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.
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