Companies urged to maintain China links

Companies should continue to manufacture in emerging markets when they encounter difficulties, rather than withdraw in a ‘‘dictatorship-like way’’, according to an expert in ethical leadership and emerging economies.

Technology company Gallagher Group has brought manufacturing back to New Zealand from China amid security concerns. And allegations of genocide and human rights abuse in China’s Xinjiang have prompted companies such as H&M and Nike to stop using cotton sourced from the region.

However, University of Canterbury management lecturer Anna Earl said companies should collaborate to improve the environment in emerging economies rather than withdrawing. ‘‘First World countries cannot just say: We are not going to operate; we are going to stop all our production in those markets because there is an issue of international relations, geopolitical relationships and international trade,’’ she said.

‘‘It is a coercive mechanism of responding to the issues. But this will not necessarily help those markets to change. If you completely stop your operations there, what sort of example are we setting?

‘‘It is a very dictatorship-like way of trying to show the other market, or your partners, that we are just going to stop and that is it.

‘‘I strongly disagree that we should just stop operations there.’’

Gallagher chief executive Kahl Betham told a recent tech forum in Hamilton that the company’s decision not to base its manufacturing in China had helped it score contracts with the ‘‘Five Eyes’’ intelligencesharing countries of New Zealand, Australia, Britain, Canada and the United States.

The company had invested in automation to bring home manufacturing from China that was previously unaffordable here, he said.

For many companies, shifting manufacturing back to New Zealand would force them to raise prices, which would restrict their markets, said Siah Hwee Ang, a professor of international business and strategy at Victoria University. ‘‘We also don’t have the skills or scale of manufacturing in China,’’ he said.

Companies that shifted out of China to appease Five Eyes countries risked being shut out of the market, he said.

‘‘If you ever want to go to China again, I think good luck with that one – you will never get in again.’’

Waikato University law professor Alexander Gillespie said tech firms manufacturing in China could face concerns that their software or hardware had ‘‘back doors’’ that allowed Chinese officials access. Gillespie said companies needed to weigh up the risks of manufacturing in China and be mindful of their social responsibilities, especially regarding concerns such as human rights that could cause a consumer backlash in the West.

Earl said that while security was an issue, it needn’t be a deal-breaker.

She said companies should first do their homework about a market.

They should base somebody in the country to understand how that market operated, fully immerse and embed themselves into the environment and set down clear standards.

‘‘If we want change and if we want equality in the world and if we want change for human rights in China or Russia or in Africa, it is definitely about global collective action,’’ Earl said. ‘‘It is thinking about ‘we’ collectively, as opposed to ‘just me and my company’.

‘‘You can actually lead the change – you can set an example of how a company should be socially responsible,’’ she said.

‘‘I strongly disagree that we should just stop operations there.’’ Anna Earl

Management lecturer at the University of Canterbury