Proposal for a joint infrastructure fund
Aleading Chinese businessman has proposed a joint NZ-China Infrastructure Fund should be set up to fast-track infrastructure development in Auckland.
“New Zealand is a large and beautiful country,” he said, requesting anonymity at this stage. “Auckland is the business capital and we want to build a internationalised capital not just a New Zealand capital.
“It is very important to join together to work with overseas markets and not close the doors — this is not good for New Zealand or the New Zealand people.”
The Herald understands the concept has been road-tested with officials. In essence, it would involve participants from both countries: Governments, banks, the NZ Super Fund, ACC and possibly infrastructure developers tipping capital into the fund. Chinese construction firms would be invited here.
There were many challenges in the NZ construction market, the businessman said, questioning why New Zealand “builds so slowly” and citing the capacity of construction companies, and a lack of workers and high technology. This view is underscored by Beijing Capital’s director in New Zealand, Henry Zhang, who recently compared Auckland to Beijing because of the pressing transport problems and shortage of investment in transport infrastructure.
Chinese investors, bankers and property buyers need prompting before they openly admit that China’s new capital controls are impacting investment here.
Irrespective, the Chinese appetite for New Zealand companies and choice residential estate doesn’t look likely to lessen any time soon.
A finance sector player said new capital controls had made it a slower process for Chinese investors to buy New Zealand companies (and those elsewhere).
He hoped it was “maybe just for a period” and confirmed what any astute Aucklander knows — that Chinese interest is still keen in the residential property market. “New Zea- land is a beautiful country and compared with Beijing, it is very cheap and very good to live here.”
Bell Cai, chief executive of eSupply Global, confirms Chinese investors are now experiencing barriers to getting their money out of China. The low-hanging fruit has been plucked and investment costs are higher than before, says Cai, who has acted as an investment go-between.
Like Chinese bankers — who now have to more stringently manage exposures to Chinese clients to guard against money-laundering — Cai says interest in residential property is high.
“More incoming migrants demand more residential properties — especially high-density affordable properties,” explains Cai. “Construction costs could be the key factor that limits the growth in this sector, but from a longterm perspective, investment in residential property is profit-positive.”
Chinese investors also experience difficulties with their investment execution because of what Cai terms the “cultural gap”.
“Cultural challenges in investment are not always easy to see in the public media, because it is the key recessive factor that even investors are not aware of or are not happy to explore directly.”
Investor appetite is keen in five main areas, outlines Cai:
Tourism — where Chinese tourism numbers are poised to grow but there is a shortage of hotels;
Fast-moving consumer goods — which are geared to Chinese consumer appetites and based on New Zealand high-quality food;
Healthcare — where China has an ageing society where the ageing population holds most of the wealth. “NZ’s healthcare competencies could potentially attract ageing people from China to live in New Zealand for a short time or longer-term and bring their wealth along,” says Cai.
Manufacturing — there are huge opportunities for an upgrade of NZ manufacturing at this stage.
Innovation — the higher purchasing power of the Kiwi family has led to more luxury products on the streets of Auckland and elsewhere. This leads to an upgrade of consumer products and more new and innovative products for family life.
“It could be the opportunity for investment in this area as well.”