Thursday, April 30, 2015 Section D China Business Where dreams are made From the green pastures of Cambridge to a manufacturing dynasty in China, Zuru Toys is out to become an innovative billion-dollar company. Alexander Speirs meets the successful Mowbray family

uru Toys chief financial agood idea and some raw determina- officer Anna Mowbray is tion back in 2005. The company’s first ever-confident: “We’re going toy was aminiaturehot air balloon to be abillion-dollar company that Mat invented, winningthe New Zin the next five to 10 years, without ZealandScience Fair in 1993. adoubt.” Zuru moved quicklyinto commer- The writing is on the wall: amural at Seeed Studio in Shenzhen. Picture /Alexander Speirs It’s an extremely impressive target cialisingthe product, enlisting friends on top of the strong growth Zuru has and family to manufacturethe alreadysustained. After Zuru shifted balloons from plastic bags, Coca-Cola its business from the Waikato to cans and hand-bent wire in the family southern China, the company garage. An innovativeapproach reachedUS$55 million turnover in Sales for that product continued to 2013 and $US100million last year. grow, prompting Mat to leave uni- It’s been afamily business from the versity and concentrate solely on the We need to stay in touch with changes in China writes Tim Groser outset.Eldest brotherMat founded business. the business and is the chief execu- When sales surpassed 10,000 tive; Nick is directorand president; units, expansion becameinevitable. China’s rapid growth provides many in order to build the city into aglobal training programmes (agreed during and sister Anna roundsout the senior Insteadofexpanding in New Zealand opportunities for New Zealand and science hub. This will build on already President Xi’s visit to New Zealand in management team as the finance or outsourcing internationally, Mat New Zealand businesses. high research and development spend- November last year), to Fonterra’s in- guru and chief operations officer. and Nick jumpedonaplane to Our trade profile shows we’ve ing (over $16.5 billion in 2013). Of course vestment in China through large-scale The Mowbrays, who grew up in Guangzhou. grasped these opportunities in away this push for innovation is not limited dairy farms and its recent purchase of Cambridge, have resistedseeking out- With little knowledge of the Chin- we should be proud of. But to be truly to Shanghai — outside the cities, the anear-20 per cent stake in the Chinese side capitaland investment, opting ese business environmentorthe successful in China, innovation is vital. Government is encouraging greater ef- infant formula maker Beingmate. for an organicgrowth strategythat highly competitive internationaltoy China is showing increasing interest ficiency in the agricultural sector, pre- But we mustn’t limit our thinking to kept the company in family hands. marketthey were attempting to break in higher-value products and services. senting many opportunities for New agriculture. New Zealanders are an Its growth rate has been kept in check into, it was acase of trial and error. In May last year, President Xi Jinping Zealand and China to work together. innovative bunch across all sorts of and is manageable. It began with the pair sleepinginthe tasked Shanghai with accelerating its We have much to offer in this area, “We will continue to grow intern- bushesoutside Guangzhou airport science and innovation development from animal health and dairy farmer continued on D2 ally –althoughit’s not all about the when they first arrived — atale they money for us, it’s about achieving that both proudly recount. next goal. At the moment, we’re con- Once they found their feet, Zuru On the road in China tinuingtofocus on toys and inno- quicklywent from successtosuccess. vating,but we’ll be lookingtodiver- The company diversified its product sify outsideoftoys and expandthe offerings, and expanded from the Herald Business Editor Liam Dann business.” single injection mould and limited (left) and journalist Alexander Speirs ThoughMowbraydeclinedtooffer factoryspace with each new success- (far right) both travelled to China much of ahint about what that would ful launch. recently to look at the changes in the entail, Zuru has been workingona Rapid growth began when Zuru country’s economic focus and its number of “big projects”.She says “we debutedRobofish, an electromag- desire to transform itself into an have spread ourselves thin enough netic roboticfish which swims in international innovation hub. for now.” water. The product was abest seller The idea of abillion-dollar com- worldwide, even knocking off Lego as ● Liam Dann D5 pany is afar cry from the Zuru that ● Alexander Speirs D6-12 enteredChina with little more than continued on D11 Language teaching out of kilter with trade

The number of New Zealanders learn- The New Zealand China Council compared with the other interna- most of our economic relationship established a$10 million contestable ing Chinese and other Asian lan- report, titled Crisis of Complacency, tional languages. with China,” he says. fund late last year to support teaching guages does not reflect the country’s reveals just two students are learning Pat English, executive director of Mr English has called for areview of Mandarin Chinese, Japanese and economic and trading reality in 2015, Chinese for every $1 million of New NZ China Council, says New Zealand of language studies in New Zealand, Korean in state and state-integrated anew report has revealed. Zealand exports to China (totalling must increase the number of students saying “we are not linking our invest- schools. China, along with Australia, is now more than $10 billion annually) — learning Chinese at the post-primary ment in language to our cultural and The fund encourages greater col- New Zealand’s largest merchandise compared with 63 for French, 31 for level. economic needs”. laboration among schools in partner- trading partner. Spanish, 17 for German and 10 for “If we remain complacent, we risk He believes acomponent of the ship with external Asian language China is also the second biggest Japanese. the opportunity to build on our suc- review should be needs based — and cultural organisations. The source for tourists and sends the Japan and Korea are also among cessful bilateral trade, tourism and “there is potentially an economic re- second round of funding for teaching largest number of international New Zealand’s top five trading part- education linkages. We also risk the turn for the investment by way of any Asian language opens in August. students to New Zealand, particularly ners and the number of students opportunity to equip future genera- future employment”. ● Crisis of Complacency: full story Auckland. learning their languages are low tions of New Zealanders to make the Meanwhile, the Government on D20 D2 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ NZ atop-5 study destination for Chinese students ■ Innovation apriority in China’s future New normal andnew opportunities

New Zealand is well placed to reap the benefits of an ongoing relationship, says ambassador Wang Lutong

hina is the largesttrading the annualBoao Forum for Asia afew anew type of industrialisation, IT partnerofNew Zealandand days ago, “this new normalofthe application, urbanisation,agricultural more than 120 other Chineseeconomywill continue to modernisation and green growth,its countries. As the Chinese bring more opportunitiesoftrade, US$10 trillion importofgoods, economyC enters astate of “new nor- growth,investment and co-operation US$500billion outbound investment mal” it draws worldwide interest and for other countries in Asia and be- and 500 million overseas visits in the attention. yond.” comingfive years will create broader China has shifted to anew normal In this intertwined world,the old converging interest. of economic development as the old practiceof“going it alone“and the One of the agreements reached model of credit and investment-led mentality of “the winnertakes all” is during President Xi Jinping’s visit to patternofgrowth is no longer no choice for China. New Zealandlast November was to sustainable. It is shiftinggear from The impactofthe global financial take positivemeasurestoconstantly high speed to medium-to-high speed crisis has not yet subsided. Primary promote bilateral economic and growth;from an extensive model that factorsimpacting on global demand trade relations to anew level and emphasised scale and speed to a includethe large number of develop- ensure that the FTA remains relevant more intensive one emphasising ing countries that have not fully and current — that is to upgrade the quality and efficiency; and from being realisedtheir economic potential, FTA. driven by investment in production which has led to unbalanced regional Trade Minister Tim Groser’s visit factorstobeing driven by innovation. developmentand awideninggap to Beijing and the sixth Meetingof As the economy continues to grow between rich and poor. China-New ZealandFTA Joint Com- in size and in resilience — 7per cent Those are the contextfor the “Belt missioninWellington last month in 2015 — the momentum it generates and Road” initiative. The vision and kicked off initial discussions regard- will be larger than the double-digit Ambassador Wang Lutong action paper of the initiative has been ing negotiations to upgrade the FTA. growth in previous years. developed. Substantive progress has The China-New ZealandFTA was Comprehensively deepening re- This new normal of the Maritime Silk Road, seeking been made in the establishment of the first signed between China and form and structural adjustment is innovation-driven development,ex- the Asian InfrastructureInvestment developed countries. It’s now the first under way. China is streamlining gov- Chinese economy will tensively applying information and Bank. The Silk Road Fund has been one to be upgraded. An already-very- ernment administrationand continue to bring more smart technologies, and launching launched. Constructionsofanumber high-standardFTA, the Most Fav- mandating more power to lower- major projects on high-end equip- of infrastructureconnectivity pro- oured Nation (MFN) status means level governments to remove opportunities of trade, ment, information networks, inte- jects are movingforward. New Zealandgains the benefitof roadblocks and boost marketvitality. growth, investment and grated circuits, new energy and new Being the first developed nation to commitments China makes in future It is also accelerating reformsofprice, materials. join the AIIB as afounding member, FTAs that are more liberal than those of the fiscal and tax systems, and of cooperation for other As envisioned by aWorld Bank New Zealandiswell-positioned for in the NZ-China FTA. state-owned enterprises. report,with its changeofgrowth the opportunity the “Belt and Road” Greateropportunities lie ahead for With the view to upgrading itself countries in Asia and strategyand adaptation to new initiative will bring. co-operation in goods and services, from amanufacturer of quantity to beyond. challenges, China is well positioned Thankstothe successful im- financeand investment, as well as one of quality,China is implementing to becomeamodern, harmonious plementation of the China-New Zea- people-to-people exchanges, to such strategies as “Made in China President Xi Jinping and creativehigh-income societyby land Free Trade Agreement, the value deepenour comprehensive strategic 2025”, “Internet Plus“,the Silk Road 2030. of two-way trade is more than NZ$50 partnership. As for predictions? Why Economic Belt and the 21st Century As President Xi Jinpingnoted on million aday. China’s speeding up of not let the future tell us. Innovative approach to relations with China

continued from D1 because current institutions are not able to meet the region’s growing sectors. The purchase of Fisher and needs. This is ahistoric endeavour — Paykel Appliances by Chinese com- the first significant addition to the pany Haier shows how valued Kiwi Bretton Woods multilateral institu- ingenuity is. And on my recent trip tions formed in the aftermath of to China Ihad the pleasure of opening World War II. Zealong Tea’s flagship store in Beijing. New Zealand is now working with Zealong Tea grows premium China and other prospective mem- oolong tea on their Hamilton-based bers to frame up the bank; addressing estate, then sells it to the world’s issues such as purpose, governance, leading tea producer, which shows financial arrangements, voting rights what can be achieved by thinking and investment safeguards. We have outside the box. some way yet to go, but we share with Ialso opened the 25th Esquires China adesire to see anew bank coffee store in China. The brand in emerge which is fit for purpose, run China is owned by New Zealand efficiently, governed well, and which company Cooks Global Foods. The materially contributes to the sustain- company is aiming to have 300 stores able economic development of the in China by 2020. The Esquires brand region. If we can get it right, the bank is strengthened by New Zealand’s will be anew driver of growth in the reputation for fresh, high-quality pro- region that will benefit the New Zea- duce, and our well-known cafe´ cul- land economy and all our exporters ture. It also benefits directly from the who trade in this vibrant and import- NZ-China free trade agreement, ant part of the world. which sees coffee beans roasted here Innovation is afitting theme for entering China tariff free. this year’s China Business Report. China’s drive to innovate has seen It is akey attribute for businesses it look to New Zealand’s education and the Government in their dealings system, thanks to our emphasis on Trade Minister with China. But most importantly it encouraging creativity and fresh Tim Groser says reflects the fast changing nature of thinking. There are around 25,000 we need to be China and the Asia-Pacific region Chinese students studying in New prepared for the more broadly, something we all need Zealand schools, universities and fast-changing to be prepared for. institutions and arecent survey nature of China. placed New Zealandin the top five preferred overseas study destinations for China’s wealthy they are significant achievements in Xi agreed to look at upgrading the NZ- institution in the region, the Asian middle class. the international community and China free trade agreement during Infrastructure Investment Bank CHINA BUSINESS 2015 The Government has shown we continue to help drive our relation- the President’s visit to New Zealand (AIIB). The bank aims to help address Executive Editor: Fran understand the need to be innovative ship forward. in November last year. Ivisited China the significant infrastructure deficit in O'Sullivan in our approach with China. This is The free trade agreement signed in March this year where Imet China’s the region. China approached New Writers: Liam Dann (Business demonstrated by the “four firsts”:the in 2008 has transformed our relation- Commerce Minister, Gao Hucheng, Zealand early asking whether we Herald editor), Greg Hall, Bill first country to conclude negotiations ship. Thanks to the improved access and we agreed to aprocess to con- would consider becoming a “prospec- Bennett,Graham Skellern, with China on its accession to the to each other’s economies, two-way sider upgrading the FTA. It is too early tive founding member”.Weagreed — Alexander Speirs, World Trade Organisation, the first to trade has doubled and New Zealand to say what the result might be, but the first Western developed economy Subeditors: Isobel Marriner, recognise China as amarket econ- exports to China have more than it is another example of the strength to do so. This decision sits with our Greg Hall, Graham Skellern. omy, the first developed country to quadrupled. But some time has of our innovative and pioneering history of “firsts” with China and it is Layouts: Isobel Marriner enter into FTA negotiations, and the passed since this agreement was relationship with China. pleasing to note that many of our Design: Richard Dale first country to conclude acompre- signed and China has now entered China is also becoming increa- friends have since joined the nego- Advertising: Nathan Laing, hensive FTA with China. Iknow these into free trade agreements with a singly innovative in the international tiations to establish the bank. Nancy Dudley. achievements sound more impress- number of other countries. sphere, most significantly through its We joined because the Asia region nzherald.co.nz ive to bureaucrats than the public, but The Prime Minister and President proposal to establish anew financial is deeply important to our future, and D3 China Business: ■ China leadership setting pace for NZ ■ NZ must stay ahead of curve with China relationship Thoughtstarters: CEOs on China Inside Theo Spierings — Fonterra

What always amazes me is that with We can always choose to be part of thinking. They are open for it. But we China — wherever the world is or it or not. But we’d better be part of it. are not knocking on the door. whatever issues they have to deal with If we don’t get China right, it is Take Fonterra. We really did not — the Chinese leadership is so strong difficult to operate from the South have aChina strategy but we launched and the development is so fast we have Pacific and difficult to compete in the one in line with the group strategy. to stay at China pace otherwise we lose rest of the world. So don’t talk to me Now, three years down the road, we SMEs relevance. about spreading risk in New Zealand. sell four times the ingredients. We have Sage advice for small and That is the most important message We need to do maybe two or three more than doubled food services. We medium businesses from and it’s most on my radar with all the things in the market really well that are have launched Anmum and Anchor. MichaelBarnett — D13 issues we face around the world in connected to our DNA and thinking We are building our farms progress- markets. and logistics and we need to forget ively. We have formed partnerships With China you need to have avery about the rest. with Beingmate and Abbott. good relationship with Beijing — that My concern is that New Zealand and That’s why the Chinese like us — is very important. To have astrong Fonterra go fast enough. Because China because we move with their thinking, connection at the national level is the moves on. China goes so fast. but at pace. key. But you also need something very The basket has to be attractive If commercial people — like Chris focused at regional levels. enough to the Chinese. We should and Iwith global footprints — don’t lead, Listen very carefully to what the potentially have more eggs in the then it is difficult for the country. And Chinese tell you. Listen very carefully basket but we need to move and we need more “outside in” thinking. because they have avery clear agenda. develop with the Chinese and their ● The right DNA — D14 Agribusiness ANZ’s David Green on China’s Christopher Luxon — Air New Zealand fierce hunger for trade — D

Big picture wise, it’s obvious the re- trade agreement. But now others are being able to do business in China. lationship between China and New going to have FTA agreements. So the There’s lots of anecdotal evidence Zealand is still in very good heart. first mover advantage goes away that the quality of our Chinese teach- Big Issues The danger, what we need to over time. So, what's the next first ing is poor. When my generation Experts on China Business watch out for, is that we don't want mover advantage? came through high school, Japanese give the lowdown to lose the notion of the “firsts” we When we see avisa deal being was the number one language we have achieved. done between the US and China — were learning. EY China experts Joanna And we don’t want any slippage who arguably have more tension in We need that same sort of focus Doolan and Florence Wong — or to move down the pecking order their relationship in some ways than on the Chinese language. — D17 with China. New Zealand — that is areal challenge Istill think it is important to diver- Beijing-based David Mahon — We should be continuing to posi- and something we should be on the sify the China risk. We at Air New D19 Minter Ellison’s David Gilbert tion New Zealand as apetri dish for front foot with going after those Zealand are doing that purposefully — D18 the Chinese to gain experience work- things as new ”firsts”. around the Pacific Rim, around the DLA Piper's Martin Thomson ing with Western economies that We could be doing alot more to Americas and Asia and Australasia. — D21 have sufficient developed market build Chinese language skills. Ireally But the move to the “new normal“ CPA’s Alex Malley — D22 scope — but on asmall scale. don’t understand how acountry that and abigger middle-class in China, We can play quite an important in the next 20-30 years thinks it's will impact on tourism, and big num- role and position New Zealand very going to become an important trading bers trickling through will have con- positively. The question is about the partner for China, and, already is — sequences. level of ambition. We’ve got this free doesn’t have abigger drive around ● Air NZ joint venture — D16

INSIGHT #64

IN CHINA, KNOWING YOURFOOD COMESFROMA TRUSTEDSOURCE IS OF GREATIMPORTANCE

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ANZ Bank New Zealand Limited. D4 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ Chinese household sector key to NZ export health ■ Chinese consumers reenergised Confidence drives change

Karen Silk, Westpac General Manager, corporate and institutional

sanexporting nation the reflecting rising consumer little information available as a performanceofour incomes and increasing predictor of Chinese Consumer economy is highly confidence. Likewise, the more behaviour. dependent on those of recentdeclinesinthe value and The Westpac Economics team ourA tradingpartnersaswell as volumeofNZsoft commodity has addressed this informational outcomes of geopolitical change exports were heavily influenced shortfall by teaming up with MNI such as that currently in play in by adecline Chinese consumer Indicators to produce the Westpac Europe. Both will heavily confidence. MNI China Consumer Sentiment influence competing supply, With scale of unprecedented Index.Each month we telephone demand and subsequent price for proportions,variationinChinese 1000 ordinary Chinese people the goods we export. consumer appetite has the ability across 30 cities and enquire about The ascentofChina to the to create volatility in revenue and their financial situation and number one destination for New return for NZ business not prospects. Zealand merchandiseexportscan previously seen and therefore an The surveydates back to 2007 be attributed to growing demand understanding of the mood of the and has afforded us fantastic by Chinese consumers for high Chinese Consumer is critical. Until insights some of which we share qualityprotein goods,inturn recently there has been precious below. Theworstappears to beover

alreadybeen described: it is not a Chinawill play ahuge part in our prospective event. Well-versed China watchers will economy in future, write know that consumer confidence and the state of the housingmarket are and difficult to separate. In this regard, Dominick Stephens Huw McKay Chinese consumers are little different to their Kiwi, Australian, British or hinese consumer sentiment Koreancounterparts (to name afew). plungedinearly 2014, and by Ergo, the Westpac MNI survey October was close to the captures awide range of attitudes to lowest levels seen in the his- the housingmarket. Ctory of the survey.That drop in The key to last year’s drop in Chinese consumer sentiment was an Chinese consumer confidence was important leadingindicator of falling house prices. waningAustralasian export Our readingofthe currenthousing prospects. situation, based on the latest Westpac New Zealandfound that fewer MNI survey with due deference paid Chinese consumers were willing to to the officialdata on prices,construc- stretch to high-end food products tion and turnover, is that the overall imported from distantlands. No- markettroughed in October of last where was this more evidentthan in year. However, the improvement last year’s plunging prices for dairy Dominick Stephens Huw McKay since that time has been a) timid in exports. scale, b) geographically uneven, and But other exporters are now begin- c) dramatically different from previ- ning to feel the pain. Notably, Chinese ous recovery phasesthat have been demandfor muttonisdiminishing. characterised by rapid rebounds in Australia was even more profoundly activityfuelled by very strong policy affected. The slowingChinese con- multipliers. struction sector reduceddemand for Our forecast is that housingcon- steel, which has flowed throughto struction activitywill dig its way out lower prices for Australia’s key of negative annualgrowth territory exports, iron ore and coal. by the September quarterofthis year, New Zealandhas felt the knock-on and grow modestly thereafter. This effect of that Australian slowdown will help to stabilise the demandside via the super-strong New Zealand of the Chinese economy, with flow- dollar /Australian dollar exchange on benefits for New Zealand. We rate, which will tax the tourism sector remaincomfortable with our forecast among others. for gradually rising dairy export We’ve also seen asurge on home- prices and modestly improving ward bound Kiwis fleeing the weak conditions for other exporters to Australian economy. China. After such along period of pessi- The intimate linkages between mism, we welcomed the green shoots consumers and the housingmarket of recovery that were evidentinthe highlights that amore confident Chin- March instalment of the Westpac MNI ese household sector is anecessary China Consumer Sentiment Index. condition for arecovery in the near- Chinese consumer confidence has term fortunes of New Zealand’s soft clearly been boostedbythe central commodity industries. In the longer bank’s decisiontolower interest rates Following the pronouncedpessimism that term, the Chinese household sector in late February. will be the major driver of New Chinese consumers have now re- dominated much of 2014, this tilt towards amore Zealand’s services exports, with in- sponded in positivefashion to both optimistic posture is exceedinglywelcome. It is ward tourism and higher education of the interest rate cuts delivered so toppingthe list. far in the currentcycle. That under- too early,however, for China’s policymakers to Further, Chinese households will lines the fact that monetary policy declare victory. becomeamajor foreign investor in settingswere overly restrictive in our financial markets, as the inevit- 2014, and that the progressive able deregulation of cross border unwinding of those settingswill bene- capitalflows progressively gives this fit the economy, to adegree, this year detail, the major impulseinthe month postureisexceedingly welcome. It is group greaterfreedomtodiversify and next. of March was asteep uplift in both too early, however, for China’s their portfolios. While the Chineseeconomy’s currentand expected family policymakerstodeclare victory. Over Building adeep understanding of many structural challenges are a finances. Currentand forward- the full history of the survey,ithas the collective psycheofthis group of genuineconstraint on the long run lookingassessments of business sent decisivesignals aroundcyclical consumers is thus abasic require- sustainable rate of growth,the survey conditions also increased, but less turningpoints that with hindsight ment for developing aconsidered argues very strongly that policy re- dramatically so. count as definitive. To our minds,the view of New Zealand’s own short and mains apotent force in the minds of The consumers’ attitudetowards jury is still out (and is probably order- long term economic prospects. consumers. real estate was also more positive, on ing dinner). ● The Westpac MNI China Consumer Notably, easier policy settings, balance, buildingonthe modest Even so, the survey is clearly Sentiment survey is releasedona with the promise of more to come, cumulative improvementsince indicating that the worst is passed.In monthly basis seem to have out-weighed the low- November last year. other words,further deterioration ● Dominick Stephens is chief ering of the annualgrowth target in Following the pronounced pessi- from alreadystraightened levels is economist (NZ) and Huw McKay is the minds of consumers. mism that dominated much of 2014, now unlikely. In sum, the trough for senior international economist Lookingatthe results in more this tilt towards amore optimistic confidence in this currentcycle has (Sydney) for Westpac. D5 China Business: ■ Over 600 more cities in China now than in 1949 ■ Chinese cities to house 1bn by 2030 China’s hauntingghost cities

The “if you build it, they will come” mantra does not seem to be working,writes business editor Liam Dann

eware of anecdotes about ghost cities, an economist tells me in Beijing.China is big and the forces at work areB of ascope not as easy to visualise as the giant concrete and steel shells that dot many urban sky lines. It is sage advice. Even forewarned,itishard not to be shocked by the scale of aban- doned development when you visit asecond tier city like Tianjin — about 150km south of the Chinese capital. In the centre of the city — which has apopulation of 15 million and boasts acommercial centre dating back to the colonial era of the 19th century — stand three monolithic blocks of concrete and steel. Typically, as is the case here, you’ll still find plenty of new buildinggoing on nearby.Central Tianjanhas aflash new financial centre in development. The future of the three ghost towers, who the ownersare and why they are left unfinished, seems to be forgotten as the city forges on to new and better things. Cashflow, debt and acomplicated mix of local body politicsall seem play arole in the processof abandoning the work. Empty,often unfinished property developments aren’t hard to find in China and have fast becomeemblematic as growth slows and the economy undergoes one of the most dramatic transitions in modernhistory. The officialline is adramatic slowdown in export, manufacturing, and construction as the centralGov- ernment looks to shift the economic balancetowardsthe servicesector and domestic consumption. The buildinganecdotes get worse as you head furtherout of town. On the southern outskirts, in an area destined to becomeanew scienceand technology zone you can count one block of about 25 high rise towers — unfinished concrete and steel. The cranes appeartobelong gone, although once again, just afew hun- dred metresdown the road, there are Cranes working regionswill suffer in this period of severaltoweringover what appears on Tianjin’s new changeothers will continue to grow. to be asimilar tower complex. financial district Underlying urbanisation remains a Keep drivingafurther40kilo- tower above the powerful trend. Only 53 per cent of metresand you’ll hit astaggeringly colonial the population is urban,compared ambitious development some have financial district with about 86 per cent in New Zea- described as the the ultimate monu- (above); Liam land. Migration to cities is still strong ment to China’spropertydevelop- Dann (right) with between 17 and 19 million people ment excesses. Modelled on the explains that makingthe move every year. Manhattan skyline, Yujiapuisanew China’s Perhapsthe ghost towerswill be financial districtbeing built from economy is completed and filled in time. scratchand due for completion in more growing Regardless, this slowdown is very 2019. It is billed as covering alarger more bearish real and over the next few years may area than the City of Londonand the than bullish. well involveshocks that will rattle financial districtofManhattan. Pictures /Pat English Western markets and economies. In terms of “build it and they will Whether they rattle the Chinese come” optimism it is certainly im- establishment is anotherstory pressive. But even if you take the altogether. property anecdotes with agrain of For New Zealandbusinesses trying salt, economic data out of China has to make sense of the increasingly been consistently cominginbelow negative stream of economic China expectation for months. news it is important to keep things It was clear from economists, in perspective. This countryisasmall bankers and financial analysts Imet player in avast market. on my visit this month that the tone Most of the things we export — food of commentary on China’s transition primarily — are on the right side of to a “new normal” is growingsteadily the “new normal” policy equation. more bearish. The Chinese Governmentwants to And it is hardly surprising that, see wage growth,employment and among the China bears, property is consumer consumptionstay strong. often singled out as the most likely Secondly, aWestern-style crash cause of amore seriousChina crash. may never come. This is aregime In the West it is so often the case Under Xi Jinping’s leadership ad- biggesttask to ensure the successof with trillionsofUSdollars in that property — or lending-based dressing corruption has becomea the economic transition is to re- stimulatory firepower and the politi- aroundpropertyinvestment — is the key focus and is quite closely establish controlinthe regions. cal clout to regulate as and when it spark for amajor marketfire. entwined with the economic China is abig place and Standard &Poors has warnedthat needs to. Last week Western media reported rebalancing. more property defaults cannotbe There may be slumpsand defaults the first-ever defaultbyamajor Chin- There is aview that corruption — while some regions will ruled out and few would disagree. and growth will slow, but it would be ese developer — Kaisa Group particularly at local government level suffer in this period of One Western property analystI brave to bet againstthe Chinese Gov- Holdings — as furtherevidenceofan — has contributed to poor quality spoke to in Shanghai, before the Kaisa ernment’s ability to maintain stability impending crash. infrastructureand investment. It has change others will news, told me he was surprised we as it goes throughthis transition to It should come as no surprise that becomeaseriousrisk factor for a continue to grow. hadn’t seen amajor developer go anew normal. Kaisa — which has missed $52 million whole range of companies doing busi- under — despitethat remained optim- in interest payments — is embroiled ness in provincial China. istic about the broader Chinese prop- ● Liam Dann has been travelling in in an anti-corruptionprobe targeting Many analysts, both Chineseand erty picture. China as arecipientofthe New Zealand officials in the city of Shenzen. Western, now believethat Beijing’s China is abig place and while some China Council Media Award. D6 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ China R&Dspend to surpass that of the US &Europe

Kicking: off Chinese

eshould follow we need to do more of it.” the strategyof Alexander Speirs travelled to Chinatoinvestigatethe country’s Auckland-based incubator The innovation as an Icehouse has been attempting to impetusfor de- transformation from the world’s factory into an innovationhub bridge the gap and increase collabora- velopment.“W Independent innovation tion between New Zealandand Chin- should be the essenceofthis strategy ese start-ups for anumber of years. and the most urgentthing to do is to Talks were held with Tsingshua eliminate system and mechanism Technology Park in Beijing about the [bureaucratic]obstacles, so as to free prospect of aKiwi LandingPad ven- up the huge potentials of scienceand ture based there, but nothinghas yet technology as the primary force of materialised. productivity.” Icehouse chief executive Andy Those were the words of Chinese Hamilton confirmed talks were President Xi Jinping, who continues ongoing, saying “we are lookingto to stress the importance of China’s host Tsingshua University Science long-term ambition to becomean Park in New Zealandlater in the year. innovation-led economy and aworld We were up there last year visiting, leader in the development of science and we continue to work with the and technology. Head of the China MarketDevelop- It followsfrom the plans started by ment Hub, Tony Wei, and his team.” his predecessor Hu Jintao’s adminis- Whether the Icehouse will be able tration.Back in 2006, China declared to move beyondproof of concept and openly its plan to becomean“inno- marketvalidation with Tsingshua re- vative society” by the year 2020 and mains to be seen. aworld leader in scienceand tech- Callaghan Innovation, however, is nology by 2050. developing its own international China, now the world’s largesteco- strategyand last year met with Torch, nomy,has boomedand blossomed effectively its Chinese counterpart before our eyes. The changeover the responsible for accelerating the past 20 years goes beyondthe facts commercialisation of technology and and figures that tell the story. It’s innovation in China. writtenonthe faces of everyday With discussions at both ends, the Chinese–there’s ashift in attitude, chances of new opportunitiesfor an increase in optimism and asearch New Zealandstart-upsand innova- for prosperity. tors in China look positive–and it It’s come hand in hand with econo- could be privateorgovernment led. mic reform.China going out to the During China’s economic coming- world stimulated its growth and out party over the past two decades, increased wealth dramatically,but it astaple of the national growth strat- was far from asustainable growth egy has been developing infrastruc- story. During this period,China be- ture on the back of aconstruction came the largestexporterinthe world boom. –ifyou invented it, China could build Innovation has been no exception. it, quickly, cheaply and efficiently. Scienceand technology parks are a But China was merely clippingthe key pillar of the national innovation ticket on production, rather than strategyand have been popping up reapinglarge-scale rewards from all over the country, on ascale that those who developed ideas and led few, if any, other countries could the way with advances in scienceand hope to achieve. technology. The parks are designed to stimu- Now the economic growth story is late collaborationand innovation, at- startingtochange.AsChina enters a tract foreign businesses and capital, “new normal” phase with predictably and serve as hubs for integrated slower growth rates, Beijing’s goal is economic development. In 2013, to stoke economic growth through these parks were home to nearly the twin enginesofpopular entrepre- 72,000 companies –with that figure neurship and mass innovation, says certain to grow significantly. Premier Li Keqiang. The Herald visited Zhangjiang Hi- Recentyears have seen the rise of Tech Park in Shanghai — one of the the likes of Alibaba(e-commerce)and largestinChina and aptly dubbed Sina (online media)from homegrown China’s Silicon Valley.When its next successstories to legitimate internet expansion is completed, the park will behemoths. They have listed on the encompass nearly 80sq km — literally New York Stock Exchange. But as a the size of acity. whole,innovation in China remains “Currently, we have more than too compartmentalised. 10,000 companies with offices in the The real challenge is for China to park, and GDP generated in 2014 was move from asociety and economy 3.2 trillion RMB (NZ$670 billion),” says built on aplatform of producing and Fan Xi You, DeputySection Chief of emulating the ideas of others to one Innovation Promotion Department at existingatthe vanguard of new Shanghai Zhangjian National Inno- scienceand technology. with Hong Kong ranked number 10. how to capitalise on arapidly chang- vation Demonstration Commission. China is puttingits money where But while the shift from factories ing environment. That will take a The park is alreadyhome to 300 its mouth is, as capitalcontinues to to innovation is talked about in op- rethinkofthe currentstrategy and Fortune500 companies and has a be pouredinto research and develop- timisticterms, the reality is that mass approach to China,but with the depth liaison office in Belgiumtohelp at- ment at anationallevel. China is well manufacturing is no longer the cash China is putting its of the relationship and experience in tract businesses from Europe, with a on the way to its target of 2.5 per cent cow it once was for China and change China, New Zealandisinthe box seat secondoffice plannedfor the US. of gross domestic product to be spent is more necessary than desirable. money where its to carve out alucrative niche. “Bringing internationalcompanies on research by 2020. The impactofthe one-child policy Scienceand Innovation Minister, here is one of the main strategies of Based on 2013 GDP figures,that on labour force numbers and mouth is, as capital Steven Joyce,acknowledges the the Shanghai municipal government,” investment would be astaggering urbanisation has seen the low-cost changing environmentand agrees says Xi You. US$231billion at atime where the rest manufacturing pool dwindle as continues to be that how New Zealandapproaches it Xi says more than 300 of the top of the world has been trending in the wages have risen. Southeast Asian will be crucial. “China is getting more 400 multi-nationals in the world have opposite direction — thanks to claw- countries — such as Indonesia, poured into innovative, but by their own ad- set up their R&D centresin backs necessitated by the Global Fin- Vietnamand Cambodia — have be- missionthe Chinese would say Zhangjiang. ``All of the companies ancial Crisis. By the end of the decade, come more competitive and cost- research and there’s still away to run,” Joyce says. that registerwith Zhangjiang and pay the OECD predicts China’sR&D spend effective, encouraging major multi- “For New Zealandcompanies, the their tax here are entitledtoreceive will eclipse both United States and nationals to invest heavilythere. development at a accepted modelisthat we have alot full industrial support, so it can be European Union. It’s part of amuch bigger societal of innovation and China has got a quite an attractive option.” The Chinese Governmentisalso shift under way in China: to create national level. massivepopulation and distribution That support can extend to helping relaxingrules and red tape in an effort an environmentwhere innovation channels — it’s amarriagemade in with labour issues,government to improve the ease of doing business, can be fosteredand entrepreneurs heaven. But actually, it’s important relations, construction and planning while rolling out incentives for busi- churned out in asociety that is that New Zealandcompanies ac- management,aswell as access to the ness development — such as provid- inherently risk-averse. It brings knowledge the increasing levels of park’s own credit union. ing seed capital, supporting entre- together anumber of threads–the innovation up there as well and be The park also has strong links to preneurs and offeringtax credits to reformswill likely affect the every- Alexander Speirs was awarded open to marrying in to that.” the innovation community at all fledgling and established businesses. day life of regularChinese people as atravel grant by the Asia New “Innovation is comingand fast. levels, including incubation centres There’s along way to go, however. infrastructure, education, economic Zealand Foundation to study There is alot of money being poured for domestic and foreign companies The world’s biggesteconomypres- policy and law are touchedwith the China's innovation into research in China,and our chal- helpingtoget new businesses and ently sits 29th on the Global Inno- same innovation brush. developments. He received lenge is to see how good are we at ideas off the ground. vation Index — an improvementon As China moves away from mass travel assistance from Air New partnering up with that and securing “The local government has a 35th last year, but still far back from manufacturing and prioritises inno- Zealand and NZ Inc. aplace for our companies and re- where it would like to be, particularly vation,New Zealandmust figure out searchers. Ithink it’s happening, but continued on D7 D7 China Business: ■ 3D printing central to future Chinese education ■ Business incubators here to stay innovation strategy

continued from D6 The University Students Venture teaching to be heuristic, exploratory, Park has all the bells and whistles, discussion-based, and participatory, programme which will give acertain from 3D printers and motion capture and help students learn how to study. Feet on the accelerator amount of money once ayear for the technology to state-of-the-art We will stimulate students’ curiosity, construction of platforms for any classrooms and film studios. The cat- develop their interest and hobbies, incubator — this is general support,” egory of the idea isn’t important. The and foster afine environment for Recent years have seen an manufacturers and mentors to says Jian Lin, vice-general manager focus is on the quality of the idea and independent thinking, exploration explosion of business incubators, develop their prototypes and work of Tsingshua Business Innovator at development of entrepreneurs. and innovation.” accelerators and startup support on scaling their business. Tsingshua Science and Technology The venture park is home to abusi- China plans to install 3D printers networks all over the world. The primary driver though, is Park. ness nursery, incubator and accelera- in all of its 400,000 plus primary Varying in scale and expertise, getting connected in with China’s “Local government will also open tor, with arigorous yet bespoke pro- schools over the next two years. For their success has been as varied supply chains early in the process abidding process for incubators to gramme that has seen 45 per cent of acountry synonymous with mass as the startups they were helping. and working closely with compete for funding with specific projects successfully completed. production and factory labour, auto- Taking arather unique manufacturers during the purposes — as an example, for the It’s alarge component of awide- mation and learning to work with approach to the now burgeoning development of their hardware. construction of laboratories or arching move to improve the crea- new technology is the way of the market is Shenzhen-based HAXLR8R provide seed capital special equipment. There are no ski tivity and business nous of the Chin- future. hardware accelerator, HAXLR8R. for all companies which are trips to Switzerland.” ese. Entrepreneurs are assisted One major hurdle still to be over- Founded by Cyril Ebersweiler accepted into the programme, An example of an incubator centre through the development of their come is intellectual property (IP) law and Sean O’Sullivan in 2011, the with an option of US$25,000 for is the University Students Venture business, offered classes and pro- in China, which has scared some programme has now had fifty a6per cent stake in their Park — afull-service business hub vided with support — whatever form entrepreneurs and companies from companies take part, with all but company, of US$100,000 for a9 designed to turn students ideas into that may take. setting up shop due to fears of being one continuing as agoing concern. per cent stake. fully-fledged businesses. The emphasis on post-graduate unable to enforce their property “When Istarted to invest in “What we do is take our It’s one of alarge number of skills and business training comes at rights and patents. Joyce says it’s a hardware companies, Ihad ahard companies from prototype to ventures being supported by the gov- atime when China has been opening problematic area still but that’s time figuring out how people could global businesses. It’s more than ernment, and is acollaboration up its education system, with anum- maturing as well, and understanding attempt to launch aproduct an investment focus, we want to between the Shanghai Science and ber of reforms and developments in how to work with them is important. without actually knowing how it take our businesses through to a Technology Commission and the an attempt to be competitive at an China is taking the issue very could be built and manufactured. stage where they can launch their Shanghai Education Commission. international level. seriously, but it’s hardly asituation HAXLR8R is built the other way products and get to revenue” says General Manager of the University The primary issue, however, con- that can be solved overnight. around,” explained Ebersweiler. Ebersweiler. Students Venture Park, He Xueqin, tinues to be afocus on rote learning The Standing Committee last year “Since the beginning the idea Following the completion of the says “incubation centres in different and teach to the test, instead of a approved aproposal to establish was to actually create things from Shenzhen portion of the prog- areas will focus on different speci- holistic education incorporating three specialised intellectual prop- here in Shenzhen, instead of ramme, all of the companies travel alties. Government, at different levels, problem-solving and creativity. It’s a erty courts, the culmination of nearly creating somewhere else and to San Francisco for ademons- provides funding and policy support problem the Chinese Government is 20 years of discussions. They are in coming here to manufacture,” tration day –pitching to qualified to these centres, then professional well aware of, and it is changing tack Beijing, Shanghai and Guangzhou as The HAXLR8R programme investors and global media alike. industrial parks, administrative on its medium and long-term educa- part of athree-year pilot programme takes place twice ayear, following Graduate companies have groups or agencies bid for the right tion reform platform. to determine the value and effect of an open call for entrepreneurs with collectively attracted tens of to provide services.” One of the desired outcomes over implementing amore rigorous IP concepts or early prototypes of millions of dollars of investment It’s reminiscent of what New Zea- the next decade is “putting apremium protection system. new hardware. through private investment and land has been doing with outsourced on integrating learning with thinking.” It is hoped the courts will create Successful applicants travel to crowdfunding, with 3D printed incubators and accelerators through The Outline of China’s National Plan local expertise and facilitate amore Shenzhen, China for the first part drones, smartphone polaroid Callaghan Innovation — such as for Medium and Long-term Educa- widespread rollout of IP to enable of the 111-day programme. There, cameras and “smart” adult toys Astrolab in Auckland — but the Chin- tional Reform and Development they work intensely with advisors, highlighting initial rounds. ese scale is on another level. (2010-2020) says: “We will advocate continued on D12

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During his visit to China, Alexander Speirs came across aCalifornian company with aNew Zealand connection working hard to improve the quality of film production on the mainland.

estled in the middleofa For Cameron Pace, R&D remains newly built but eerily based in the United States,but Cheng empty sciencepark on the says ashift towards China should be outskirts of Tianjin is a on the cards in the future. Ntreasure trove of 3D technology and “The long-term vision of this joint innovation. venture is that eventually we will do The projectisajoint venture more and more R&D in partnership between the Chinese Government with our US-based team. What we and Cameron Pace Group — founded hope to do is combine so we can by film directorJames Cameron, who jointly developtop quality,price ef- lives in New Zealand, and cinema- ficient products — that’s how we tographer Vince Pace. Cameron Pace combine the best of both worlds.” Group develops 3D technology, Cameron Pace has extended its aiming to improve the quality,sim- R&D from film and diversified into plify its use and lower costs. Alexander television, advertising and gaming. The Californian business, based in Speirs (right) in The company builds the technology, Burbank, partnered the Chinese Gov- Tianjin with Al often custom-made to suit the differ- ernment two years ago in an effort Ross, ent platforms. to bring world-class 3D technology to Counsellor, In Tianjin,CameronPace demon- local filmmakers and cinemagoers. Science & strated some developments, showing The chief executive of the China Innovation, MB how the technology can work every- operation, GordonCheng, says the and Gordon where from sports sidelines to Cirque joint venture is expanding the de- Cheng, CEO du Soleil. The results,when done ployment of top 3D technologies that Cameron Pace properly, are stunning. have been developed by Cameron Group, China. Cheng says he hopes the develop- Pace over the years, as well as moving ment of techniques and technology furtherinto different fields across will not only benefitthe film making film, television and gaming. US$5 billion in receipts last year. markethas declined and amajor ment is trying to achievetwo things industry, but also the vast consumer “Also, very importantly,wewant “Demand for 3D content, in particu- reason is the large number of poorly with this venture. The first is to industry. But it’s clear that film re- to bring high quality imagesinterms lar, is growingrapidly and China now made 3D films. It shouldn’t be a promote the cultural and media mains king at Cameron Pace. of the techniques used in the film and has the largest3Daudienceinthe gimmick, it should be immersive.” aspectsofChina and Tianjin.Wehope And he hopes in the future his contentmaking processinChina. world,” says Cheng. With agrowingappetite for 3D to attract more talent to the industry, company will have the opportunity There were over 700 films made in “Right now more than 70 per cent contentbut adistinct lack of talent, and more filmmakers makinghigh to partnerwith Wellington-based China last year, but we think there of screensinChina are 3D-capable technology and knowhow, China was quality 3D films. Weta Workshop. is alot of room for improvementand and we’re seeing more and more 3D an opportunity for Cameron Pace to “The secondistopromotetechno- “We would like to build aplatform we want to bring the best techno- films comingout. We have an import- take afoothold — and the Govern- logies in the region — this area is within China which comprises the logies — in this case 3D — to work in ant role to make sure the quality is ment agreed. “The Governmenthas known for developing key compon- best playersaround the world,and China.” up to standard, otherwise it actually helped by partially fundingthe ven- ents for spacecraft, there’s clean tech- involves firms like Weta and other China is on track to becomethe hurts the 3D industry. “This is what ture and of course in terms of getting nology,asuper computer and com- top New Zealandtechnology com- world’s largestbox office within the we’ve seen in the United States over the approvals and certifications panies like Samsung doing their re- panies in the film makingindustry,” next five years, after taking nearly the past three or four years. The required,” says Cheng. “The Govern- search and developmenthere.” he says. What wall? Over 20 yearsago theWestpac group starteddoing business in Beijing. Now, with over twodecadesunder ourbeltweknowwhatittakes to help our clientssucceed in China. We’vebuilt capability, connectionsand experience that we’re usingtotakeour New Zealandclients onto aglobalstage. So whetheryou need trade finance or risk management advice,orwanttotalk to thebankthatisatthe leadingedgeofRMB convertibility -you’llfind it’s well worth connecting with NZ’s No.1 ForeignExchange1 andTrade Finance2 Bank.

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The Huawei Sparkinnovationpartnership bears700MHz fruit writes Bill Bennett

hen Chinese Premier Xi has been consolidatingequipment on Jinpingvisited Auck- Spark’smobile towers. Historically land last November he each generation and set of spectrum joined New ZealandPM might use different hardware and WJohn Key to witnessthe signingofa antennae. Havercroft said Huawei memorandumofunderstanding was able to cover everything with a between Huawei and Spark. single set of equipment: “That brings The agreement will see the world’s about economies of scale and largesttelecommunications equip- efficiencies”. ment company use its massivere- Wu says Spark is internationally search and development resources to recognised as aleader when it comes tailor mobile technologies for the to 4G technology in the 700MHz New Zealandcarrier. spectrum band. The frequencies Spark and Huawei were already aren’t used everywhere yet, but are workingtogether. In 2013 the two important in Asia-Pacific, Latin formedaJoint Innovation Pro- America, the Middle East and Africa. gramme, or JIP, which led to the He says it’s worth noting that Chris world’s first commercial trial of 4G, Quin, CEO Spark Home,Businessand fourth generation, mobile telecomm- Mobile is chair of the Global 700M unications using the 700MHz spec- Industry Alliance, an industry group trum. set up to encourage global develop- Huawei CEO Jason Wu says the ment of 700 MHz technologies and memorandumofunderstanding will supply chains. help Spark catapult into the next generation of mobile technology: 5G. He says the first 700MHz site, in The market here is innovative the Waikato, was runningalmost im- mediately and despitethere being and New Zealand is aheadofthe almostnocompatible equipment at the time, they noticeditwas being curve. used within weeks. Jason Wu, Huawei Since then Huawei has rolled out 700MHz sites for Spark in Auckland, Wu says: “This is how we can make Wellington and Christchurch along sure mobile carriersand customers with many rural sites. It was afast in these regionscan get access to the rollouttaking just six months. best handsets and equipment. It’s Wu says the network already why all the flagship mobile phones covers most New Zealandcustomers. now work at 700 MHz.” Spark’sinvestment in 700MHz Huawei is interested in what hap- spectrum band is strategic. When the pens in New Zealand. Wu says: government auctioned the frequen- “Carriers, equipment suppliers and cies freed up by switching off the regulators in these countries are all analogue television broadcast net- watching closely to see how Spark work, Spark managed to win four of fares in New Zealand. The market the nine frequency blocks on sale. here is innovative and New Zealand It meant ahuge investment, but is ahead of the curve, there are op- owningthe lion’s share is potentially portunities to do things here that lucrative. That’s because 4G is all don’t exist elsewhere. about data, unlike previous genera- “The JIP model isn’t uniquetoNew tions of mobile technology. The more Zealand, we have similarpro- frequencies acarrier owns, the more grammes in adozen or so countries. data can be transmitted throughthe However, it was one of the first and airwaves at the same time. So a we’ve taken the experience we’ve carrier with more bandwidth can learnt here to other countries, it offer customers faster mobile appliesespecially in Europe.” broadband and that gives them a He says this will pay off for New competitive edge. Zealandwhen the mobile industry Wu says 700MHz is particularly moves on to 5G. That’s scheduled to well suited to 4G. It is also easier for reach mass markets in 2020, but carrierstouse, it reachesfurther than there will be pilots first. New Zealand other frequencies and can mean was relatively late to the 4G party, but fewer sites are neededtoprovide the that is less likely to be the case with same amountofcoverage — that 5G. Apart from anything else, Wu says makes it cost-effectivefor mobile it won’t be as difficult for Spark to carriers. upgradefrom 4G to 5G as it was when David Havercroft, Chief Operating it made the transition from 3G. OfficerofSpark Connect says the Things start to get excitingatthat theory of 700MHz is all very good in point. the physicslaboratory, but things While the move from 3G to 4G was changewhen you get out into the about movingfrom afocus on voice field. “We had the bandwidth, but we to mobile broadband, the switch to wantedtoget the best out of it, that’s 5G will introduce ubiquitous wireless where we joined with Huawei”. data networks with low latency. This One of the initiatives to come from will drive the so-called internet-of- the Huawei-Spark JIP is carrier inte- things and will make innovations gration.This helps mobile companies such as driverless cars apractical make better use of their radio spec- reality. trum investments.Itmeans Spark can Wu says to make that safe you bundletogetherall its 700MHz spec- need anetworkthat can respondfast trum along with its holdings in other enoughtokeep driverless cars safe frequency bands,including 1800MHz in high-speed traffic. and 2600MHz. Havercroft says this is what Spark “We wantedtobring all our was lookingfor when it picked frequencies together and combine Huawei as atechnology partner. It them into asingle block. Huawei was didn’t want to cut adeal for now and doing something similarelsewhere so hunt aroundfor something else when it was the obviouspartner,” says the next generation came around. Havercroft. “Huawei talks as if it expects to do Carrierintegration means fat business with us for the next 100 internet pipes in the airwaves capable years. Even the contextofthe next of fast speeds. Wu says Spark has sites 15 to 20 years is long by industry in the Auckland CBD capable of oper- standards. ating at 300 Mbps. Thoughthis is the “We didn’t pick Huawei because it kind of speed found on terrestrial was the cheapest — although the fibre networks, wireless bandwidth is prices are sharp — we picked it be- shared so, while users will rarely get cause of the company’s commitment this level of performance,they will to the long-term, its willingness to see massively increased data speeds. look forwardand invest in research Another development of the JIP and development.” D10 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015

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Microblogging service is investing in R&D to stay ahead of the pack in China, writes Alexander Speirs

ina Weibo is the biggestsocial testing,” says Hong. “We had alot of media network you’ve prob- functionalitiesinWeibo that Twitter ably never heard of. didn’t even have until very recently, The Chinesemicro-blogging like pictures and pages. Weibo is Sserviceisthe 15th most popular really big and now quite different websiteonthe Internet and continues compared with Twitter, and alot of to move from strength to strength — those things we did that have made last year listing on the Nasdaqstock us successful were specifically de- exchange in an IPO valued at US$3.5 signed for Chinese consumers.” billion.The valuation followsstagger- The biggestbattle for Weibo in the ing growth in users, with 120 million future will be public perception. Since people accessing the platformona its IPO and the increase in exposure monthly basis and 87 million on a throughWestern media,Weibo’s poli- daily basis. cies aroundcensorship have been Thoughthe growth of Weibo has under fire — with the clampdown been remarkable, it is important to during last year’s unrest in Hong Kong note the inherent advantage it has aparticular focal point. had in developing from afledgling Hong says the levels of attention company to adominant Internet and censorship discussion that property. Weibo generates is disproportionate Social media is highly restricted to the reality of what is actually and regulated in China.When happening. Facebook and Twitterrefused to play “Alevel of controland monitoring ball with the Chinese Government’s is pretty common to all internet strict regulations and restrictions, The icon for platforms aroundthe world and if they were bannedinshort order. Chinese you see Weibo,for the most part it’s It’s no coincidence that during this microblogging apretty open platform. People are time the fast rise of domestic social service Sina talking about alot of things,but media platforms truly kicked into Weibo. obviously there will be boundaries gear, but Ken Hong, General Manager and there will be limits.” of Weibo Marketing Strategy, says it “That is something consumers between the platforms. But Hong says “What is really going on is not was just acontributing factor to its neededand wantedinChina and it this is no longer afair label. much different to alot of other media growth. resultedinanexplosion of user “Initially, we were pretty similarto platforms in China or in many other “Obviously from acompetition growth — particularly at the grass TwitterinWestern society, but today different parts of the world,” says perspective, when you have fewer roots level. Ithink our ability to the platformhas evolvedtremend- Hong. “Acertain level of censorship competitors that is beneficial. But at leverage alot of celebrities and key ously and Ireally think we shouldn’t will be neededinChina, but Ithink the same time Ithink it’s important thoughtleaders really helped the call it Chinese Twitteranymore.” overallthe situation is not as sig- to keep in mind that it’s just one platformtogrow. They quickly Social media is afickle business nificantasalot of other people expect factor,” he says. moved onto the platform, they tend and innovation is an essential com- it to be. Hong points to savvy marketing, to have alot of interesting things to ponenttomaintaining relevance in “Obviously, there will be some incremental innovation and tailoring say and obviously draw alot of the face of new competition. To that inappropriatethings that we have to its offeringtoChinese audience as the attention from regularconsumers.” end, Weibo is investing significantly censor, controland delete.Some of key tenets to Weibo’s success. Weibo has excelled as abusiness in research and developmenttostay that involves excluding fake informa- “If you look back about five years because of its ability to adapt and ahead of the pack. tion and inappropriatecontent,but I ago, there really wasn’t this kind of introduce new features to the plat- “We have avery large product think for the large part Idon’t see any media.It’s extremely accessible, an form. Weibo was initiallyreferredto team and astrong technology team. key difference between what we open platformand information can as “Chinese Twitter” and criticised It’s acombination of doing market have to do as aplatform in this be shared and spread very quickly. because of the vast similarities research, trial and error, and alot of market,” says Hong.

Zuru builds the dream in China Learning on the job continued from D1 control drawers, design and creative,’’ Mowbray says. “We are making areal the top selling toy for the 2012 Christ- effort to build our in-house China Learning the lay of the land mas season in New Zealand — the first creative team but it’s hard to find that when it came to selling toys was time aKiwi company had achieved talent. I’m always looking for good an arduous process for Zuru. In that since the launch of the iconic product and packaging designers, top anew country, attempting to Buzzy Bee. quality illustrators. break into aglobal market in Robofish was the fastest selling toy “We go through thousands of in- which they had no experience globally in 2013, with more than 15 terviews and have avery heavy meant there was alot of trial and million sold and reaching the top five rejection rate. Our standards are ex- error involved. list for toys sold in 40 countries. tremely high.” “Because we had no Nearly 30 million units have now Mowbray says sourcing in China knowledge of the industry, we been sold worldwide. can be difficult, but once the right didn’t realise that all deals took Leveraging off the success of people are found, they are phenom- place in, and revolved around Robofish, Zuru headed off major enal. Their work ethic is amazing, and showrooms in Hong Kong,” players in the industry –the likes of skill sets are incredible. explained Nick Mowbray, Hasbro and Mattel –towin the rights ``We are competing at an interna- president of Zuru Toys. to a “huge portion” of the master tional level and our talent has to “Originally Iwas just phoning license for Finding Dory,the sequel match acompany like Hasbro. Get- and emailing, anyone and to Disney’s blockbuster film, Finding ting to that level is what we’re striving everyone. Itried to find as many Nemo. Zuru Toys’ Anna Mowbray oversees Chinese workers. to do and we’re making great head- contacts as Icould to get in with “Ithink we should be able to match way.” the major retail bidders.” the success of Robofish just off the “It’s not just fish; we’ll be doing a get with automation –which would With the growth of Zuru’s R&D After unsuccessfully trying to back of Finding Dory. Finding Nemo jellyfish, an octopus and aturtle. The obviously drive down the number of team, Mowbray estimates 70 per cent beg, borrow and steal their way was 15 years ago and it’s still iconic. original turtle is just launching right staff we require. Our factories aren’t of new products are being developed to some showroom space, the All the main voice talent is returning. now, he’s fantastic. Walks on land and big enough to handle ahuge product in-house, with the remaining 30 per Mowbrays managed to We just went to an early viewing last swims in water using the same button launch like Robofish. At our peak, we cent coming from external inventors. scrounge together enough week in Los Angeles and it’s looking cell technology from Robofish.” were producing 60,000 units aday Zuru receives thousands of money to rent atiny piece of fantastic,” says Mowbray. Thankfully for Zuru, the launch of the Robofish, which also needed concepts for new toys each year — Hong Kong real estate. “To get the master license for Zuru comes on the back of further develop- to be waterproofed. both solicited and unsolicited — and The significant expense, is huge. Only the biggest toy com- ment of their own factories and ``It’s afine line, but we’ve got a it has sufficient volume to conduct however, meant corners had to panies in the world have achance of strengthening relationships with good understanding now of manufac- asubstantial quarterly review with be cut in other places. winning amaster licence from the outsourced production. turing in China and we can be quite their inventors and innovation team. “I used to sleep under my likes of Disney and Marvel, so it’s an “Right now we outsource about 90 savvy when we assess the technical “Usually Mat, Nick and Iwill each conference table because it was exciting time for us. We’ve already got per cent of our production in China, capability against the product have an opinion on an item straight- the largest space in the great relationships with Nickelodeon so at any point in time there are over requirements and make good away. showroom,” said Mowbray. and Pixar, so adding Disney is going 6000 workers doing Zuru products. decisions.” “Then we’ll banter about how to “I remember my very first to allow us to really leverage off that.’’ We then bring aportion of that pro- As Zuru grows, the portfolio of approach it and whether we push meeting I’d arranged, the buyer Zuru will collaborate with Disney duction in-house,’’ Mowbray says. products has grown quickly, forward with optioning the product,” came early and Ihad slept in a as they prepare to roll out aglobal “We have two factories which are prompting arapid expansion of says Mowbray. little. marketing campaign ahead of aJune Zuru owned and operated, with 600 creative and development staff based “If we option the product, they’ll “I didn’t want him to see me 2016 premiere. workers across those two sites. Not in China to go along with increased then build and send us prototypes of sleeping there, so Istayed under It’s atight turnaround for Zuru to huge, but growing quickly. capacity. the toy. We will cost it and price it, the table perfectly still and get the products finalised, produced “We’re looking to be up to about “We’ve grown our research and and figure out where we can fit it with missed the first meeting I’d and ready to go to market in little over 1000 workers in the near future, development (R&D) team to over 50 one of our brands and into our larger actually managed to get!” 12 months time. depending on how advanced we can including engineers, prototypers, portfolio.” D12 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ 2014 sees 13m jobs created in China ■ China’ e-commerce sector adevelopment priority Kickingoff Internet Plus almost everything China’s New Zealanders as we are so used to an open environment. For Chinese, innovation China’s latestbuzzword is abusiness this is aperfect platformtoput their names on the internationalstage. strategy strategy that appears all-encompassing, as Only the internet could make Psy’s Gangnam Style so popular and so foundonarecentvisit famousinsuch acheap way and Xiaoying Fu short time. The third industry revo- continued from D7 lution has built many production nternetPlus — the new engine to be connected to the network. This lines for mass market. China to be more competitive glob- for sustainable growth — was the is ahuge job. Chinesecall the internet as the ally, and facilitate the entry of com- hottestword during my recent China recently openedthat market fourth industry revolution. Based on panies that may have previously business trip to China. to privatesector. It makes sense that data analysis, it will provideservice been apprehensive. IPremier Li Keqiangunveiledthe Hope King recently launched its pro- and products that fits individual The Supreme People’s Court will Internet Plus Action Plan during ductionline in Auckland to manufac- needs. monitor the development and per- parliamentary sessions in March. ture optic fibre connection related New Zealandhas to positionitself formance of the IP courts over the “The plan aims to integrate mod- elements primarily for the Chinese well for this important turningpoint next three years and report back. ern manufacturing with mobile market. in the Chinese market. Some remain far from optimistic Internet, cloud computing, big data Secondly, this platformisvery flat We need to diversify our engage- about China’s late entry into IP pro- and the Internet of Things.Itwill also and extremely easy to enter. Every- ment with China.More effort needs tection and fear it may be too late. encourage the healthydevelopment one can leverage it as long as you to go into entering China’s huge, French venture capitalist Cyril of e-commerce,industrial networks, have an idea that is appealing to your emerging mobile digital market. In Ebersweiler, who runs amentoring online bankingand help Internet customers or consumers. this digital world,our goods and programme in China, says “I’m afraid companies increase their interna- China needs to find anew way of Again, this probably can only be services are delivered in seconds, no the window has passed for Chinese tional presence,” he said. keepingthe employment rate at a achieved in China due to its popula- Free Trade Agreements,nocustoms hardware start-ups because of the Examples of Internet Plus include stable level. Large SOEs can no longer tion. Iwould imaginethe big data clearance. rise of companies like Xiaomi.” Internet Plus Education, Internet Plus fulfill the purpose. When many lower behind Alibabaand Himalaya have The recent signingbetweenKiwa Xiaomi is relatively new — five Healthcare, Internet Plus Transporta- end, labour intensive factories have more commercial values,just like Digital and Beijing Kaku Media Co is years old — but with aUS$45 billion tion and Internet Plus Entertainment. been forced to close down, this plat- eBay, Google and Facebook. ababy step for entering China’s mo- valuation. In that short time, it has Actually, Chineseare adding the form is perfectfor the younger gen- The internet has also createda bile digital education/entertainment become the third largest smartphone Plus to everything you can imagine. erations — they are less concerned huge digital market, particularly for market. Kiwa is aspecialised com- maker in the world behind Apple and This is avery smart move for the about money,willing to work for mobile games.Tecent, the largest pany focusing on publishing Samsung. Xiaomi has courted plenty Chinese Government. First, the themselves and very flexible. games company in China, had online interactive digital books.Kaku is a of controversy along the way. internet itself is an infrastructure. If This platformisalso perfectfor game revenue of RMB44,756 million media company with its own TV Apple, in particular, has been vocal the Chinese government has spent innovation, with lower entry costs. in 2014, a40per cent increase over channel, animation company, retail in its criticism about Xiaomi copying billionsonmotorways for “catching Statistics show that in 2014, 13 million the previous year. shops,games company and offline its products and technology. Xiaomi up”,then spending the money for new jobs were createdinChina, many Social network revenues increa- children’s programme. products have been banned in India internet backbones is leadingthe way of them in internet related businesses. sed by 43 per cent to RMB18,554 To fully leverage the relationship on the basis of patent infringement worldwide. The internet era has just Alibabaisaperfectexample, serv- million.The increase was primarily built with Kaku, we need to work with and commentators have gone on started. ing small and mediumenterprises for driven by in-gameitem sales within other New Zealandcompanies. One In China, still, many fee-charging buying and selling physical goods.A mobile platforms. New platforms, of my big take-aways from my recent Xiaomi is disruptive of highways are very light, as people less well known platformfor many new technology and new devices trip to China was that Chinese com- prefer the alternate free road. But New Zealanders is the Himalaya have driven changes in behaviour. panies now want to build strong the innovation everyone has to use this digital high- online radio station.Within 21 months Thirdly, this platformhas no partnerships insteadofcompeting environment in China. It way. There is no alternate route. of its launch,ithas over 140 million boundaries, or at least if you comply with each other. The Chinese Governmentisfacing registered users and thousands of with ChineseGovernment rules and New Zealandisasmall country: do means Chinese start-ups the same issue as we are in building radio stations. regulations, what you put online and we have the luxury to compete with have to go global to this digital highway. The Government Amajority of the hosts are free- what they put online is visible to each other in this huge market? can only build the backbone. To use lance, and some of them have everyone no matter where you are succeed. the full potential of fast internet, attracted over 20 million followers. on the planet. ● Dr Xiaoying Fu is Director, Kiwa offices,homes and public places have Those are impressive numbers. This may be less important for Digital Cyril Ebersweiler

record speculating that Xiaomi is un- likely to move into the United States market due to alack of its own Another busy dayonthe international circuit patents and proprietary technology. “They are commoditising, or as we call it Xiaomising, technology very Government Minister Steven Joyce quickly. That’s amajor threat for new had less than three days in Shanghai companies, because if Xiaomi goes for business and efficiency was the into every business and throws name of his game. billions of dollars at it, what it is doing Joyce wears anumber of hats, and is commoditising others’ innovation. is often switching between his But the scale and speed at which it portfolios of Economic Development, goes is aconcern,” says Ebersweiler. Science and Innovation, and Tertiary Xiaomi’s products tend to sell for Education, Skills and Employment. less than half the price of their equiva- This was no better displayed than lents, with original producers lament- during his recent visit to China. Joyce ing the difficulty competing with a moved seamlessly from promoting rival who has afraction of their origi- New Zealand business at the Shang- nal development and licensing costs. hai Boat Show to talking international “Xiaomi is disruptive of the inno- investment strategy with Nuplex, and vation environment in China,” says learning about the future of cross- Ebersweiler. “It means Chinese start- border education ventures at New ups have to go global to succeed.” York University in Shanghai. “In the US and the Western world, there is no equivalent of Xiaomi and Q: This is your fifth trip to China so it’s avery unique issue,” he says. since becoming Minister — what Detractors argue that rather than has been your biggest take-away simply producing cheap knockoffs, this time around? incremental innovation has been a This trip is definitely the maturing of pillar of China’s development. How- the relationship — what Imean is the ever, it’s not sustainable as along- lift in our Government’s and private term driver of innovation. sector resources that are being But general manager of Weibo applied to the relationship. Ithink marketing strategy, Ken Hong, says we’re seeing amove from atrading the process has led to uniquely Chin- relationship to one where we’re on ese products which have advanced the ground and we’re apart of China. beyond their initial model. “There are Q: With Australia signing its own alot of products, copied in asense Free Trade Agreement with China, — although that might not be the right what can we do to ensure we Stephen Joyce visits the Nuplex Factory in Changshu. Picture /Alexander Speirs word — but they’ve learned from the increase the value of our relation- original Western examples. Alot of ship and don’t get pushed to the While Idon’t think it will ever get to Ithink our food and beverage curve, we either become apart of that them have evolved significantly — side? the stage of joint trade missions, companies are learning that they and help shape it, or we get run over whether it is to cater to the Chinese By most countries’ standards, we because we’re different, we are 28 have to be on the ground directly and by the steam roller eventually. consumers’ taste or in terms of the have agreat relationship — million people combined, and next involved themselves. That’s changing We are getting some good investment richness and functionality. particularly given our size — but we door neighbours who are pretty small the landscape and they’d probably all from China and we are seeing some “We had alot of functionalities in never take it for granted. Australia by world standards. We should do agree they should do it faster. good examples of New Zealand Weibo that Twitter didn’t even have will want to take advantage of its own what we do well in New Zealand — That’s one thing we definitely have companies succeeding in China with until very recently, like pictures and Free Trade Agreement and we should collaborate to take advantage of each to do more of. We are still fairly under- their investments. But it’s about the pages,” says Hong. “Weibo is really big be able to help there. We should be other’s knowledge and experience. done in the high-tech space, and tend long haul — there are not many and now quite different compared able to have joint opportunities Q: There are clearly areas where to look more towards America and overnight successes, and we’ve got to with Twitter, and alot of the things together, we’ve learnt things which New Zealand is performing well in Europe in that area. Ithink in the long keep learning the lessons on how we we did that have made us successful may be helpful to them, and Australia China, but where could we look to term as China gets more focused on invest in China. were specifically designed for Chin- can undoubtedly be useful to us. be doing better? innovation and moves up the value —Alexander Speirs ese consumers.” D13 China Business: ■ New Zealand and China looking to bump annual trade to $30 billion All roadsleadto China...

...but don’t rush it, warns Michael Barnett

ince the signing of New Zea- logies. Our Chinese partners, with a land’s Free Trade Agreement belief in self-strengthening, will look for with China, the opportunity to control of knowledgeand supply rights boost our trade with an econ- to ahuge market and may have a Somy growing mostly in double digits different view to the ownership and has been too attractive to ignore. rights to innovation, so we need to Even in the cloudy moments of that acknowledge and respond to this. relationship, when Fonterra’s botulism New Zealandersmay believe that incident threatenedNew Zealand’s free trade is exactly that, but as many brand values and representation, both sectors have already discovered, the countries’ leaders issued the aspira- introduction of special accreditation in tional challenge of lifting trade order to access the China market can between China and New Zealand from be restrictive,astowho does export $20 billion annually to $30 billion. into that market and who owns the There was no “how” we might do supply chain. this, but obviously there was acon- Asmall or medium enterprise in tinued dependency on commodities New Zealand may well believe that a and growing tourism. Government-negotiated Free Trade For other than the large commodity Agreementwill leave no exporter sectors, the opportunity to participate worse off than their local competitors, The first five in this export potential of China is but this is not so. For the future, we years of the FTA fraught with risk. As we review the first need all our government agencies to have delivered five years of our Free Trade Agreement be enablers of access, not simply some significant relationship, New Zealand businesses regulators in apartnership for free learnings, says might like to consider how they want trade. Michael Barnett. to do business for the next five years ● Atrusting relationship and understandwhat success might The challenge for all relationships the home side are all institutionsyou trust your partners at home and then try not to be distracted by the many look like. is how you approach this critical value. trust and have built relationships with. determine when. opportunities you will see. Stay fo- Though New Zealand may have a Should you trust until you know you We speak the same language, have ● Take your time cused on your core business and do formal China strategy, the first five shouldn’t, or don’t trust until you know lived in the same communities and For asmall and medium business not be seduced into committingbe- years of the China relationship has you should? understandtheir values. entering China there can be no rush. yond your emotionaland financial delivered some significantlearnings For business this is apart of the risk We need to rememberthis when we There is aneed to visit more than once capacity. You will never fully under- for small and medium enterprises in doing business anywhere in the start making judgmentsonwho we will — to understandthe region where you stand China or the Chinese the way (SMEs). world, including China. Small and me- establish relationships with and why. may be doing business; to learn how you understandNew Zealand and the My top three learnings look like this: dium businessesare not rich in Accept there is acultural difference. the supply chain works; who the com- people in business here, but you do ● We are culturally different resources,sothey need to be able to We will then know the interpretation petition is; how they operate and price; bring the uniqueness of aWestern This does not mean that one is right prioritise who they will have relation- we apply to ownership of property, to introduce you — who you are, what education and New Zealand values. or wrong, but it does mean we do ships with and ensure that these re- ideas or intelligencemay well be your strategy is and how you intend You can make these acompetitive things and interpret things differently. lationshipsoffer the richness in interpreteddifferently by an intended to operate in this huge market of advantage — enjoy the journey. New Zealand’s small and medium busi- contacts and networks needed to suc- partner. opportunity. It all takes time and has nesses want to take their innovation ceed in amarket. Should you trust? Of course you acost — you need to be able to sustain ● Michael Barnett is chief executive of and creativity to the world in the form Advisors, bankers, shippers, law- should, but rememberthe process you this. the Auckland Chamber of Commerce of new products, services and techno- yers, copyright and supply chains on unwittingly may have gone through to Once you are on this road to China and Industry.

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minterellison.co.nz D14 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ Growing Chinese middle class means agrowing demand for NZ’s high-quality proteins The right DNA for the future

Dairy giant Fonterra has plans to forge on in China despite being buffeted by adownturn, writes Fran O’Sullivan

onterra chief executive Theo Spierings has revealed the NZ dairy company is “definitely” lookingatdeveloping another —Fand possibly its final — Chinese farming hub in Heilongjiang in part- nership with Beingmate. Fonterra unveiled anew global partnership with Beingmate, which is China’s largestinfant formula manu- facturer, last August. Beingmate alreadyhas 10 dairy farms in China’s northeasternpro- vince of Heilongjiang. Spierings says Fonterra will definitely use its know- ledge to help Beingmate — in which it has an 18.8 per cent stake — to improve the existing farms’effective- ness and efficiency to bring them to the same globalstandard as “we run them at”. “On top of that Ihave said to the Governor (of Heilongjiang) that with the partnership of Beingmate we shouldreally consider ahub in Heilongjiang.And possibly that will be the last one.” Spierings says if Fonterra estab- lishes anew farming hub in Heilong- jiang with Beingmate, it will be close to hittingits annualproduction target from China of 1billion litres of milk when all of its hubs reach maximum production. Last year, Fonterra also forged a strategic alliance with American pharmaceuticals and health care giant Abbott to develop anew $342 million dairy farm hub in China.Chicago- based Abbott is abig playerinChina’s infant formula and nutrition market. The new hub was to be Fonterra’s third in China and would complement its existing farming operations in Shanxiand Hebei Provinces. But Spierings says thoughFonterra Familiarity helps mould partnership has alwaysspoken about building five hubs in China,they are now building doublefarms insteadofsingle ones The Beijing Government-led Alexander Speirs travelled to marketing strategy will be forged. to achieve abetter return on capital. consolidation of the Chinese dairy Hangzhou to meet with Beingmate “In the past, we studied the needs It is clear Spierings has taken a sector — which got strongly under way Beingmate Chairman Zhentai of the market first and then developed shine to Heilongjiang’s Governor Lu last year — left infant formula manu- Wang to find out more about the ● Set up in 1992 to produce aproduct to fit that market,” says Hao — widelytipped to be amajor facturer Beingmate facing two options. global partnership his company children’s food Wang. “In the case of Anmum, it is playerinBeijing’s “next generation” Buy up ahost of smaller producers or has struck with Fonterra. ● Diversified into infant already an established product, so the leadership — who singledout two-way co-operate with amajor international formula in 2002 research is about finding suitable sales investmentasthe key to ensuring the dairy player. deal to be put through in arelatively ● Produces 100,000 tonnes channels.” stability of bilateral trade between Beingmate Chairman Zhentai Wang short time. The formal negotiation of baby formula annually Wang hoped the current deal with New Zealand and China duringa told the Herald the company chose to process lasted only eight months, with ● Four production bases Fonterra was the beginning of alonger recentvisit to Auckland. work with foreign companies. familiarity between top executives throughout China partnership and further ventures, with Heilongjiangisone of the strongest “Working with foreign companies is cited as areason for efficiency. both Australia, and children’s food in provinces of China in the farming, the most likely way we can help satisfy “Fonterra was motivated to find a his sights. “With Fonterra willing to dairy and stockbreeding industries. the tremendous needs of the Chinese partner to further develop their pres- the two firms are ajoint venture. expand their business into Australia, In Auckland Lu made the point to market,” he said. “Many Western ence in this market. We have worked Therefore, Fonterra authorised we see alot of potential there. We an industry briefingthat the challenge countries have accumulated signi- together for close to adecade, so when Beingmate to manage this product and would like to co-operate with Fonterra to long-term trade is ensuring stability ficant experience in their long history, Fonterra raised the proposal with us, be the distributor for the Anmum to explore this new market and and reliability. Relyingonprice developing their own dairy sectors. we naturally agreed this was agood brand in China.” develop new business. competitiveness for goods will not They also have avariety of resources, direction for both of us to go.” Beingmate sells into more than Beingmate’s focus is in food for guarantee long-term trade,but two- the price is more competitive and costs The newfound co-operation will 80,000 outlets around China across a children in their early childhoods. way investmentwill guarantee trade are relatively low. have amarked effect on the day-to- variety of markets, touching both high- “New Zealand and Australia have a in the long run. “Based on prior experience working day operations for both companies tier and low-tier cities through a huge resource base and variety of Governor Lu also promoted the with Fonterra, we thought they were due to the impact of regulatory diverse network. Wang explains the healthy foods, outside of dairy. investmentopportunitiesinhis pro- adesirable target in terms of scale, requirements in China. most important issue is to study the “These are all potential products for vince duringameeting at Fonterra. technology and integrity.” Says Wang: “Under Chinese law, Anmum products and their suitability children’s foods and if we could jointly “He is very brand-driven,” says Wang said Beingmate’s prior co- Fonterra’s product Anmum cannot be in different Chinese markets. Once that develop in this area, it could be abig Spierings. “He is very active and en- operation with Fonterra enabled the sold in competition with Beingmate as research has been completed a win-win situation.” ergeticand avisionary man. Iwas very impressed.” Fonterra faced some criticism over it is along time ago that China took cause the milk prices are putting took alot of high-level management its acquisition price for Beingmate. But more than 50 per cent,” says Spierings. pressure on us. time — coupled with help from the Spierings says the company had taken It’s also significant that the pro- “We really have best-in-classfarm- New Zealand Government — to re- apotential profit downturn into its ducersare once again buying — not ing but with the current milk price you solve.The malicious 1080 threatwas valuation numbers. “We boughtata merelythe traders — which indicates can only operate cash — you can’t yet another incident that could have solid but not too high price.” inventories are finally being run think about Ebit and profit.” — but didn’t — take management’s eye Spierings has good connections down. Despite the tough environment, off the China ball. with Beingmate founder Xie Hong. He is confident in the long-term Spierings says the company has a But the Chinese and NZ authorities They both sit on the JV’s strategic future for Fonterra in China given the uniquestrategyand “we need to keep handled it with delicacy and the im- committee. inevitable demand for first-class pro- on drivingit”. pact was transitory. Fonterra is also open to partner- teins that will come as the Chinese “We need to focus on initiatives. Spierings has put that behindhim ships in the food services area in middle-classgrows. Last year we did so many deals in one as he focuses on the Fonterra busi- China and is working on attracting a “Ican’t changethe ingoingassump- year, we have enoughonour plate.” ness. “We need to get faster because financial partner. tion for the China Strategy as we wrote Spierings has faced huge challen- the geopolitical world changes so fast But its fortunes have been buffeted it three years ago,” he says. “But it is ges since he becameFonterra’s chief that we as management need to keep by the sharp and persistent downturn terrible at the moment. It is the lowest executive — almostall of them relating the metabolic rate up,” he says. in commodity prices on the Global- milk price Ihave ever seen in China.” to China.Getting farmer-shareholder The Chinese Government — like DairyTrade (GDT) auctionplatform Internationalfactors have clearly approval for “trading amongfarmers” Fonterra — is now focused on the right since last year. been at play. (Taf) was atough sell. But that was partnershipsand the right DNA for the Spierings says recentmovements But for Fonterra the reality is that expected. future. on the GDT platform indicate China low dairy prices are makingitdifficult What wasn’t expected was the im- “With a500 millionstrong middle- is back in the market. to farm in China. pact of the DCD and WPC80incidents class which has money, Idon’t see “Chinawas again more than 50 per “We continue, but it has afinancial and the false-positivebotulismaffair why they would not buy good milk cent of globally tradedvolumesand effect,” says Spierings. “It hits us be- on the business. These incidents each products.” D15 China Business: ■ China economic liberalisation on fast track ■ China financial system to double US by 2030 Feeding fierce hunger for trade

New Zealand is leading the world in relations with China, presentingthis country with amassivegrowth opportunity — if it can position itselftomaintain its lead,writes David Green

ew countries have been as Many are turningtoadiet rich in quick as New Zealandtoem- proteinand vitamins, including sea- brace the opportunitiespre- food, red meat and dairy products, sented by the rise of China as along with fresh fruit and vegetables. awForld power. In other words,demand is soaring Politically and economically, New for the types of food and beverages Zealandhas been aleader in recog- New Zealandproduces. nising China’sglobal status.Success- Asubset of this demand, which ive governments have advanced our exceeds New Zealand’s production relationship with Beijing — culminat- capacity many times over, is from a ing in New Zealandbeing the first growingcategoryofcustomers that OECD countrytosign acomprehen- are willing to pay an additional sive Free Trade Agreement with premium for products that originate China in 2008. from trusted regions, are of high China has since grown to become quality and meet marketexpecta- New Zealand’s largesttrading partner tions aroundpracticesand standards. and is akey marketfor many of our Amajor study commissionedby major exportindustries, such as ANZ estimated that, given these de- dairy, forestry, meat, seafoodand velopments, New Zealandcould cap- wool. ture up to $1.3 trillion more in agri- It is also amajor source of cultural exportsbetweennow and migrants, students and touriststo 2050. New Zealand, and an increasingly But the rewards will not just fall important part of New Zealand’s into our lap; other countries are make-up and consciousness as a chasingthem too. The study points nation. to significant barriers to be overcome ChineseNew Zealanders are a at every step of the supply chain. valuable part of our society, while Key among these is the ability to maintaining close cultural and busi- source capital. Across the sector the ness links with China — an advantage capitalgap is immense — afurther David Green. Picture /Illustrations /ANZ supporting business connectivity NZ$210billion will be neededtoen- with Asia. able production growth and NZ$130 Anumber of New Zealand-based billion to support turnover in farm companies are also well established ownership. in China,showingthe way for others Farmers cannotpossibly raise all seekingtobetter understand it as a the capitalneeded to fully realise the countryand as amarket. opportunity. But, again, developmentsplaying out in Asia offer new promise. The rewards will ANZ economists point to afurther wave of economic growth in our not just fall into our region,underpinned by apotential “revolution” in the development of lap; othercountries Asian financial markets. In their report, Caged Tiger: The are chasing them Transformation of the Asian Financial System,they tipped this revolution to too. The study drive up Asia’s share of global economic outputfrom 17 per cent two points to significant decades ago to 35 per cent by 2030, and over half by the middle of this barriers to be century. In China’s case, its Governmenthas overcomeatevery recognised the urgency of reform and is fast-tracking financial liberalisation step of the supply and the openingupofthe domestic financial system to internationalcapi- chain. tal flows. RMB convertibilityplays an important role in this. New Zealandjoined aprivileged If China continues to pursue these few nationslast year with an agree- reforms, ANZ forecasts that its finan- ment with China allowing banks to cial system will be more than twice directlytrade the two national as big as the US system by 2030. currencies. By the middleofthis centuryChina This deal carries with it the poten- will account for half of Asia’s financial tial to furthergrow trade and invest- assets.Shanghai will rival New York ment flows. as aglobal financial centre and RMB The arrangement saw ANZ, as part will dominate in Asia as aregional of aselect group of banks,being fundingcurrencyand agenuine rival grantedamarket-maker licencefor to the US dollar as aglobal reserve direct RMB/NZD tradingbythe currency. People’s Bank of China, and we have For the wider region,including seen first-hand how it has helped lift New Zealand, this rise of Asia as a the confidence of companies in New financial power points to adramatic Zealandabout doing business in increase in cross-border investment, China. agrowingsupply of both equity and Thoughprogresstodate has been debt assets and the emergence of a great, there is enormous potential to new investor base. furthergrow the economic benefits Alreadywesee significant pools of of our relationship with China and the funds accumulating across Asia’s other growth markets of Asia. rising economies. New Zealandis Rapid urbanisation in those well-placed to secure capitalfrom markets, along with rising wealth and those growingmarkets,which under- development of the Asian financial stand our strengths and potential system are set to lift the opportunities throughtheir growingtrade to another level — if this countrycan connections with us. positionitself to grasp them. To fully realise the opportunities As the growth economies of Asia this capitalcould release — in terms developand modernise, they are of jobs, productivity and growth — fuellingavast migration to cities. New Zealandneeds to be clear on At around700 million,China’s where we want to encourage and urban population now outnumbers direct funding, and provideconsist- rural dwellers for the first time, and ent signals to attract investment. an estimated 200 million more will move to cities in the next 20 years. ● David Green is Managing Director In cities, consumers enjoy rising Institutional, ANZ New Zealand, and an spending power and increasingly de- Executive Board Member of the New mand food that is safe, of good quality ZealandChina Council and convenient. ‘ D16 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ China’s booming middle class present important opportunity for NZ’s tourism sector Jointventure takesto theair

Air NZ China Manager Nick Judd talks to Alexander Speirs about the prospects in China for our national carrier

ir New Zealand’s General market will likelyhave astrongin- Manager of China, Nick fluence on where thosepotential Judd, sat downwith the 3.5m destinations may lie, as the number Herald in Shanghai re- kg in air freight sent by Air NZ to to of services between New Zealand Acently to explain how theirnew joint China annually. and Chinacontinuesasteady trend venture with Air Chinabetween Bei- upwards. jing and Aucklandwill work. “The biggest thingatthe moment Juddlikensthe new jointventures 5m coming out of Chinaisthe capacity to otherJVs the airline has with its kg carried out of China to all growth, which continues to progress Cathay Pacific and Singapore destinations of which more than unabated,” says Judd. Airlines alliances. “If you look back 18 months ago, “The key different to thosetwo therewere 14 flights aweek between though, is that we’renot flyingour 3m Chinaand New Zealand — sevenby own planes on the route,” he kg terminates for New Zealand. ChinaSouthern and sevenbyAir explains. New Zealand.Peaks this yearcould “How that will workiswe’ll help % quiteconceivably rise to 35 flights sell and distributetheir services on 23 per week. the Beijing routeand they’ll do the increase in air freight carried on Air “The big question is whether this samefor the Shanghai service.” NZ services to China in the year to growth is sustainable. At the moment Air NZ notesthere is no cargo date and it seemsthat as soon as you put component to the Air Chinaalliance, capacity on during the high season, so Air Chinawill operate as adirect % it gets swallowed up — but will that competitor to Air NZ Cargoonthe 19 carryon.” new Beijing services. from China, compared to last year. The otherconsideration says “The dealopensupthe opportun- We wouldlove to be in aposition Commodity Split: Judd, is the lack of suitable accom- ity for us with competitive pricing in Much of the air freight carried on Air modationfor Chinese tourists — par- the market, while both us and Air whereweare opening new routesin NZ to China is seafood (lobsters) and ticularly on the scalerequired if Chinacan worktogether on our China,but that is still alittle while away. dairy products. From China, air freight numbers continuetotrend upwards. distribution strengths,” Juddsays. is classified as “general freight”,made “We’ve already had quiteabit of “We’ll bringacombined marketing Nick Judd up of electronics and garments. feedback around Chinese New Year and salespresence to the market, so this yearthat people struggledtoget ultimatelythe goodthing for cus- hotelrooms. tomers, is that we will sit downand “Thenyou overloadawhole lot try to align our products as muchas morecapacity from Chinaatatime we can.” whennumbers are increasing from The dealhas been along time in Experiencemust match expectation America and everywhere else — it the making, with “on and off” could be very interesting through discussions taking placebetween Air that peakperiodnext year.” NZ and Air Chinafor anumber of Air New Zealand chief executive tourism on quite period. He says the bigger question Juddsays though reciprocal years. Christopher Luxon says bringing in dramatically facing tourism on the China front is travel from New Zealand to Chinais Realmomentum started to pick up extended visas for visitors between which is really one of value over volume. growing, it’s doingsoatafar slower last year, with Air New Zealand eager China and New Zealand is the “biggest great,” he says. The industry has to work hard to rate. “It’s still ratedfor New Zea- to get amarketpresence back in thing in the tourism space”. “But we are attract more higher yield premium landers as atougher destination and Beijing afterwithdrawing from their At the 2014 Beijing Apec meeting, running into customers. abit of an unknown, so Ithink from Auckland-Beijing service in 2012. presidents Xi Jinping and Barack infrastructure “The average Chinese visitor atourism perspective, you probably “The ability to workwith an airline Obama unveiled their intention to issues and spends two times what an American get people who are moreopen to with the strengthsand distribution extend the validity of visas for customer tourist does once they are in the travelling. reachofAir Chinaand beingable to Chinese entering the United States, service and country.” “The bulk of the people coming get back into Beijing was an ideal and conversely, for up to 10 years. Christopher experience He underlines the point that the NZ from New Zealand at present are situationfor us,” says Judd. “We Although the duration period of each Luxon issues in New tourism infrastructure investments thosecoming to visit friends and would love to be in aposition where stay does not change, the overall visa Zealand.” will not support afive-fold increase relativesinChina.” we are opening new routes in China, application fees that regular travellers He cautions that the tourist in growth from the Chinese market. Stimulating growth on both ends but that is still alittle while away.” would otherwise face for multiple industry needs to make sure it is not But the industry is stepping up to will remain important, as Air NZ Though Juddsays the possibility visits over a10-year period is taking the Chinese market for granted support atwo-fold increase through works with the likes of Tourism NZ of adding moredestinations in China markedly reduced. when it comes setting expectations to higher yields. to promote New Zealand as ades- directly from New Zealand is not on Luxon observes that this gives the attract premium visitors. Air NZ already has adaily two-way tination. the immediate radar, shiftsinthe US aconsiderable competitive “The experience has to match the service between Auckland and The scaleofthe opportunity market are making that possibility advantage when it comes to the expectation for these visitors Shanghai. But it’s also packing on coming out of Chinaisofcourse moreattractive. rapidly-growing Chinese tourism otherwise they will choose Croatia, more revenue growth by leveraging muchlarger, and at atime of huge “Costs havecome downsig- market. Austria, Thailand or somewhere else asignificant increase in cargo growth in demand for international nificantlyfrom afuel perspective of He suggests that New Zealand and to go.” capacity via new planes on the tourism. late and if that lasts long term,it Australia could also look at the From Air NZ’s perspective, the Shanghai route. “There werebetween 100 and 120 changesthe dynamics of anumber possibility of ajoint Australasian Visa airline intends to keep on evolving its Says Luxon: “For me it’s value over million Chinese that travelled over- of routes that we look at and the cost — such as used for the ICC World customer service and is heading (for volume; finding the right yield and seas last year — mostofthat was to structures associatedwith that. Cricket Cup — because there are so the first time) with alot of spill into customers who can stay for longer Southeast Asia and HongKong. “It opens up the possibility of many visitors moving between both the shoulder season. Luxon notes that and spend more money and disperse Thatbase is growing by morethan destinations that potentially weren’t markets. though this is good from acapacity those benefits throughout the amilliontourists every year, so profitable or sustainable previously, He is upbeat about the potential planning point of view, New Zealand country better and more consistently; you’ve got adifferent catchment so therewill be anumber of for the Chinese tourism market. was basically out of accommodation and keep the cargo and the trade population than we had afew years destinations we will be looking at.” “We have turned the taps of across the country at the recent peak flows moving.” ago, because the market has grown Continued growth in the Chinese so dramatically.” Wooing the high-value Chinese traveller China is on the verge of an outward Auckland Airport’s business is grow- Our greatest challenge is the sense that acountry,” says Littlewood. ‘We need tourism boom as middle-class incomes ing rapidly on the back of more Chin- to work hard and shift some of that surge. Already New Zealand has begun ese flights. Air New Zealand has adaily we are full as acountry, demand into the shoulder seasons.” to chalk up more business as more service to Shanghai and will later re- Auckland Airport is involved with high-quality Chinese tourists spend open its route to Beijing, this time with Adrian Littlewood the Ministry of Business Innovation more time (and money) during their aJVpartner Air China. China Southern and Employment’s tourism partner- visits here. has quickly expanded its daily services increase in FIT (free independent ship programme. CLSA reckons that outward tourism out of Guangzhou, and China Eastern travellers). Acouple of years back, 25 The concept is to build seasonal boom will gather pace as the country’s has come into the fray with plans to per cent of Chinese visitors travelled itineraries for Chinese travellers based per capita GDP approaches atipping fly from Shanghai four times aweek. independently to NZ: now it is around around food and wine. “We’ve already point of US$8000, which will lead to “We’ve got fantastic connectivity people to come to New Zealand.” 55 per cent. “They are typically the smashed through some early targets amassive increase in discretionary coming through,” says Littlewood. Littlewood reckons many people do high-value, high-quality premium tour- with high value and premium cus- spending power across the Chinese “Some people have said isn’t this a not fully appreciate the complete trans- ists,” says Littlewood. tomers,” says Littlewood. “We are middle-class. problem to have all this new capacity formation now under way in Chinese With the massive increase in Chin- working with companies like Ngai CLSA also forecasts outbound tour- coming in. But alot of the Chinese tourism. He says there is no shortage ese travellers comes the need to invest Tahu. ism numbers will swell to 200 million travellers have been trying to get to of opportunities but it is important to more in tourism infrastructure. Chin- “As part of awelcome package we annually by 2020 as “what used to be New Zealand but have been travelling “make sure we get the right passengers ese investors have recently been to the could send abasket of food and wine luxury” becomes seen as acommon through other ports to get here because into our country”. fore, investing in high-class NZ lodges, to whet the appetite of Chinese leisure activity by the middle-class. there is no capacity on those direct The signs are promising. Ayear or hotels like Fu Wah’s planned 6-star consumers while they are at home.” For Auckland International Airport flights. New capacity will actually so ago, Chinese tourists’ average stay hotel on Auckland’s Viaduct Harbour The plans are underpinned by re- CEO Adrian Littlewood the “signals and divert those flights back to direct which was 3.8 days. The most recent figures and Pengxin’s acquisition of the search which shows NZ’s high-quality signs are all heading in the right direc- will actually have the side benefit of show it is 7.8 days, spurred along by Queenstown Hilton. “Our greatest chal- foods and wines are amajor attractor tion, which is fantastic”. opening up other capacity for other direct flights. The has also been an lenge is the sense that we are full as for Chinese premium travellers. D17 China Business: ■ Outbound investment from China tipped to exceed inbound for the first time Riding the Silk Road to success

fter more than 30 years of list of Chinese investors looking for investment-driven target industries. growth, China plans to China is seeing an outbound After the investment process is move from its depend- complete, it is critical to establish an enceA on manufacturing exports to an investment boom, say Joanna integration framework so the cul- economy driven by domestic de- tural and expectation differences are mand. Doolan and Florence Wong proactively managed. These issues As arecent EY report on private are likely to include how you con- equity in China notes, executing this tinue to incentivise and empower change has not been easy. The struc- your staff under the new environ- tural reforms needed for the transi- ment; how you deliver sustainable tion have come at aprice — acut in context, since the Global Financial slogans, the Chinese Government Industries of interest for Chinese- growth, how you create the right in the country’s growth rate. Accord- Crisis in 2008, foreign direct invest- has thrown its weight behind these based investors include: managementstructure and secure ing to the IMF’s latest figures, GDP ment from China has grown about programmes, meaning more can be ● Asset managementcompanies the top talent, what level of engage- fell from 7.8 per cent in 2013 to 7.4 40 per cent ayear. achieved in ashorter timeframe ● Agrifood industries, ranging ment you need with your new in- per cent last year — well short of the Another recent EY report Outlook than in countries like New Zealand. from animal feed, seed technologies, vestors and how approvals and double-digit rates China enjoyed as for China’s outward foreign direct The objective of this investment food safety and security, and ongoing communications are recently as 2010. But these figures investment 2015 clearly shows the has shifted from acquiring pro- consumer products such as dairy, managed. are still well ahead of New Zealand’s. new wave of outbound investments duction factors (such as resources) processed meats, precooked dishes It is important to use local profes- In response, the Chinese Govern- is underpinnedbygovernment poli- to acquiring advanced technology and frozen foods sional advisors with the right cross ment has introduced araft of fiscal cies and the accelerated implemen- and brands with the aim of increas- ● Clean-tech and energy border experience and an intimate and monetary stimulus measures tation of the “One Belt, One Road” ing the internationalcompetitive- conservationtechnologies understanding of both markets. designed to boost investment across strategy. ness of Chinese companies and ● Pharmaceuticals and health The big unknowns include differ- several targeted sectors, including It also shows Chinese industries meeting the changing domestic con- services ent taxation and regulatory regimes, energy, infrastructure, real estate are diversifying from “Made in sumption. ● Advanced manufacturing and cultural barriers. and banking. China” to “Made for China”.Though How ready are New Zealand com- technology There are likely to be huge differ- Rebalancing the Chinese econ- these may seem like catchy PR panies to benefit from this? ● Consumer products and servi- ences in expectationsand time hori- omy away from areliance on ces relating to lifestyle zons — for example, our fast and exports (and low value-added manu- ● Real estate investments,and furious expectationsaround growth facturing) towards aconsumption- Many global investors raise alot of money related lifestyle and luxury related and investment will need to alter based economy is aradical change products and services dramatically if we are to attract and the EY report says the move will and invest to generate high returns ● Technology Chinese investment. reduce the economic focus on GDP The starting point for New For those seeking to do business growth at all costs. ‘”The most fruitful quickly, and sometimes they are looking Zealand-based companies is to en- in China, the market-oriented ref- deals of the future will be those done sure their businesses are invest- orms of the past decade have drama- by firms that can add significant for relatively risky investment ment-ready by engaging in vendor tically changed the business land- operational expertise, financial dis- due diligence and generally getting scape. As the EY report puts it, China cipline and good governance prac- opportunities. Unlike traditional ways, we their house in order. is “rife with opportunity”.Asalways, tices over an extended period.” The process should be robust and the challenge lies in identifying The expansion of China’s invest- want to develop our global opportunities cover the upside and downside risks. them. ment footprint is acritical part of this No stone should be left unturned; the strategy and figures from the Chin- in the next 10 or 20 years, instead of the disclosure process should be warts- ● Jo Doolan is the chair and Florence ese Ministry of Commerce show and-all. Wong the director of EY China/New 5090 Chinese enterprises have next three to five years. Those seeking investment might Zealand Network if you would like a already made direct investment off- Zhong Lei, senior managing director at Fosun Group, speaking at the EY Strategic also want to engage with groups copy of any of the China reports then shore in 156 countries and regions, Growth Forum in Shanghai in May 2014. such as EY China Overseas Invest- email us on worth $US90.17 billion. To put this ment Network (COIN) which has a [email protected] The China Connection

When youleave NewZealand, with the Chambers of Commerceyou know youhave a networkofChambers across the globe. Youcan do business in China confident in the knowledge thatthe China Chambers of Commerce –

• Provide introductions • Understand local rules andregulations • Provide local intelligenceand expertise

www.aucklandchamber.co.nz D18 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ China now the top global destination for foreign investment, surpassing US Cementing Christchurch’s ties with the sister city

Lianne Dalziel

We were in China for the celebration of the 30th anniversary of Christ- church becoming asister city to Gansu Province, where of course Rewi Alley spent much of his life. But now New Zealand’s relationship with Southern China and in particular Christchurch’s ties will step up alevel. We’ve signed aco-operation agree- ment with Shenzhen –adeal that has progressed very quickly from ameet- ing with the Mayor of Shenzhen only four months ago. Shenzhen is avery front-footed, for- ward-facing and future-facing city. They are very much focused on companies that are in their growth stages, and now are reaching out to the rest of the world. Our interests are aligned in asignificant way, largely shared interests of the region around ICT, research, science and technology –all of which resonates with how we envision the future of Christchurch. But we’ve got to learn to trust each other before we can do business together. In New Zealand, you meet somebody, do adeal and shake hands. Done. It doesn’t work that way in China, you need to spend time creating and working on relationships. Now that we have aformal entry point with Shenz- hen, we’ve created an opportunity to allow the relationship to flourish. Tom Hooper, Head of the Canter- bury Development Corporation will help take that next step –he’s returning to China in the next few weeks and has already set about establishing a confirmation around asignificant visit to Christchurch from amajor Chinese company. ● Lianne Dalziel is the Mayor of Christchurch Is Chinese FDI agood thing?

New Zealand should work to keep itself attractive to Chinese investment, writes David Gilbert

ince 2010, the amountofChin- corruption, and astable system of chaser who would operate and invest Our OIA focusesonthe concept of ese investment in the New government with high transparency in farms in amanner that could be sensitive land which in almostall Zealandcommercial real es- in the governmentaland judiciary expected of areasonably competent circumstancesexcludesanaverage tate markethas been growing. processes. The fundamentals in dairy farmer”. family home or apartment. ThisS trend has been matched by attracting investors into our commer- Put simply –the court held that a Contrast that to the positionin similartrading partnergrowth both cial property markethave been and ‘with and without’ counter-factual Australia where foreign non- in the Chinese and emerging Asian continue to be positive. analysis is required. It is amatter of residents are required to seek markets from 2009 onwards. With So how easy is it to invest in New asking whether the benefitislikely approval to purchase aresidential the rise of China as New Zealand’s Zealandifyou are from China? to happenifthere was no overseas property, with approval only given major tradingpartner,and smaller The operation of the Overseas investment. for new-build properties. increases from our traditional foreign Investment Act (OIA) has alarge role The OIA also provides that if there Foreignnon-residents are not per- direct investment (FDI) regions(in- to play in an offshore investor’s de- is aproposedpurchaseofnon-urban mitted to purchase any interest in an cludingAustralia, US and the Euro- cision to invest into New Zealand. land that exceeds 5hectares(which established or second-hand residen- pean Union)our relationship with the Large commercial property assets includes farmland), the applicant tial property. Asian superpower is indeed in expan- can be caughtunder the OIA but are must show, and the relevant Minis- In additiontothat currentposition, sion mode. not the focus of the legislation. My ters must determine, that abenefit the Australian government has The increased investment from observation is that New Zealanders will be, or is likely to be, substantial proposed to increase the application China into New Zealandisanexceed- and the media are generally not and identifiable. fees for residential property from the ingly positivething, and when worriedabout the foreign direct in- As someone who deals with OIA currentnoapplication fee to $5000 combined with the matching growth vestment in commercial property processonadaily basis Ican assure for apropertyunder A$1 million and in China as our major tradingpartner, assets (particularly in Auckland). you it is arobust system. $10,000for each extra A$1 million in it highlights the deepening, mutually So why do we not care about This is in contrast to the obligation the purchase price, and to create a beneficial, trade relationship between Why do we not care Chineseinvestment in the new hotel for all other forms of sensitive land new registersothe Australians will the two countries. This is apositive to be constructed in the Wynyard (land that includes foreshore, land know how many foreign residential indication that our now major trading aboutChinese Quarter, but we do care about farms that is of heritage value or land that and agricultural property owners partnersees the New Zealandcom- in lower-populated parts of the has significant conservationvalues there are in Australia. mercialpropertysector as inter- investment in the countryand the purchase of homes for example) which must show that It would be advantageousfor NZ nationally competitive. in our largestcity? the overseas investment will/or is to begin to find solutions by creating What is it about the New Zealand new hoteltobe It is undeniable there is something likely to benefitNew Zealand. So in aregister of non-resident foreign in- commercial property sector that emotiveabout foreign purchases of essenceitiseasier to buy land ad- vestorsinto the residential housing appeals to Chinese investors? constructed in large tracts of land, and some people joining our foreshore or lakes or of market. My initial observation is that what tend to blame rising house prices on heritage value than it is to buy afarm. We would then have that empiri- motivates ahigh proportion of Chin- Auckland’s offshore buyers. So what about foreign investment cal data to confirmorend speculation ese investors is the desire to diversify With respecttofarmlandIfeel we in our housingmarket? that foreign FDI is having amaterial their portfolio and have an alterna- Wynyard Quarter, have arobust regulatory framework This is atopic that comes with adverse impactonresidential hous- tive property asset base outsidemain- governed by the Overseas Invest- significant public and media concern. ing prices in New Zealand. land China. However, that in itself is but we care about ment Act (OIA) which is rigorously The views of commentators in this It is my opinionthat New Zealand not sufficient to turn initial investor appliedbythe Overseas Investment area vary widely from comments that needs to continue to be an attractive interest into positiveinvestment ac- farmsinlower- Office (OIO). it is less than 10 per cent of the current place for Chinese investment. tion in New Zealand. We have seen some changes in the housingmarket, to statements that it We seem to have the appropriate There are many optionsaround populated partsof last few years over how the OIA is appears that the currentmarket is measures in place with regardsto the world that would providethese interpreted and the test is now even heavilyweightedbynon-resident investment in large tracts of land, same benefits to the averageChinese the country and the more robust than previously. foreign buyers. however it would be advantageous investor. The good news is that our In 2012 the High Court considered The truth is that we just don’t know for any policy setting and debate on property sector is standing up to purchase of homes that the appropriate counter-factual for sure. UnfortunatelyNew Zealand foreign direct investment in residen- internationalcomparison. New Zea- in that 2012 Crafar Farms decisionin does not gather information on tial real estate to be able to draw on land has aless complex tax regime in our largest city? that case and indeed the test to be foreign non-resident acquirers of resi- empirical data much as our Austra- than Australia, no stamp duty regime, David Gilbert appliedinall future cases was “what dentialproperty(unlike Australia) so lian neighbours are doing. an ease of doing business which would likely happenunder the there is no empirical evidence to ● David Gilbert is aReal Estate Partner ranks very highly,very low levels of ownership of an alternative NZ pur- support either view. for law firm Minter Ellison Rudd Watts D19 China Business: ■ NZ’s perceived independence attractive to China ■ Chinese housing market to fall further

As our ties with Chinagrow but old alliances remain, the issue of trust will cometothe fore, says David Mahon

he threat by an unknown countries with which it shares values extortionist to contaminate of transparency, democracy, and gov- Fonterra products with the ernmental accountability. poison 1080, unless the Gov- China respects loyalty to old friends Ternment discontinued its use, had the Walking the line and is not surprised New Zealand potential to cripple New Zealand’s im- shares intelligence with its traditional age as asource of safe food. The calm allies, but it is suspicious of those who and discretion with which Fonterra growing economic influence, but India, try to contain it. and the Government handled this at- by virtue of its scale and more impene- American aims to contain China tempt at economic terrorism resulted trable economy, is the exception. have altered little since Nixon in relatively little damage. Afree trade agreement with India brokered an awkward partnership Chinese consumer reaction was would be good for New Zealand but with Mao based on economic engage- slight and the subject failed to gain harder to negotiate and even harder ment and political containment in 1972. momentum in the press or social me- to benefit from, compared with China’s New Zealand cannot be apartner to dia. Fonterra and the government relatively more open and stable mar- this outdated, quixotic strategy. learnt from the mishandled communi- ket. China has trusted New Zealand cations around the DCD and C. New Zealand’s strongest trade re- above most other rich, developed botulinum false alarms of the last few lationships are increasingly in Asia but countries because of its independent years. its deepest political allegiances still lie foreign policy. Astoundingly, hundreds of people with the US, Australia and Britain. New Despite recent revelations of our in the Government, police and Zealand is respected in China for the role in intelligence sharing, successive Fonterra investigated the threat for integrity of its food and beverage in- Governments have made choices that four months without leaks to the me- dustry (where products such as Ma- demonstrate New Zealand makes its dia. Despite the problems New Zealand nuka honey and brands such as Zespri own decisions regarding China despite, has faced adjusting to the impact of sell at ahigh premium), its quality at times, incurring the ire of its tra- China’s influence on its economy over engineering, and the creativity and ditional allies. the past three years, the corporate and sophistication of its film industry. On the eve of Britain’s return of public sector are showing greater Air New Zealand has even managed Hong Kong to the Mainland in 1997, awareness and surefootedness. to develop arecognised service brand resisting intense pressure from Britain The Chinese economy will grow among upper-middle-class Chinese and the United States, New Zealand steadily but likely lose some momen- ● David Mahon is managing director of Mahon China Investment Management. travellers. Recent disclosures of how was the first OECD country to recog- tum this year, perhaps even falling close New Zealand has remained to the nise the legality of the new Hong Kong slightly short of the Chinese- further the market will fall, market economies, where residential pur- United States and Britain in sharing Government. New Zealand faced simi- Government-forecasted GDP growth sentiment has become amore power- chases are more highly leveraged. political intelligence, however, raises a lar opposition by recognising China as rate of 7per cent. Influenced by the ful force than the Government’s Chinese households’ urban saving sensitive issue in the future: trust. afree market economy in 2004. strengthening US dollar, the Renminbi selected easing of credit policies. Pre- rates also average 40-50 per cent, some New Zealand has been perceived by As the US sided firmly with Japan will probably ease slightly — between dictions of sectorial collapse continue of the highest in the world. its Asian trading partners, particularly over the Diaoyu Islands dispute in 2013, 2-3 per cent — against the dollar. This to prove unfounded, for most Chinese Under present circumstances New China, as arelatively non-aligned New Zealand took the position that it will assist exporters, but the Chinese have bought houses with 30-50 per Zealand exporters can rely on the nation — the country that did not join was not the business of other countries Government remains committed to cent deposits until recently, and have Chinese economy to retain relatively the invasion, declared illegal by the to take sides in what is acomplex issue, regulating its domestic economy more the means to meet mortgage high and steady growth, but as the United Nations, of Iraq. New Zealand’s and that any conflict needed to be effectively and relying less on exports obligations. slump in dairy prices has demon- antinuclear stance has been for many resolved through arbitration. and unstable economic booms to de- The recent drop of deposit require- strated, New Zealand does need to New Zealanders ametaphor for the New Zealand will not gain by simply liver growth. ments to 20-40 per cent is unlikely to diversify its exports to China. country’s nonalignment, and US siding with China in the region out of The Chinese Government’s spur many Chinese buyers to purchase New Zealand is working hard to warships are still not allowed to visit crude economic interest, and New Zea- attempts to balance the overheated homes they cannot afford. expand its export markets with free New Zealand ports. It is not about land’s future choices will be housing sector will continue, but it may The damage wrought in China has trade agreements, such as Anztec with choosing between China and tra- increasingly complex. But China prove difficult to limit price drops as been less severe than what would have Taiwan and the New Zealand-South ditional allies, but New Zealand must should be given reason to continue to much as anticipated. occurred in asharp downturn in New Korea FTA. Few countries can or walk afine line between its economic trust the independence of New Zea- As investors wait to see how much Zealand and most other developed would want to stand outside China’s interests and its loyalty to those land’s foreign policy. D20 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ Chinese language an education priority ■ Language the key to advantage Teaching out of kilter with trade

Chinese make up alarge and growing percentage of New Zealand’s population, so we need to lift our game

Graham Skellern

hinese language learningin New Zealandsecondary schools is way out of step with the country’s growing Ctrade and cultural relationships with China — the world’s biggesteconomy. ANew ZealandChina Council re- port has revealed that, for every $1 million of New Zealand’s exportsto China, just two students are learning Chinese — compared with 63 for French,31for Spanish, 17 for German and 10 for Japanese. Based on statistics produced by New ZealandInstituteofEconomic Research (NZIER), 4218 secondary schoolstudents studiedChinese last year compared with more than 20,000who studiedFrench. These Chinese language students were spread among 82 secondary schools, whereas Spanishwas taught at 160 schools and French at 215 schools. “China is our most important tradingpartner,our largestsource of (international) students and second biggestsource of tourists,” says NZ China Council executive director, Pat English. “There is an economic need to have more Kiwis communicating and understanding China in acultural context. Chinese now make up alarge and growingpercentage of New Zea- land’s population, so we need to lift our game. “We understand the importance of increasing our pool of Chinese speakers. Research from the Asia AMandarin language class at New ZealandFoundation shows a Westlake Boys High School. clear preference for schoolchildren to learn Chinese compared with other guagestogain entry. “As the figures non-English languages, but enrol- show, we are not linking our invest- ment figures show our language ac- ments in language to our cultural and quisition levels are clearly out of economic needs.These factors synch with these expectations.” should be taken into consideration in The foundation’s survey found areview of language studiesinNew that 83 per cent of New Zealanders Zealand. Acomponent of the review were in favour of learningasecond should be needs based,” he says. language in school, and amajority 49 “New Zealandmust increase the per cent of respondents said children number of students learningChinese in schools should learn Chinese. at the post-primary level. If we remain Mr Englishsays German, Spanish, complacent, we risk the opportunity Japanese and Maori enrolments are to build on our successful bilateral consistent with the relativeweight trade, tourism and educational placed by the survey respondents. linkages. But French is taught more frequently “We also risk the opportunity to than surveyed importance (by equip future generations of New Zea- 10,000 compared with other lan- landersand make the most of our guagesvcurrentenrolment of economic relationship with China,” 20,478)and Chinese is significantly Mr Englishsays. under-taught(by 25,000 vcurrent Martin East, president of the New enrolment of 4218). “The relative ZealandAssociation of Language mismatches are stark when we con- Teachers, says it’s important for New sider SpanishtoChinese language Zealanders to embrace asecond lan- teaching. Attitudes are 2.7 times in guage. “We are seeing an increasing favour of Chinese (49 per cent to 18 interest from schools in taking up per cent) but secondary school Chinese. It’s still at an early stage but enrolments are 2.7 times in favour of we are seeing steps in the right direc- Spanish(11,573 enrolments v4218 tion. China is strategically important Chinese). and Chinese is alogical choice.” “Let’s look at languages where graduated from New Zealandeduca- 2013 to 24,143 in 2014 — ajump of 26 He says there is agrowingnumber there is ademand in relationtofuture tion institutions. But Mr Englishsays per cent. of intermediate schools teaching employment,our economic future “if you are in China doing business, The Confucius Institute, with Chinese but the take-upisstill low at and cultural diversity,” Mr English there are still only avery small per- branches in Auckland, Wellington the secondary schoollevel. Often it says. centagespeakingEnglish relativeto and Christchurch,has an active pro- comes down to resourcing. There is The report,titled ACrisis of Com- the size of the population. grammeofplacing native speaking aperception that Chinese is difficult placency, says “for the first time in “In senior management of com- Mandarin language assistants (MLAs) to learn and schools will have to our history,weare dependent on a panies and organisationsinChina, far from China in New Zealandschools. increase their staff numbers to teach non-English speaking countryfor our fewer speak English. So if you want Last year there were more than Chinese effectively. long term economic wellbeing — to communicatedirectly with the 100 MLAs teaching at 250 schools Mr East says the Governmentwas China is now our largestmerchandise decisionmaker, isn’t it better to speak across the country — 44 in Auckland, aware of the situation and has estab- tradingpartner.” their language and understand their 38 in Wellington and 25 in Christ- lished the Asian Language Learning New Zealand’s exports to China culture?” asks Mr English. church. in Schools (ALLiS)programme, which have increased from $0.5 billion in “We can’t just keep relyingon The report reveals: If the current has a$10 million contestable fund to 1994 to more than $10 billion in 2014 others to do our translating for us, or rate of primary schoolstudents carry support teaching of Mandarin Chin- — matched by asimilar amountof for them to speak English. Language on and study Chinese at secondary ese, Japanese and Koreaninstate and imports. There were nearly 200,000 is akey to understanding business school, then the demandwill increase state-integrated schools. Chinese visitors/tourists to New Zea- culture, so we can make far greater to 24,000 by 2021. The number of The aim is to strengthen the lan- land in 2014, secondonly to Australia, gains and improve our economic We can’t just keep relying on secondary schools presently offering guage learningpathwayfrom prim- and China is New Zealand’s biggest positionifwetruly understand who others to do our translating for Chinese language is low and will need ary throughtosecondary schools. source of internationalstudents. it is we are dealingwith and how to increase significantly to cope with The fund encourages greatercol- Atotal of 24,268 internationalfee- better to managethe relationship.” us, or for them to speak this demand. laboration amongsschools in part- paying students from China studied The increase in New Zealand English. Language is akey to Mr Englishsays schools have nershipwith external Asian language here in Trimester 2of2014, making students learningChinese is being understanding business limited resources and if there are and cultural organisations. up 28.4 per cent of all enrolments. driven largely at the primary and language studiesalready in place, The first round of fundingwas Many Chinese speak Englishand intermediate level. Primary school culture. such as French,Spanish and Japan- conducted at the end of last year, and between 300,000and 400,000 have enrolments increased from 18,754 in Pat English ese, then it’s harderfor other lan- the secondround opens in August. D21 China Business: ■ NZ growing on China’s radar ■ Three of China’s four state banks now active in NZ Good news: China invests here

nvestment by China in New Zealandhas increased, there’s As China turns its gaze our way, more to come, and every reason it should grow yet. our connectedness may be IStart with the finalists under the DLA Piper Award for Investment with growing, says Martin Thomson China, at this year’s HSBC NZ China Trade Association Business Awards, which featureasignificant group of Chinese investors. They have created jobs for New Zealanders, introduced of US$26,638. Most of that foreign list of investment in farms was China. capitalinto our economy, and are investment came from Australia (63 It’s relatively difficult for offshore producing the highestcalibre of pro- per cent). China featured 6th on the investors to buy productive farm land duct. They includeMilk New Zealand list with only 0.4 per cent of foreign here. New Zealand’s Overseas Invest- Holdings (Shanghai Pengxin), Yashili direct investment into New Zealand. ment Act has in-builtprotections and New ZealandDairy, Fisher and Paykel As China turns its gaze our way, restrictions. Appliances (Haier), and Oceania that connectedness may be growing. China’sinvestment in agricultural HSBC China Business Awards Dairy Limited(Yili). Chinese tourism into New Zealand land revealsastrategyfor vertical All reflect increased investment by has flourished, and the sector is integration in investment in the dairy The number of Chinese tourists announced at aGrand Gala Dinner on China in New Zealand, following poised for furtherinvestment. Tour- sector — farms as well as manufac- visiting Whale Watch Kaikoura has Thursday, 7May. exponential growth in trade. Exports ism NZ says China is our second turing plants.This brings us more jobs soared by more than 200 per cent in The finalists are four years, and the operationis ● Mainfreight Award for excellence to China rose from $4.5 billion in 2009 largesttourism market. Conse- in manufacturing. It also contributes forecasting numbers to double again to $11.8 billion in 2014. Visitorsfrom quently, anumber of four or five star to products produced in New Zealand in Export or Import: Synlait Milk, New within the next five years. Zealand Focus and Glacier Investments. China to New Zealandrose from hotels are in development:Shanghai- being tailor-made for the Chinese General Manager Kauahi Ngapora ● Auckland International Airport 228,000in2013 to 264,000in2014. based New Development Group’s market. says while overall tourist numbers Award for ExcellenceinTourism: Ngai Those visitorsspent more: $1.2 billion NDG centre in Auckland’s CBD; Fu With regardstoChinese invest- from China are surging, attractinghigh Tahu Tourism ,Whale Watch Kaikoura in 2013 compared with $1.6 billion in Wah’s Hotel in Auckland’s Wynyard ment in residential property: there is quality independent tourists has taken and Youth Hostels Association of New 2014. Quarter. Jiang Zhaobai of Shanghai agrowingChinese population in ahuge amount of planning and Zealand. Encouraged by President Xi Jin- Pengxin Group boughtthe Hilton Auckland, now with 171,000Chinese investment. “In 2010 we put afive year ● DLA Piper Award for Inward or plan in place which involved spending Outward Investment with China: Fisher ping’s visit to New ZealandinNovem- Hotel in Queenstown last year. in our city. Let’s not forget that mi- time in China to build relationships, ber 2014, China’scuriosityabout us Three of China’s four state-owned gration has resultedineconomic &Paykel Appliances, Milk New Zealand employing Chinese speaking staff, and Holdings,Oceania Dairy and Yashili New has increased. While the President banks are now registered in New growth in the city. engagingwith Chinese social media. Zealand. showcased attractive imagesofNew Zealand.. That alone signals invest- Investment has not all been one “The plan worked so well we ● HSBC Award for Supply Chain Zealandback to aChinese audience, ment will grow. way. Fonterra’s investment in Chin- exceededour target early and Innovation: Comvita NZ, Milk New he also found in New Zealanda The education sector is benefiting. ese dairy enterprises is increasing. independent travellersare now our Zealand, and Synlait Milk. greatest driver of growth.” ● Cathay Pacific Award for willing trader and seller. Clearly vis- China is the single largestsource of New Zealand’s presence in China is Whale Watch Kaikoura has been Outstanding Contribution: Chinese New ible to the president was the consider- internationalstudents, with ENZ also growing. named as afinalist in the 2015 HSBC Settlers Services Trust, Natural History able room for more, quality foreign reporting New Zealandhad made “the All in all, then, this information NZ China Business Awards for its NZ and Waikato Institute of Technology direct investment in New Zealand. top five preferred overseas study revealsaconstructive pictureof success in leveraging the Chinese (Wintec). A New ZealandSectors Report2014, destinations for China’swealthy”. China in New Zealand: plenty of room tourism market. David Wishart from the HSBC ● HKNZBA Award for Hong Kong published by MBIE, said “New Zea- As far as investment in New Zea- for more investment, and apositive Business:Comvita NZ and New Zealand land is less connected with the global land farmingland goes, there has outcomefor New Zealand’s relation- NZCTA China Business Awards says Whale Watch Kaikoura is astandout Focus economy than other similarly devel- been growth. ship with China. example for other tourism Tickets are selling fast. Discounts oped countries.” It cited inward direct But controversy has been fuelled Where’s the bad news in that? organisations keen to tap into the are availablefor table bookings. investment per capita of US$18,533 withoutfull justification. As Colin ● Martin Thomson is apartner at DLA Chinese tourism market. Book now at: http://www.nzctabusi compared with an OECD small nation Taylor reported in the Herald’s 2014 Piper New Zealandand chairman of the The 2105 winners will be nessawards.co.nz/register/ averageofUS$40,509 and Australia Agribusiness Report, well down the NZ China Trade Association

专业高效，诚信可靠，理解协作 DLAPIPERNEWZEALAND 协同中国企业一同走向成功

CAPABLE. CREDIBLE.COLLABORATIVE. We knowwhat needstobedone.We’ve successfullydone it before. We’ll become an extension of your team. DLA Piper NewZealandisthe first globalbusiness lawfirm to operate in NewZealand. We arehighlyexperienced in supporting Chinese clientsinlong term opportunities, and in structuringgreat deals.Wewill taketime to help you understandNew Zealand. And with officesinBeijing,Shanghai and Hong Kong, our adviceisseamless and international. We understandcultural nuances and speak your language. Forfullyconfidentialadvice youcan trust,please contact our ChinaPracticeexperts or visit www.dlapiper.co.nz. MartinThomson, Partner Te rence Ng, Partner +64 9300 3850 +64 9916 3370 [email protected] [email protected]

DLA Piper NewZealand is an independent lawfirm. It is associated with DLA Piper,aglobal lawfirm operating throughvarious separate and distinctlegal entities. D22 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015 China Business: ■ Knowing Chinese culture key to NZ success ■ Advantages in being RMB centre Takingit to thenextlevel

Is New Zealand making the mostofits favoured relationship with China, asks Alex Malley

sChina becomes the As such it is important that New dollars, for example. More import- world’s largest, and argu- Alex Malley Zealandcontinues to take steps to antly, it would reinforce the close ably most important re- address the perpetual challenge of relationship between New Zealand gional economy, there are improving the productivity and inter- and China,which by itself can boost Aopportunitiesthat exist now for many national competitiveness of business, greatertrade and investment. New Zealandbusinesses. Yes, there while at the same time continuing to Treaties with China are not are challenges but also some real and deepenthe relationship with China. enough. More businesses must de- substantial opportunities, and they’re One way to enhance the relation- velop the capability to leverage the on offer for all sectors, not just agri- ship is for the Governmenttoseek opportunitiesthat these agreements culture. approval from China to becomean create.Fundamental to that is raising As astraight-talkingAustralian, it offshore centre for the China’s cur- the knowledge and understanding of is easy to acknowledgehow well New rency, the renminbi (RMB). Asia, moreover of China itself. This is Zealandisperforming both on the at the political and cultural level, as sportingfield and economicallyand much as it is at the business level. how positiveNew Zealand’s future Businesses all over We need to remember, achild born outlookis. today may well spend their whole Akey component of that econom- the world see New workinglife with China as the world’s ic successisthe overallgood relation- largesteconomic power. ship the countryhas with China,as Zealand as aplace Efforts to improve Asian literacy evidenced by New Zealandbeing the are absolutely the right course of first developed countrytoenter into that not only has action.It’s about better integrating aFree Trade Agreement with this with the region and giving our chil- economic powerhouse.Though the business-friendly dren the best chancetosecure the FTA has obviously had direct benefits high paying jobs of the future. for many exporters, particularly in policies but comes It is no wonderKiwis are excelling the agricultural sector,itcan also be well beyondthe confines of size and viewedasanofficial endorsementof with astamp of geography. With the economic epi- New ZealandbyChina. It is this fact centre clearly shiftingtoour part of which puts New Zealandinavery approval from China. the world,and with advances in strong positionglobally. technology, geography is no longer This bodes well for New Zealand’s Currently, there are 10 jurisdic- an issue. New Zealanders are able to long-term prosperity as businesses all tions outsideMainlandChina that continuing drawing on their well- over the world see New Zealandas have been given approval to establish recognised spirit of aplace that not only has business- offshore RMB centresincluding Hong entrepreneurialism and sense of ad- friendly policiesbut also comes with Kong, Singapore, Londonand Syd- venture and seek out and grasp the astamp of approval from China. ney. opportunitiesthat China can offer. Obviously New Zealandisnot the The advantages that would flow Finally,inthe spirit of Trans- only countryormarket to have such from New Zealandbecoming an off- Tasmancompetition, Iamhappy to apositive relationship with China. shore RMB centre are many,includ- report that the Wallabies are looking Many that come to mind are China’s ing the ability to better facilitate trade, very good this year! geographic neighbours who are also allowing businesses to transact with closely alignedonapolitical, econom- their Chinese customers and ● Alex Malley is chief executive of ic and social level. suppliers in RMB rather than in US CPA Australia

FromNewZealaNd to South eaStaSia one Company,one team,one vision

James Lee Director China BusinessGroup T+64 9359 5353 M+64 21 344 517 [email protected]

Leading commercial real estate agent, www.cbre.co.nz James Lee,has joined CBRE New Zealand leading the China Business Group. With strong knowledge and skillsand awealth of experience, James can build advantage for your business in Chinaand New Zealand. D23 China Business: ■ NZ horticultural exports reach $4b ■ 30 per cent of horticultural exports go to Asia Focus on quality bears fruit Social media helps get the Zespri message across, writes Bill Bennett

uality helped Zespri sell $150 million worth of kiwi- fruit to China last year. The company’s generalmana- gerQ of marketing Carol Ward says owningthe quality label is important in every marketZespri operates in, but it resonates especially well with Chinese consumers. She says: “Quality boils down to taste and the look of the fruit in supermarkets.Our kiwifruit has a high quality external appearance, it looks great on the inside and it tastes great. We emphasis quality in every- The social thing we do in China. If we use an media campaign image in our marketing, it’s alwaysa culminated in a very high quality photograph.” Zespri juicy Pitchingatthe top end of China’s water fight in a fruit markethas its rewards. Ward Shanghai park. says aZespri kiwifruit sells for about 10 times the price of locally produced but is taking the expansion city-by- ects of kiwifruit. It also had afamily fruit. Differentiationand branding is city. At presentZespri operates in 15 focus. important, because China is the home key markets where it can get ahigh Zespri wantedtoposition SunGold of kiwifruit. Varieties grow wild in the level of marketing support. as agood fruit choice for children. She country, though Ward says they don’t “The cost of television advertising says the company’s health message taste good. is prohibitive. We don’t have the goes down well in China: “Agreen China grows and sells ahuge budgetfor that. We go for in store kiwifruit has as much fibre as abowl amountofkiwifruit. Most of its pro- tasting — we spent $20 million on that of bran, while the gold varietyhas ductionisconsumed locally and last year. We use alot of billboards more vitaminCthan any other fruit.” tends to sell out during the season. and wraps on public transport. We do Kiwifruit is New Zealand’s leading New Zealand’s southern hemisphere cost-effectivemarketingonline”. horticulturalexport and set for sig- seasonswork in Zespri’s favour be- nificantgrowth.Some of that growth cause it means the company can will be met by increased yields. supply during China’soff season. Kiwifruit can be as “We have ahuge research and China is Zespri’s secondlargest developmentprogramme focusedon marketafter Japan.Itaccounts for broadand diverse kiwifruit farm productivity,” says about 15 per cent of global sales. Ward Ward. “Newervarietiestend to be says the goal is to increase sales from as apples. Theycan higher yielding, so orchards can boost $150 million to $200 million this year. the fruit produced per square metre. That’s abig jump, but the growth comeinevery “At the same time we’re working potential is to increase sales in China to increase the amount of land under by 20 per cent year-on-year for each shape, size and cultivation. There might be 12,000 to of the next five years. 14,000 hectares of kiwifruit orchards Ward says much of that growth colour. today,but the potential is by no will come from the SunGold variety: Carol Ward means exhausted. We’re lookingat “We expecttodouble the sales of gold extending outsidetraditional kiwi- kiwifruit in China this year. The fruit growingareas. It helps that our SunGold is especially appealing to Zespri ran ahigh profile social growers are getting good returnsfor Chinese consumers and has proved media campaign to launch the fruit and the industry is economically criticalfor the growth of the industry SunGold varietyinChina using Sina and environmentally sustainable.” which has now recovered from PSA”. Weibo,which is similartoboth Zespri is also developing akiwifruit Launched in 1997, Zespri has Facebook and Twitter. breeding programme. Ward says the grown to becomeone of the top five That campaign drew 25 million company expects to see new vari- fruit brandsworldwide. In China it is social media hits and culminated in eties emergefrom workingwith the third largestbrand. Yet despite aZespri juicy water fight in aShang- China.Althoughmost consumers are this, there are parts of the country hai park. The social media campaign familiarwith only one or two vari- where it is still relatively unknown. is matched to online shopping sites eties, she says there are potentially That’s afunctionofthe country’s size. — urban Chinese consumers habitu- hundreds. “Kiwifruit can be as broad Zespri’s biggestchallenge is China’s ally buy food from the internet and and diverseasapples. They can come geographic vastness. Ward says online food shopping is associated in every shape,size and colour. China is such alarge marketthat with quality. “The main reason they don’t at the Zespri had to focus its marketing Ward says though quality is moment is because the varieties don’t effort. At first this meant selling only Zespri's main marketing message, the alwaystaste great, so our workingis in the top tier of cities. Now, the social media campaign was more focusedonlooking for ones with company is movinginto the next tier, linked to the health and vitality asp- great flavour.” D24 nzherald.co.nz | The New Zealand Herald | Thursday,April 30, 2015

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