Businesses urged to consider digital exports to China
As New Zealand’s pre-pandemic tourism and education trade with a clamped-down China struggles to recover, the New Zealand-China Council is advising businesses to consider exporting digital services.
The NZ-China Council published a research report yesterday assessing the health of services trade – which includes tourism, education, and other non-tangible exports such as professional consultancy – between New Zealand and the country’s largest trading partner, China.
‘‘Obviously, education and tourism, especially, are the two large components that took a massive hit from Covid and that’s still in place. But on the other hand, at some point, it will presumably come back,’’ said John McKinnon, the council’s chairperson. ‘‘Both at the head of that, but also, in a way accelerated by it, has been the shift to digital services, and that’s probably a trend which will continue, even if Covid restrictions disappear, because it’s a different way of thinking about how to offer services to people in other countries.’’
The report was released as people took to the streets across China to protest their Government’s hardline Covid-19 policies. The Covid restrictions have dampened China’s economy and made doing business in the country difficult.
McKinnon said that business in China had been constrained by an inability to have personal contact with customers in the country.
It was too early to say what effect the protests in China might have on New Zealand businesses, he said. ‘‘For a business, though, it needs to be taking account of the existing environment in China, which is quite limiting. If you’re in business any form of dislocation . . . that sort of thing adds to the uncertainty mix, so it’s a tricky one.’’
The report, produced by consultant Stephanie Honey for the council, which is funded by the Government and its business members, said ‘‘the period ahead is likely to continue to be challenging, with many downside risks’’.
Tourism from China to New Zealand had fallen from $1.6 billion to $119 million between 2019 and
2022, and ‘‘continues to struggle’’. Education services fell by 44% to $720m in the year to June 2022. This sector was struggling less than tourism because Chinese students remained in New Zealand and some services were delivered online.
Exporting digital services to China was considered an area of ‘‘new opportunities’’.
However, the report noted China’s digital economy was highly regulated, ‘‘particularly in relation to ‘sensitive’ data’’, meaning businesses faced high compliance costs. ‘‘It’s a new area, which itself means that there’s a degree of uncertainty as to how that regulatory environment may evolve over the coming years ... This is an area probably of growth. So it’s one where nobody should sort of just rush into it, but it might well be an area that can be explored and China, of course, has the volume and the amount, which can make that worthwhile.’’
He said the example of Les Mills’ work in the Chinese market throughout the pandemic was ‘‘fascinating’’.
‘‘What they’ve done is they’ve found ways of training people online, they’ve found ways of delivering programmes online, they’ve found ways of delivering fitness equipment for people to use in their homes, while they watch the thing online.’’ The Government has in recent years urged businesses to diversify away from trade with China, because of fears of further disruption to New Zealand’s most important trading relationship.
‘‘This is not about diversification or not diversification. It’s about putting the spotlight on an area of our external economic activity which has had a severe impact from Covid . . . and looking ahead to how that might continue to evolve,’’ McKinnon said.