SCAL­ING UP CHINA THROUGH COL­LAB­O­RA­TION

Rod MacKen­zie re­ports on the April busi­ness mis­sion to China led by John Key, and ex­plains what’s go­ing on be­hind the scenes to en­cour­age trade growth in the China mar­ket.

Exporter - - FRONT PAGE -

Read­ing the news gen­er­ated by New Zealand's good­will mis­sions to China gives the im­pres­sion that ev­ery­thing is just fine and that it's all plain sail­ing.

It's not, of course, but there's real rea­son for op­ti­mism at the mo­ment – tinged with a dose of re­al­ity about what do­ing busi­ness with the Chi­nese is ac­tu­ally like.

The busi­ness mis­sion led by our PM in April this year had many of the char­ac­ter­is­tics of pre­vi­ous vis­its. He was greeted like a fam­ily friend; the pub­lic ut­ter­ances from both sides talked of the warmth and close­ness of the bi­lat­eral re­la­tion­ship; and the over­all trade num­bers are look­ing rea­son­ably healthy.

This pos­i­tivism is largely borne out be­hind the scenes too. Who would have imag­ined seven years ago that New Zealand busi­nesses and their cus­tomers would fill the over­sized ball­room at the Pudong Shangri La Ho­tel and that all of them would be in high spir­its?

That was cer­tainly the case at the busi­ness lunch held dur­ing the April mis­sion.

Things are markedly dif­fer­ent from the pre-FTA, pre-World Expo days. Two-way trade vol­umes are an ob­vi­ous sign that New Zealand's at­ti­tudes to China are chang­ing. A more telling fac­tor, though, is that New Zealan­ders are clearly feel­ing far more con­fi­dent in their busi­ness re­la­tion­ships; have learned at least some lessons over the past few years; and have re­alised that China is a long-haul mar­ket – not one that typ­i­cally de­liv­ers quick riches.

There has been tan­gi­ble progress. It was enor­mously heart­en­ing, for ex­am­ple, to see Ze­spri, an­nounce that it was go­ing to sub­stan­tially strengthen its pres­ence in China. It wasn't that long ago that Ze­spri's in-mar­ket part­ner was in real trou­ble and po­ten­tially so was Ze­spri. So this com­mit­ment to hands-on man­age­ment of the busi­ness is en­tirely the right re­sponse. They've also learned a few things about IP pro­tec­tion. They're not grow­ing any of their pro­pri­etary va­ri­etals in China it­self – not yet at least.

Fon­terra, which seemed at one point as if it was go­ing to self-im­plode in China, ac­tu­ally got an honourable men­tion from the rul­ing party (the Chi­nese one that is). The more cyn­i­cal won­dered if this was a slightly back­handed com­pli­ment and that the Chi­nese were con­grat­u­lat­ing the com­pany on not hav­ing stuffed up in the past 12 months – but per­haps that was just the trans­la­tion.

There was a strong Maori pres­ence in the lat­est mis­sion and, as has been the case in the past, their affin­ity with the Chi­nese is quite re­mark­able to ob­serve. There is still a lot of work to be done to turn this con­nec­tion into real and sub­stan­tial com­mer­cial re­turns, but this will come.

Ev­i­dence, though, that not all has been well was the miss­ing ele­phant in the room – namely the con­tin­gent of in­fant for­mula man­u­fac­tur­ers that had been a pres­ence in pre­vi­ous New Zealand gath­er­ings.

This for­merly abun­dant, if some­what frac­tious, group has been dec­i­mated in the past 12 months by fierce com­pe­ti­tion and a volatile reg­u­la­tory regime.

It's not over yet ei­ther. Fur­ther re­stric­tions on the num­ber of brands that can be pro­duced by any one man­u­fac­turer are on the way. Watch out for a flurry of new in­fant for­mula plants be­ing built in New Zealand over the next year or so as a re­sponse to this.

There were a few oth­ers, too, who were find­ing China's con­stant chang­ing of the rules of do­ing busi­ness, ev­ery­thing from shift­ing tax­a­tion

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