descending order of seniority.Greeting ceremonies may also take place atmeeting venues or restaurants. Sometimespeople will stand up when being introduced.When meeting your Chinese hosts, the mostsenior person in your delegation should befirst in the reception line. Others shouldfollow in order of seniority. Sort this outbefore the meeting.Your interpreter should stay close <strong>to</strong> the headof the line <strong>to</strong> introduce your most senior person.Those greeted should move down the lineInner MongoliaPopulation 24,706GDP 7,427JiangsuPopulation 78,660GDP 8,187ZhejiangPopulation 54,427GDP 7,876GuangdongPopulation 104,303GDP 6,864Hong KongPopulation 7,097GDP 11,540Source: Chinese National Bureau of Statistics 2010, currency in US dollars (map is of <strong>China</strong> cus<strong>to</strong>ms terri<strong>to</strong>ry)<strong>New</strong> Zealand Central, Shanghai<strong>New</strong> Zealand Central is a world-classbusiness centre in Shanghai that offersa range of services <strong>to</strong> <strong>New</strong> Zealandcompanies wishing <strong>to</strong> explore or expandon opportunities in <strong>China</strong>.The facility was set up by NZTE as ashowcase for <strong>New</strong> Zealand and as a facilityfor doing business in the world’s fastestgrowing market.The venue has a range of rooms <strong>to</strong> suitdifferent business needs, whether it isa wine tasting, exhibition, seminar, galadinner or product launch. Attendance at<strong>New</strong> Zealand Central events and functionsShandongPopulation 95,793GDP 6,478is by invitation only <strong>to</strong> guests of thehost organisation.Businesses can take advantage of informaland formal meeting rooms, seminar,conference and short-term office space,and enjoy silver service dining for up <strong>to</strong>60 people.Client packages are available <strong>to</strong> suit bothfrequent and casual visi<strong>to</strong>rs. Applicantsmust be <strong>New</strong> Zealand registeredcompanies, sponsored by <strong>New</strong> Zealandregistered companies or be allies of NZTE,and agree <strong>to</strong> terms and conditions of use.www.nzte.govt.nzBeijingPopulation 19,612GDP 11,060TianjinPopulation 12,938GDP 11,084ShanghaiPopulation 23,019GDP 11,540FujianPopulation 36,894GDP 6,127