China: it doesn’t mean what you think it means

Dame Jenny Shipley (photo: MYOB)

Every month, The Moxie Sessions bring together a small group of business thinkers to discuss ways New Zealand can take advantage of the Internet or technology to boost its national competitiveness. For more, see November’s session looked at New Zealand’s relationship with China, where it is heading and how companies can make more of the opportunities.

Numbers tell the story. In 2013 China overtook Australia as New Zealand’s biggest goods trading partner. Since the Free Trade Agreement in 2008 our goods exports to China have tripled: mostly we are selling milk and wood, and buying electronics. It’s not just trade. China is also our second largest source of tourists behind Australia.

Dame Jenny Shipley cautioned we shouldn’t be dazzled by the numbers. She says the recent growth in trade between New Zealand and China happened in part by accident rather than design, and although we have a free trade agreement with China, our position is far from unique: China is the main trading partner for more than 130 countries.

She says there’s increasingly little New Zealand can teach China about doing business on the Internet. The world’s largest internet company is Chinese. The country has a fast evolving online economy, with its consumers more likely to buy online than New Zealanders. More Chinese people have smartphones than the entire US population and it is critical that New Zealand businesses rapidly turn their minds to the potential benefits of these e-commerce platforms to business profitability in the future.

During his time in China, recently returned New Zealand Trade Commissioner to Shanghai, Mike Arand worked in a team employing young, urban Chinese. He says they were representative of the modern Chinese market. They are well-off by our standards, live in dual income households and when it comes to buying, they are spoilt for choice. Chinese middle class consumers are used to getting the best the world has to offer. Chinese buyers for that market want to know if our products are “world class” or how our products rank amongst the world’s best.

That means German engineering, Australian minerals, and New Zealand agriculture. It can be as simple as wanting to buy our farming expertise and transferring skills to farms in China. Related New Zealand technology would be software and applications for the agricultural sector.

David Robb is Professor of Operations and Supply Chain Management in the Graduate School of Management at the University of Auckland, and has long connections with China. He says while the past two decades have been dominated by trade and tourism, we now need to focus on other areas including services. There are opportunities for New Zealand firms in education, software development and consulting.

Robb emphasises the long-term nature of dealing with China. “To succeed you have to love China, and want to see it flourish”.  He also says it is important not to be too hard-nosed. It’s not a place where you can make a fast dollar. Arand adds that companies need to think in terms of “this is who we are and what we do” more than “what am I going to get from this?”

That’s just part of the yawning gulf between where were are in our commercial relationship and how we relate to China and the Chinese on the cultural plain.

Despite the strengthening trade relationship, Chinese direct investment in New Zealand remains tiny: only a few percent of US or Australian levels. What little Chinese investment reaches New Zealand gets far more media scrutiny and public interest than money coming from elsewhere.

And despite the large numbers of Chinese nationals living, working and studying in Auckland, most of us have not made any effort to welcome them in or get to know them, or to try to harness their knowledge, skills and networks to benefit our businesses. Professor Robb says that most Chinese coming to Auckland to study leave after graduating without ever having been inside a New Zealander’s home.

Shipley, Arand and Robb express the sentiment differently, but they all say we need to look more closely at where China is going and less at where it has been.

The good news is that we have many of the things Chinese consumers, tourists and investors want. But in many cases this is not the same as the things we try to sell them, because we do not really understand our customers.

If New Zealand is to prosper from trade with China, our perception of the country and its markets needs to change. We also need to reboot how we think they perceive us. If we don’t get that right, they’ll go elsewhere; it’s not as if they don’t have a choice.

Bill Bennett is an Auckland-based freelance writer.

Thanks to Alcatel Lucent for their generous sponsorship, which helps to make the Moxie Sessions possible.

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2 Comments & Questions

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Won't matter soon. The money coming out of China will have bought all of NZ within the next 5 years.

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Real issue is the uptake of NZ business culture of paying tax and being fair. How can NZ ensure that this culture continues and is not diluted and ultimately destroyed by new migrants.

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