opening doors TO CHINA New Zealand’s 2015 vision Opening Doors to China 1

Opening doors to CHINA Foreword from New Zealand’s 2015 Vision Prime Minister KEY

China is a country that has become very important to New Zealand. We want 01 Foreword from Prime Minister Key to expand our links further to grow trade and other opportunities between our two countries. So I am delighted to introduce the NZ Inc China Strategy 03 China in perspective – a vision for New Zealand’s developing engagement with China. 07 New Zealand and China 15 The NZ Inc China Strategy It is fitting that the China Strategy is being Premier Wen Jiabao and I agreed that we should launched at the beginning of the auspicious aim for a doubling of bilateral trade by 2015. 16 Goals and priority actions Year of the Dragon, and also the year marking We’re on track to achieve that goal. 16 Retain and build a strong and resilient political relationship the 40th anniversary of New Zealand’s diplomatic relations with China. Goods trade is only half the story. Our strategy has 18 Double two-way goods trade a strong focus on services as well. To mention just 21 Grow services trade The NZ Inc China Strategy is the second in two: China is already New Zealand’s largest source the Government’s series of centralised plans – of foreign students, and our fourth biggest tourist 25 Increase bilateral investment to levels that reflect the growing commercial relationship developed to strengthen our economic, political market. We plan to develop these further, and we 27 Grow high quality science and technology collaborations and security relationships with countries and see huge potential in other parts of New Zealand’s regions, and to encourage people-to-people growing knowledge economy – design, information 33 Doing business in China links and two-way investment. technology, film and TV, food safety. 35 Preparing for China Our strategy for China starts from an explicit Knowledge is in fact set to be a key driver of our 36 On the ground recognition that an excellent political rapidly growing relationship. Clearly it is a two- relationship is the foundation upon which way street – we want to work with China to drive everything else must be built. We can’t engage forward science and technology linkages, and we with China just on the trading front – we need want to exploit the fruits of that collaboration to to work across all sectors to build the range of the commercial advantage of both countries. links that will enhance our understanding and familiarity with one another. The NZ Inc China Strategy will help us build on the successes we have already achieved. The strategy is built around developing the trade It is designed to promote a whole-of-government and economic links between New Zealand and approach. It is designed also to provide a basis the People’s Republic of China. Both countries for more effective cooperation between the understand that a strong export base and public and the private sectors. comprehensive engagement in the international economy are key elements in achieving The New Zealand Inc China strategy articulates economic growth, and boosting the welfare the vision of a relationship with China that and future prospects of our people. stimulates New Zealand’s innovation, learning Trade with China has been one of the great and economic growth. It is for us to work success stories of the New Zealand export sector together to turn that vision into a reality. over the past decade or more. So much so that I had no hesitation in setting an ambitious future Rt Hon John Key goal when I visited China three years ago. Prime Minister Opening Doors to China 3

CHINA in Perspective

One in every six people in the world is Chinese, and their homeland has amassed its resources to turn a population advantage into economic might.

The statistics demonstrating China’s modern With numbers like these, there is little growth over the next decade are staggering: argument about China’s dominance and influence in the global economy. • The number of Chinese households with an annual disposable income of over US$10,000 China is a vital part of the global supply (in nominal terms) will almost quadruple – chain; rather than just being the end-market from 57.1 million households to 222 million. for imports or manufacturer of exports, it is increasingly part of a more sophisticated trading picture. China is now often a point on the supply China's foreign reserves, which exceed chain where one part is assembled with another US$3 trillion, are now the largest in before being exported to another market for final production, and yet another market for the world. sale. Across Asia intermediate goods make up more than 60 percent of imports, and China is • Two hundred of the world’s top 700 cities the top importer of intermediate goods in will be in China, requiring 97 new airports the world. and 30,000km of new railways. This is just one way in which China’s • China’s per-capita gross domestic product predominant reputation as a powerhouse of (GDP) is about US$7,500. Due to its cheap manufacturing labour is changing fast. historically high level of savings (which has funded the country’s phenomenal growth), China is taking deliberate steps to move per capita consumption rates remain further up the value chain. As part of the relatively low at about US$2,500 a year. In 12th Five-Year Plan, the government will boost the United States, that consumption figure expenditure on research and development to is about US$30,000 per person. With China 2.2 percent of GDP. It also has ambitious targets moving to a domestic consumption growth for the registration of patents. This is on top of model, this figure will rise significantly. existing efforts to encourage internationally- based Chinese researchers to return to China • By some calculations China is on track to and to recruit 2,000 foreign experts to work become the world’s largest economy, yet it is in national laboratories. still a developing country. China’s economic growth over the past 25 years is probably the By 2015, China will have the biggest research largest and most sustained period of wealth and development workforce in the world. creation in the history of the world. In 1800, This concentrated investment in technology China generated 25 percent of the world’s has led to China emerging as an innovator in industrial output. By 1975, it had fallen to 1.5 sectors such as aviation, clean energy, finance, Clockwise from the top: percent. It is now on its way back to 25 percent. telecommunications and science. Jin Mao Tower in Shanghai, fortune cookie, Prime Minister John Key at the New Zealand Pavillion during Shanghai Expo. Opening Doors to China 5

BABICH wine

The first five years of the Babich wine Tutty says success in China has company’s foray into China were slow and complemented the business’s other markets characterised by the occasional wrong-turn because, where the rest of the world favours in terms of distribution partners. white wine, the Chinese favour red. It is expected this favouritism may dilute over But a year ago, the company signed a rare time as a new generation discovers white deal with a national distributor and this year wine, but for now China’s preference is China leapt into the top five of Babich’s 35 providing a welcome market for Babich’s export markets. pinot noir and Bordeaux-style red. Martin Tutty, director of sales and marketing for the 90-year-old family business, says: The volume of New Zealand red wine sold in “It’s been a five or six-year overnight China between 2003 and 2009 grew by 153 success.” Tutty says China has the potential percent annually, while growth in white wine to be Babich’s third largest market by 2015. over the same period was 269 percent.

Late last year, a report commissioned Philip Gregan, chief executive of by New Zealand Winegrowers showed New Zealand Winegrowers, says dozens the industry could double its exports by of New Zealand labels are in China. The Beijing National Stadium (left), wine exports to concentrating on China and the United industry clearly recognises China’s potential China have huge potential for growth (right). States. The Price Waterhouse Coopers but Gregan warns the spoils will not come report said that by 2021, the New Zealand without hard work. wine industry’s sales potential could grow by 170 million litres a year to reach almost “It’s going to require money, hard work and China’s growing economic weight is also leading in many Southeast Asian countries where a lot of worn-out shoe leather. It’s a big to the internationalisation of its currency, the it is now regarded as a hard currency. 400 million litres – and China and the United States could account for half of that growth. country, both geographically and in terms Renminbi (RMB). Now that China is allowing Between 1978 and 2005, China’s economy more of markets. Time in that market is incredibly the limited conversion of its currency for Tutty says Babich has learned valuable than quadrupled in size, and 300 million of its important in terms of understanding how investment more central banks are starting lessons about working with the right people vast population of 1.3 billion people were lifted it operates.” to buy RMB to hold as a reserve currency. and using networks to get a feel for how well from absolute poverty. It has maintained an a candidate might fit with the company. After Annual wine exports to China have grown Although the RMB remains pegged to a basket average growth rate of almost 10 percent per a couple of false starts with distributors who from $3.06m in September 2008 (the month of foreign currencies and is still only allowed annum (falling to 9.1 percent for 2009, according failed to deliver on their commitments, Babich before the FTA was implemented) to $17.0m to trade within a narrow band against this to the International Monetary Fund), attracted invested in sending Tutty to an expo in Asia in 2011, representing 456 percent growth. basket, the People’s Bank of China is allowing sizeable foreign investment, greatly expanded where his small booth cost around $6,500 for New Zealand’s share of the imported wine its currency to increase gradually in value. its international trade and built up around three days. He talked to everyone he could market in China is around 1.6 percent – the US$3 trillion in reserves. and developed valuable market instinct and eighth largest exporter of wine to China in In terms of trade, Beijing’s relaxation on the use made the contacts which led to the successful 2010 in dollar terms, and the 11th largest in of the RMB in international transactions means China’s increasing economic success has given relationship with his current importer. volume terms. that 7 percent of China’s external trade is now it greater influence in regional and international settled in their national currency (up from 1 politics. Its prosperity has driven prosperity and “It’s about creating your own luck,” he says. Of the top 15 exporters of still, bottled percent in 2010). The RMB is already welcome stability throughout the Asia-Pacific region. wine to China (which collectively make up It has cost significantly more to establish in 99 percent of the volume), New Zealand’s China than any of Babich’s other markets. average price per litre is the highest, at CHINA – INCOME GROWTH FORECAST Tutty visits China four times a year, for up to US$8.22 per litre against an average of three weeks, and has appointed a full-time US$4.49 per litre. The next highest is France, in-country Chinese sales manager. He says at US$5.01 per litre, followed by Australia 2010 38% 54% 6% 2% a company which cannot afford to invest (US$4.90) and Germany (US$4.43). significant time and resources should not Wine Intelligence’s China Landscapes 2011 2015 25% 43% 28% 4% attempt to take on China. report estimates a target audience of 18.6 “China is more complex than any other market million upper-middle class Chinese who are 0-55k RMB 55-100k RMB 100-200k RMB 200k + RMB we’ve been involved with. There are entire based in urban centres, aged 18-50, and categories which don’t exist in other countries, regularly drink imported wine. Source: McKinsey Global Institute such as banqueting and bulk-purchase for gifting. But now the pay-off from those years www.babichwines.co.nz of perseverance is starting to show." www.nzwine.com Opening Doors to China 7

New Zealand and CHINA

New Zealand enjoys a positive profile within China thanks to the ‘four firsts’.

New Zealand was: The FTA between New Zealand and China • The first Western country to conclude (NZ-China FTA) came into force on 1 October a bilateral agreement with China on its 2008 and liberalises and facilitates trade in accession to the World Trade Organisation goods and services, improves the business (August 1997) environment and promotes cooperation in a broad range of economic areas. • The first developed economy to recognise China’s status as a market economy This early willingness to recognise and trade (May 2004) with China is repaid with a level of engagement • The first developed country to enter into which is of substantial economic and strategic Free Trade Agreement (FTA) negotiations value to New Zealand. with China (announced November 2004) In the year to October 2011, New Zealand’s • The first OECD country to sign a high-quality, exports to China grew 34 percent, from $4.3 comprehensive and balanced FTA with billion to $5.8 billion, imports from China grew China (April 2008) 13 percent, from $6.1 billion to $6.9 billion.

New Zealand AND CHINA TRADE FIGURES

LEISURE $232m EXPORT TOTAL: $5810 MILLION IRON GOODS $232m

DAIRY $2080m PLASTIC $240m

WOOD $1244m HOMEWARE $310m

WOOL $398m CLOTHING $993m

SEAFOOD $268m MACHINERY $2561m

WOODPULP $216m IMPORT TOTAL: $6900 MILLION MEAT $210m

Source: Statistics New Zealand (for the 12 months to October 2011)

Hong Kong Island; with the International Financial Centre in view. 8 Opening Doors to China

Mayors of Chinese cities have significant political power and influence, so New Zealand mayors can play an important role in opening doors in China. A business delegation led by a high-ranking political figure gets more traction.

TM Total two-way merchandise trade has grown any other major nation in New Zealand’s New Zealand Greenshell mussels. more than 50 percent since the FTA, helping to trading history. partially offset the turmoil of the global financial In 2010, the New Zealand-Hong Kong, China One of the most pivotal developments came dominated by milk powder and logs, account crisis. China is New Zealand’s second-largest with the advent of direct flights from Auckland Closer Economic Partnership Agreement (CEP) for 91 percent of New Zealand’s earnings from market, accounting for over 12 percent of to China’s largest cities, initially through Air exports to China. capitalised on Hong Kong’s status as a Special exports, and the second-largest source of New Zealand which was joined in the past Administrative Region of China with autonomy imports, at 16 percent. year by China Southern Airlines. However trade is diversifying. The Government in trade matters. Hong Kong is New Zealand’s is working with industry to promote the growth New Zealand’s export trade with China over ninth largest export market worth $823 million Supported by direct air links, China has been of exports in higher-value goods such as wine the past two years has grown faster than with per annum. New Zealand’s fastest-growing inbound tourist and seafood, and the outlook is promising. market for a decade and tourist numbers will Wine exports to China grew from $3 million nearly double in five years. By 2014, China is in September 2008 to $17 million in 2011 New Zealand China Trade Association projected to become New Zealand’s second- – 456 percent growth. largest source of visitors. China's government has made it clear haven’t got something to trade, don’t bother.” New Zealand is recognised as a world leader New Zealand is a worthwhile, significantly China is the largest source of international in quality food production and China is a Ferguson, who was chief executive of the valuable and preferred business partner students – 300,000 have studied in growing market. Our reputation for science and New Zealand end of the Chinese national for Chinese businesses. New Zealand over the past decade. This innovation could make a significant contribution shipping lines for 22 years, says companies business generates not only money, but great to China’s food safety and food security. Stuart Ferguson, chair of the New Zealand should not be too proud to ask for help in links and networks created while a Chinese China Trade Association, says this status developing a strategy to approach China. person is studying – and potentially settling Some of the earliest Chinese migrants in should not be squandered. It presents an The NZCTA can help pair experienced – in New Zealand. New Zealand arrived for the 1860s gold rush. opportunity for the well-researched entry China operators with new entrants to Today, Chinese New Zealanders are the fifth of proven New Zealand products and form a mentoring relationship – be it a China’s investments in New Zealand were largest ethnic group in New Zealand – 3.7 NZ$1.8 billion in early 2010, most of it in the services, as long as operators are willing one-off catch-up over a cup of coffee percent of the total population at the last census forestry sector, followed by manufacturing to put in the necessary effort to make or a formalised, in-depth arrangement. and the largest Asian ethnic group. There are 29 and commercial construction. their Chinese venture a success. Ferguson says the war stories, wisdom and sister city and sister port relationships between experience of those who have successfully New Zealand or New Zealand-associated New Zealand and China, from Ashburton and “Probably a lot of the low-hanging, ripe broken into China are invaluable in companies such as ANZ, Richina and Fonterra Puyang to Wellington and Beijing. fruit is gone. Those who wish to enter the preparing newer operators for the have major holdings in China. Investment in market will need to do considerably more complexities of the market. Chinese New Zealanders enrich New Zealand China is important to secure a long-term market work but all export is difficult. cultural life with events like the Lantern for New Zealand products and assists in the “There is a market there for people willing Festival in Auckland, organised by the Asia New “The biggest mistakes among aspiring penetration of China’s enormous developing to put in effort in terms of research and Zealand Foundation, which attracted 240,000 entrants to the market are a lack of research tenacity.” consumer market. and a reluctance to invest time or money. It’s in 2011. While most are yet to visit China, not a market you can cut your teeth on. If you www.nzcta.co.nz The trade relationship has a very strong New Zealanders are discovering Asia through commodity base – primary products, food, clothing, electronics and hardware. 10 Opening Doors to China Opening Doors to China 11

“It’s not really a case of identifying the potential. The potential is huge. The question is how we best convert Pure New zealand Greenshell Mussels that potential into real economic growth opportunities Over a decade ago, the Greenshell™ mussel secondment from New Zealand Trade and industry made its first foray into China – Enterprise and has since become PNZGM’s for our country.” with unpleasant results. Shanghai-based general manager. With a long history in business development for Prime Minister John Key Some Chinese distributors duped consumers international New Zealand companies, Zhang with counterfeit products leveraging brings crucial Chinese business acumen Atrax off New Zealand’s strong reputation for to the task of re‑establishing a significant quality and food safety. A small and muddy Greenshell™ mussel market in China. Kevin Maurice says no exporter should Maurice also had to find a factory, and locally-grown green mussel was found be paralysed by the fear of intellectual for this he relied on his networks. He packaged and sold in-market under the “This collaboration is a long-term business property infringement in China. He’s had and another New Zealand business guise of New Zealand’s iconic Greenshell™. model looking for long-term profit. We are his intellectual property (IP) stolen or owner have collaborated to establish a Distributors sprayed water over mussels and very confident in the future,” Zhang says. threatened in Germany, Singapore and factory in southern China which fulfils froze them to add weight so they could sell Pure is sold into the food service sector, even in New Zealand, but through good for more. Perhaps the biggest concern was targeting western chefs familiar with the both their needs. The businesses have management and good luck, he’s yet to the sale of cheap Chinese mussels under the Kiwi delicacy, and Asian chefs looking for complementary technology but are in have problems in China. New Zealand name and counterfeit branding interesting new flavours. unrelated industries. into highly valued third markets, such as the Maurice set up design and manufacture PNZGM is already a multi-million dollar Finally, Maurice had to tackle the issue of United States. company Atrax about 25 years ago. His export venture and the target for 2012 is IP infringement. While ensuring he has weighing and measuring products are It was difficult for Kiwi companies to address to double sales. The price paid for PNZGM all the necessary registrations in place, sold to other businesses which then install these issues so, with the added complication product has risen from US$4.50/kg to Maurice has also taken a much more them in airports around the world. Atrax of intense competition between New Zealand US$4.85/kg in the past year. This is critical simplistic approach. He has segmented products – from the small scales which exporters driving down the Greenshell™ sale to maintaining export returns when the his business so that there is little contact weigh your check-on baggage to the large price, exporters walked away from China and New Zealand dollar remains strong. between the design capability in scales used to weigh cargo for air freight refocused on other markets. New Zealand, the manufacturing plant Zhang says members of PNZGM visit – are in 101 countries from Iraq to The in southern China and the sales centre in It was eight years before sizeable volumes customers in China. She believes this is Philippines. One example is Hong Kong of New Zealand Greenshell™ mussels the most important lesson for aspiring International Airport, where every piece of Shanghai. He routinely ships bulk goods made a return to the Chinese market in exporters: “People like to see Kiwi faces. baggage, freight or mail passing through back to New Zealand where the products 2010 – and these days, it’s much better It shows your commitment to the market.” the airport is routed over an Atrax scale. are then loaded up with the software. And, news. As a market, China has more promise whenever he uses a sub-contractor in Gary Hooper has worked closely than most. It offers strong economic The company is well-positioned in China China, he will ask them to make a piece of with PNZGM as marketing director of growth, an emerging ‘consumer class’ with to take advantage of the surging demand steel or electronic part but never divulge Aquaculture New Zealand – the industry a desire for quality imported foods, an for air travel and resultant expansion what it is for. body that represents Greenshell™ mussels, improved regulatory regime (to limit the of airports across Asia. Atrax began New Zealand salmon and farmed counterfeiters) and a history of appreciating manufacturing in China about three years “Some of these things are in conflict Pacific oysters. Greenshell™ mussels. ago, after Maurice sold off the domestic with Western management styles but I’m “Chinese consumers love our product and arm of his business to focus on exporting. the only guy who knows all the parts of The other significant difference is that associate New Zealand with quality and the jigsaw.” several of the leading mussel producers There were a number of issues to resolve food safety. The economic growth and are now working collaboratively under one before Maurice was comfortable with his Maurice encourages other Kiwi business associated consumption is phenomenal.” brand – Pure. The shareholder companies in Chinese operation. people to reconsider China if they’ve Pure New Zealand Greenshell Mussels are Hooper says the collaborative approach previously dismissed it as too hard. He found it took substantial effort to Sanford Limited, Sealord, Kono NZ Limited used by PNZGM has sparked interest document his processes so he could rely and NZ Greenshell. This approach combines in adapting the approach for channel “It is a big market. It is close to other parts on them being made to his standards resources and shares the risk and it is the and market development elsewhere. of the world. Meanwhile, we are a far-flung offshore. He has now developed the first marketing initiative of this nature and Other export sectors have also asked for little dot in the South Pacific. You can only documentation to ensure a consistently scale among mussel producers. information about the model to understand do so much business from New Zealand. high standard, but he has also employed whether it might be applicable and useful. You need to get amongst it.” Chinese businesswoman Vivian Zhang an engineering manager who spends helped establish the company while on www.purenzgreenshell.com around half his year in-market. www.atraxgroup.com “Over half of China's... 1.35 billion... population now live in urban areas.” China National Bureau of Statistics, 2012 Opening Doors to China 15

The NZ Inc CHINA Strategy

This country strategy is part of a broader government strategy to increase the internationalisation of the New Zealand economy which, in turn, is part of the wider Economic Growth Agenda. It supports the Government’s main goal to deliver greater prosperity, security and opportunity for all New Zealanders.

The strategy is part of a whole-of-government increasing exports. It identifies issues that approach to growing exports and new markets. impact on New Zealand’s ambitions. Developing and capitalising on New Zealand’s relationship with China is crucial in delivering New Zealand 2015 vision the Government’s Economic Growth Agenda, including the goal of raising the level of our New Zealand and China have strong and exports to GDP from 30 to 40 percent by 2025. resilient economic, political and people- to-people relationships which have The NZ Inc China Strategy reflects China as an stimulated New Zealand’s innovation, important bilateral partner. It has a strong trade and economic focus and sets out ambitious, high- learning and economic growth. level, five-year goals and actions to achieve them. New Zealand’s ‘four firsts’ with China create The strategy also provides an overview of the a platform to achieve these goals. strengths and weaknesses in New Zealand’s The challenge is to translate an excellent approach in the market. The strategy has political relationship and trading framework been developed by ministers and government into tangible benefits for New Zealand. Our agencies with important input from industry companies must be helped to harness value groups, businesses and organisations involved in building New Zealand’s relationship with China. as well as volume from the China market.

A central aim of this strategy is greater Not only must we focus on what our businesses efficiency and effectiveness across all need to succeed in this market, we also need to government agencies that work in and with consider what we do in New Zealand to learn China, and more targeted and cohesive services about and work with China as a partner. This to help successful businesses develop and grow focus would span investment and migration, and in China. The strategy, however, goes beyond consider tourists, students and business people. “China’s way of doing business is already having an influence around the world. World businesses will evolve to keep up with it.” McKinsey Global Institute

Clockwise from top left: Air travel expansion across Asia, Chinese student, Chinese cuisine, Chinese spice market, the Forbidden City in Beijing. 16 Opening Doors to China Opening Doors to China 17

Goals and Priority Actions

The NZ Inc China Strategy identifies five strategic goals for furthering New Zealand’s relationship with China.

1 Retain and build a strong and Police and the Department of Internal Affairs. "An astounding 30 million [Chinese] Following consistent investment in China resilient political relationship Several key steps to implement this strategy are since 1972, New Zealand has strong political with China. already underway, including: consumers are expected to shop online for connections to both central and provincial the first time, every year until 2015. That's governments. These relationships require 2 Double two-way goods trade • A 2012 ministerial work programme is in ongoing attention and investment as powerful with China to $20 billion by 2015. place for high-level engagement to push a population nearly the size of Canada." provincial economies are emerging as the forward the political relationship, and to lead new frontier. 3 Grow services trade with China trade missions to China. Boston Consulting Group For many of our largest and most progressive (education by 20 percent, tourism • China business training courses have been companies, ‘China is the new China’. by at least 60 percent, and other attended by over 400 business representatives It is critical New Zealanders appreciate the Mainfreight, Rakon, Zespri, Weta Workshop services trade) by 2015. building the capability and market readiness different scope of China’s government and build and Biovittoria are among major New Zealand of companies at the early stages of entry to the their understanding of successful engagement. companies exploring business in regional China. Increase bilateral investment to levels 4 Chinese market. This strategy identifies the need to support that reflect the growing commercial China is of central political and strategic companies to build the political and commercial relationship with China. • Immigration New Zealand’s Shanghai-based importance in the Asia-Pacific and globally. Its goodwill required for long-term success. service has expanded to enable more efficient policies directly affect New Zealand’s political 5 Grow high quality science and processing of visas for Chinese business interests, security and economy. China is How will we achieve this goal? technology collaborations with people, tourists and students. increasingly active in international rule-setting China to generate commercial and practices in areas as diverse as international Commit to ministerial engagement, both opportunities. • Two new investment advisors have been trade and finance, climate change, fisheries, aid as hosts and visitors to China, to build based in Beijing and Shanghai, to lead the and the future regional architecture of Asia. the high-level relationships required to Underneath each goal is a series of priority Government’s investment strategy in China. achieve the strategy’s goals. actions that will be implemented by relevant It is important that, in dealings with China, The 2012 milestone of 40-year-diplomatic agencies, including: the Ministry of Foreign 1 Retain and build a strong and New Zealanders’ interests are understood,   protected and advanced. relations will present opportunities to Affairs and Trade, New Zealand Trade resilient political relationship reinforce our warm relations. The rebuild of and Enterprise, Ministry of Economic with China The Chinese government plays a major role the New Zealand Embassy in Beijing will also Development, Tourism New Zealand and in business in China, both as a regulator refresh our flagship presence in China. the Ministry of Science and Innovation. After the best part of 200 years of marginal and through state run companies. In this global influence, China has reclaimed a position environment, the New Zealand Government Strengthen existing domestic knowledge Other agencies working closely on priority as a leading world power. can actively assist New Zealand companies to of China, and provide a base for a actions include the Asia New Zealand form alliances with major Chinese enterprises China/New Zealand Partnership Foundation, the Ministries of Agriculture Its global rise is characterised by economic and to access services in China. Forum, through establishment of and Forestry, Defence, Transport, Customs, and social development. China is on track to a New Zealand China Council. Immigration New Zealand, Treasury, Ministry become the largest economy in the world within The experience of many New Zealanders doing of Education, Te Puni Kokiri, Ministry for 20 years, while simultaneously lifting its rural business in China is that they “make friends first; A New Zealand China Council will bring together the Environment, Education New Zealand, citizens out of absolute poverty. make money later”. leaders in business, public sector and academia. 18 Opening Doors to China

Two-thirds of China's population – an estimated 64 percent – will live It will build understanding of common challenges in cities by 2025. and opportunities for NZ Inc to balance and lead public discussion and support ministers. McKinsey Global Institute The Council will lead a high-level bilateral Partnership Forum with Chinese counterparts. This has been underpinned by growth in commodities, but there are encouraging signs Establish a bilateral financial and of significant development in higher value, economic dialogue involving the differentiated products and services. The Aqua Luna, an antique junk boat, which Reserve Bank and the Treasury. competitive advantages offered through the takes tours around Victoria Harbour (left), Chinese factory worker (right). This will aim to build stronger mutual FTA are increasingly apparent and will grow understanding of finance and economic significantly in the next few years. Orion health policy positions and systems. In addition to the FTA, there are environmental Encourage more New Zealanders to learn factors which present a significant economic Orion Health has been active in China who have studied in New Zealand to grow Chinese language skills, train teachers opportunity for New Zealand. Among these are: for nine months and is determined to with the company and eventually return to run Chinese language programmes China’s projected economic growth; continued not repeat its competitors’ mistakes. to China to work for Orion. in schools and strengthen Asian studies urbanisation; its role in global supply chains; Orion is an Auckland-based health Oxenham says Orion is moving slowly in universities. demand for resources; and a growing middle class of consumers who expect food safety and information technology (IT) vendor, and and purposefully. Products have been Strengthen and maximise areas of security. There are many points of common New Zealand’s largest privately-owned reworked to fit the market – from the cooperation between security and law interest between China and New Zealand, most software exporter. Its software is used refocusing of marketing collateral to enforcement agencies in New Zealand obviously in the agritech and food and beverage by clinicians in over 50 countries to highlight what is important to Chinese and China. sectors, but with growing opportunities in quickly access patient records across customers, to the formation of quality technologies, natural products and specialised a variety of sources. translation upgrades using Chinese text 2 across Orion’s software. Double two-way goods trade manufacturing and services. Executive vice president hospital with China to $20 billion by 2015 solutions, Wayne Oxenham, says Orion New Zealand’s challenge will be to realise China has commanded a lot of resources started planning to enter China about China is New Zealand’s second-largest bilateral this potential and maximise the relationship and effort but Oxenham says this market – two years ago. It commissioned research trading partner with two-way trade worth $12.7 with China in addition to our current global where the military alone has 1,000 medical and developed a high-level market billion in the year to October 2011. Since the trade profile, maintaining a balanced view of centres and hospitals – is worth it. “The entry strategy. A priority was a local FTA came into force in late 2008, exports from the world. Interest amongst the New Zealand potential is unbelievable. If we capture Chinese operator who had networks two percent of the market, we’ll generate New Zealand have increased by 152 percent, the business community is strong, but there and local business understanding so fastest growth with any major trading partner remains a great deal to be done to translate that $100 million in five years. If we’re not there, Orion appointed a Chinese resident in we’re not truly global.” in recent times. New Zealand’s annual trade interest into market-ready, commercially-viable New Zealand as China general manager, deficit with China has also reduced by nearly businesses capable of engaging in a sustainable and it is now recruiting Chinese people www.orionhealth.com 60 percent. and profitable way with China. 20 Opening Doors to China Opening Doors to China 21

“Companies must have both the flexibility to adapt and the skills to How will we achieve this goal? innovate to keep in step with the basics of doing business in China and economic goals. As with our goods trade, we will identify training needs for further have scope to do better in our traditional service China high-growth companies project Chinese market’s exciting development.” development for those wishing to intensify exports to China – education and tourism – A substantial group of New Zealand Trade and McKinsey 2011 Annual Chinese Consumer report their engagement. NZTE will also work with and to develop other areas, such as design, Enterprise’s (NZTE) customers have China other agencies and trade organisations to architecture, consulting, IT, environment as a priority market in the short and medium- stimulate broader interest and awareness and food safety services. term. NZTE has assessed the needs of these such as aviation, marine, commercial fit-out, of business opportunities with China. companies and will implement a project to food processing technologies, etc; information Education: grow value of education Representing New Zealand business help them realise their full growth potential in and communication technologies; and natural services by 20 percent in China China. Through this project NZTE is targeting products and bioactives. The Government has set a goal of doubling the 50 or more successful, profitable and fast- In close collaboration with other government Each sector programme will realise market economic value of export education services to growing companies in China by 2015. agencies, NZTE will monitor and communicate opportunities for all New Zealand exporters and $5 billion by 2025. China is the largest source of changes to the business environment in China The project will help exporters to analyse and heighten the awareness of their capabilities and foreign students in New Zealand with 21,000 that may affect New Zealand’s commercial understand the market; develop products and expertise amongst Chinese customers. enrolments in 2010. Around 90 percent are in activities. A key component will be to assist services for China; and identify appropriate the tertiary sector and it is estimated Chinese During 2012, the ‘Chef-in Market’ programme companies with the complexities of exporting partners and business models. Expert advisors students add approximately $600 million to will be intensified based out of New Zealand to China and deal with the rapidly changing will also be assigned to assist these companies the New Zealand economy annually. and, where appropriate, raise capital to support Central in Shanghai; a comprehensive wine regulatory environment. Where appropriate, their growth. These services will be tailored to promotion will be developed and implemented; NZTE will work alongside companies to With improved targeted promotion by the new customers and will be additional to the suite of further support will be given to collaborative accelerate their market entry and consolidate Crown entity, Education New Zealand, and advisory services already offered by NZTE. and individual initiatives in the seafood sector; their position in the market. greater cooperative promotional spend among a wide-ranging research programme will be institutions, the Government hopes to increase Emphasis will also be placed on collaborative undertaken in niche areas; and a programme A close working relationship with counterpart the market share of Chinese students, without initiatives where market entry and development of business missions into and out of China will Chinese entities maintained across the compromising the diversity and capacity of will occur more effectively. be implemented. NZ Inc network will also help companies learning institutions. through a potentially complex and unfamiliar Target priority sectors Growing the base of China-ready exporters regulatory environment. China expects New Zealand to provide state- There are some evident sectors of opportunity Recognising the need to grow the volume of backed quality assured international education 3 for New Zealand businesses in China and New Zealand companies ready for the China Grow services trade with China services for Chinese students. This is crucial if structured programmes have been put in market, NZTE will build on its successful (education by 20 percent, tourism the value of the New Zealand education brand place or are in the process of being developed training programme for businesses at the early by at least 60 percent, and other in China is to be protected and enhanced. to realise their potential. Priority sectors are stages of their preparation for China. The services trade) by 2015 food and beverages (notably seafood and wine); courses have been offered nationwide since China is also the main market for offshore agribusiness (including food safety); high-value early 2011 and their breadth and reach will be High value, profitable non-commodity growth delivery of New Zealand education services. Our manufacturing across a number of sub-sectors expanded. These will assist companies with the will be essential to achieving New Zealand’s competitors are establishing campuses in China. 22 Opening Doors to China Opening Doors to China 23

Universities New Zealand

Derek McCormack, Vice-Chancellor of to student and staff exchanges and jointly- Auckland University of Technology and offered education programmes. outgoing Chair of Universities New Zealand, says the export education Chinese students account for about 6000 crash of almost a decade ago showed that of the 17,000 international students in New Zealand could not rely on a mass of New Zealand universities and educating students from a single source country. them will continue to be an important “…companies trying to succeed in China need to New Zealand needs to think smarter – source of income. But McCormack says looking at a much broader profile of sustainable, high-quality outcomes in remember that a number of Chinese cities are larger source countries together with business, diplomacy and industry will than many European countries.” collaborations which provide a richer grow from postgraduate collaborations. experience and greater benefit to the In this way, New Zealand will be working McKinsey 2011 Annual Chinese Consumer report countries we work with. alongside and deepening engagement with China in knowledge exchange. With that in mind, he says, universities “That’s what we should be focusing Two thousand Chinese students are enrolled How will we achieve these export need to focus on the development of on and growing.” in China-based New Zealand programmes. education goals? high-quality research and educational There is potential to more than double this partnerships, from research collaborations www.universitiesnz.ac.nz Complete an in-depth education market number and to grow associated earnings from analysis and develop a targeted, China- consultancy and training services. specific marketing and promotion Ngai Tahu Holdings campaign for New Zealand education. Chinese students have the second highest Trevor Burt spent five years living and negotiation process may take longer. He transition rates to work and residence in Explore and facilitate possibilities for working in China before taking his position says, if you can source them, it’s invaluable New Zealand, and therefore make an mutual recognition of professional with South Island iwi Ngai Tahu. to have people on your team who are important contribution to our labour force, qualifications. familiar with Chinese business. As chair of Ngai Tahu Holdings, he helped helping to lift productivity rates. New Zealand This will enhance the attractiveness of NZ negotiate the deal to develop a consortium All businesses should recognise that their must invest in thorough assessment and qualifications for Chinese students in a with Singapore-based Agria and Chinese first partnership with a Chinese entity could verification of applications to study and live in competitive market. agriculture giant New Hope, which has be beneficial beyond the deal on the table. New Zealand, while avoiding the establishment taken a majority stake in PGG Wrightson. For example, New Hope has interests in Extend the number of NZ private training of unnecessary barriers to bona fide Chinese dairying which is an area Ngai Tahu is keen to enterprises listed on the China Ministry Burt says there are similarities in the develop so there is potential for the business students and migrants. of Education Study Abroad website. outlook of Māori and Chinese businesses. partners to work together in other areas. Both take a long-term view and consider their dealings to be those of a family Burt says a good portion of Ngai Tahu international STUDENts by country business. “When you enter into a Holdings’ earnings flow from China. It is partnership, you need to align and there the largest export market for Ngai Tahu’s CHINA 24.7% is a similarity around the way Chinese and seafood business, and Chinese are the Māori think.” fastest growing client group for the tribe’s 13.4% tourism ventures, which include Shotover SOUTH KOREA Māori businesses should make the most of Jet and Huka Jet. this, he says, but not expect that they will INDIA 13.2% result in any advantage beyond some early The partnership with Agria and New Hope goodwill. “It’s got to be commercially sound will help Ngai Tahu to better understand JAPAN 8.7% and sensible. You can’t broker a deal out of the Chinese market so it can make the most good feeling.” of opportunities to increase the flow of SAUDI ARABIA 4.7% tourists through its New Zealand businesses Burt’s experience is that there is no magic and maintain its lucrative position in the to dealing with China – businesses just seafood industry. Distribution of international fee-paying students by Country of Citizenship (2011) need to be forewarned about the role of Source: Export Education Levy Key Statistics relationship-building and anticipate the www.ngaitahu.iwi.nz 24 Opening Doors to China Opening Doors to China 25

The growth in visitors from China has been significant in recent years. In the year ending November 2011, 141,000 travellers from China visited New Zealand. Average annual growth of 8.4 percent is forecast Tourism: grow tourism services 4 Increase bilateral investment to increasing investment in New Zealand include by at least 60 percent between 2010 and 2016, increasing visitor levels that reflect the growing Chinese state-owned enterprises, which could arrivals to around 180,000 per year. commercial relationship with China provide investment capital for strategic resource China is our fastest growing and fourth largest development and infrastructure funding. Major international visitor market. Chinese have Tourism New Zealand Bilateral investment flows relative to bilateral outward FDI bids from Chinese firms are subject traditionally holidayed in New Zealand as trade volumes are low. There are a number of to Chinese government vetting. Private Chinese part of a tour group under China’s Approved reasons for this: Chinese investors and businesses investors are showing increased interest in certain How will we achieve these tourism goals? Destination Status (ADS) system. However, are unaware of New Zealand opportunities; the sectors of the New Zealand economy. Sectors of New Zealand deal size is relatively small for major there has been an increase in the number Tourism New Zealand and other demonstrated or possible interest include food and Chinese investors; outward Chinese investment of independent and semi-independent agencies will develop the brand to tell beverage, natural resources, cleantech, high-value is subject to strict controls; and New Zealand manufacturing, IT, and infrastructure. Significant holidaymakers. The focus is on ensuring the the New Zealand story for specific key investors are inexperienced in Chinese markets. recent investment by Chinese firms includes quality of tour group travel and motivating sectors in China, and will invest further in in-market promotion to support Bright Foods (in Synlait), Haier (F&P Appliances) independent or small-group Chinese travellers New Zealand would benefit from increased airlines investment in new services. Foreign Direct Investment (FDI) from China, and Agria (PGG Wrightson). to visit New Zealand. and Outward Direct Investment (ODI) into Meanwhile, Immigration New Zealand’s Policy settings Air New Zealand has direct flights from China. It would serve our country well if levels Shanghai-based service, one of its four of bilateral investment reflected our countries’ Shanghai and Beijing but there are capacity Acquisition by foreign investors of New Zealand China operations, has expanded and growing commercial relationship. farming assets is a sensitive issue for some. constraints through other Asian hubs, has an outsourcing agreement for the Over the last five years, sales of land to Chinese especially during the peak summer period. lodgement of applications. Inward investment investors have been less than 1 percent of total Direct flights from Guangzhou by China Other services It is estimated China invested approximately sales to overseas investors. The Government has Southern Airlines started in April 2011 and US$60 billion internationally in 2010/11. Total undertaken a review of the Overseas Investment China is maturing as a market for New Zealand Chinese investment stock in New Zealand is Act to improve its operation and effectiveness. in November 2011 it moved to daily flights, ideas and skills, as well as goods. The following $1.87 billion; the comparative figure of FDI Officials are working on a detailed policy bringing greater stability to air connections. areas all have significant potential to grow: from Australia is $100 billion. Avenues for framework to assist in targeting, attracting On current growth projections, a new air design and architecture; water management; services agreement will be needed within the film and television company production; next year to allow further expansion of services. green engineering; entertainment, including Communications in CHINA Aviation talks will take place this year. advertising; IT and educational resources. MOBILE PHONE USERS 952 MILLION New Zealand welcomed 141,000 Chinese How will we achieve these service goals? INTERNET USERS WITH BROADBAND ACCESS 150 MILLION visitors in the year to November 2011. In the Improved statistics on services trade would 2010 calendar year, Chinese visitors made capture a more accurate picture of the growth in TELEPHONE CONNECTIONS 288 MILLION an economic contribution of $362 million. these areas and help identify possible areas for The goal is to grow this figure by 60 percent. increased service liberalisation under the FTA. Source: China's Ministry of Industry and Information Technology (2011). 26 Opening Doors to China Opening Doors to China 27

From 1949 to 1978, 280,000 Chinese nationals travelled abroad. In 2004, 22 million went abroad, rising to 57 million in 2010. Chinese officials anticipate this will exceed 100 million in the next five years. Ministry of Foreign Affairs and Trade

and utilising FDI, which will underpin the 5 Grow high quality science and investment goals of all NZ Inc strategies. technology collaborations with This will create greater certainty for Chinese China to generate commercial investors and help in shaping future investment. opportunities.

How will we achieve greater inward New Zealand science has a world-class investment from China? reputation, and China provides new Steel mill (left), Chinese New Year dragon (right). More resources have been allocated to opportunities for the commercialisation encouraging focused investment from of science and international scientific Lanzatech China that creates new opportunities collaboration. New Zealand’s participation and capabilities. in cooperative research teams provides Two years ago, LanzaTech co-founder “It’s not a quick thing. One dinner is not going a means to share and protect intellectual New Zealand officials have been working with Sean Simpson made his first business trip to do it. It’s more about time rather than property generated from research that China’s Investment Promotion Agency (CIPA) to China. throwing money at it. Relationships built is commercialised. on the preparation of high-quality, up-to-date, over time are important.” Today his cleantech company has Chinese-language information on the rules Until recently, the New Zealand science partnerships with five global Fortune 500 Many Kiwi businesses are afraid of losing their and regulations of investment in New Zealand. effort in China could be characterised as companies in China, including a joint-venture intellectual property (IP) in China. Simpson Agencies will also prioritise work to finalise predominantly individual academic contact with Baosteel and a demonstration facility says retaining your IP should be the bottom New Zealand’s FDI/ODI policy platform. with a developing China science sector, with at one of the Chinese state-owned iron and little strategic or commercial impact. Prime line of any agreement. Outward investment steel company’s Shanghai steel mills. Minister John Key’s meeting with Premier “If part of the deal is to own the IP, it’s the Total New Zealand investment stock in China Wen Jiabao in 2010 identified science and That is the speed with which your business wrong deal, it’s the wrong partner. Get out.” is $541 million; this compares to $36 billion technology as lagging behind other aspects can take off once you climb on board the in Australia. The low rate of New Zealand of the relationship and agreed to remedy Despite the hefty time investment to build China phenomenon, Simpson says. investments in all key markets, except Australia, this. Priority areas of collaboration are food, relationships, and the need to mitigate the LanzaTech uses a unique microbe to turn gas correlates with a lack of New Zealand investment health and biomedical sciences, environmental potential for IP infringement, Simpson says up the value chain and a predominant model waste into ethanol. The company’s research science, and high technology platforms. businesses considering entering China based on production and export of raw materials and development arm is in Auckland and it should go for it. or primary manufacturing and export of goods China is also emerging as a possible test bed has offices in Shanghai and Chicago. via third parties, e.g. agents and distributors. for cutting-edge New Zealand technologies, “The people who are contemplating going Lifting the level of New Zealand investment particularly in the area of greentech and LanzaTech’s swift entry to the Chinese market there have got balls. It isn’t a scary place if in China is a priority. We need to build on the industrial technology. Auckland-based has necessitated a swift education in Chinese you take precautions. Avoid the negativity: business. Simpson says the first rule is to successes of companies such as Fonterra, Rakon, biotechnology company LanzaTech has signed China is the future. We’ve got to look East.” focus on building relationships rather than Nuplex, Sanford and Richina, all of which a partnership with the second-largest steel talking money. www.lanzatech.co.nz have invested in their own, or joint venture, company in the world, Baosteel, and is testing operations in China. its emissions mitigation technology in its mills. 28 Opening Doors to China Opening Doors to China 29

“The penetration of certain goods may be high in China’s more economically developed regions, but plenty of consumer-conversion opportunities remain in less developed ones.” McKinsey 2011 Annual Chinese Consumer report

How will we grow science collaborations It’s believed this province is a good fit with with China? Maori businesses both on a sector level (both are Te Puni KŌkiri strong in tourism, fisheries, animal husbandry, We will use the jointly-funded New Zealand horticulture, and education) and culturally A number of high-level Māori business Comer says both cultures value meeting China Strategic Research Alliance to (Guizhou is home to large ethnic communities). delegations have helped introduce “kanohi ki te kanohi” (face to face). “There facilitate more substantive bilateral successful and innovative Māori to the is a strong cultural empathy and the Guangzhou also offers potential as a hub research collaboration. potential of China. measured and respectful way in which for Māori commerce. A small Māori business Māori firms conduct business in China is The Alliance will nurture research opportunities, delegation has recently visited Guizhou and In September 2010, the Minister of acknowledged and recognised.” conduct research and commercialise research. Guangzhou, with Te Puni Kōkiri (TPK), MFAT Māori Affairs Dr Pita Sharples led a very The Alliance will identify a small number of and NZTE officials. This was successful in further successful Māori business delegation Māori business assets align with large scale bilateral projects, supported by a Joint to Beijing, Guizhou, and Shanghai. exploring a number of emerging opportunities New Zealand’s export success, namely Funding Mechanism worth around $2 million in agriculture, education and tourism. It promoted cultural and business dairying, tourism, meat, wood and seafood. over three years. The Prime Minister’s Chief connections between Māori and Chinese. Comer says Māori have an opportunity to Science Advisor will continue to engage with How will we develop New Zealand’s value China's science leaders on new opportunities. Te Puni Kōkiri Chief Executive Leith Comer drive New Zealand exports and trade. proposition? says: “There are many similarities in culture New Zealand will also provide additional In China, the New Zealand brand conjures and customary practices between Māori Comer says Māori goods and services China-based science resourcing to help foster valuable associations, such as safe food and world- and Chinese. Building relationships based have a unique point of difference – that stronger links between New Zealand and beating tourism. This brand will be developed to on the sharing of cultures has proved to is tikanga Māori (such as kaitiakitanga, Chinese researchers. This would ideally be tell the New Zealand story for other specific key be very effective at opening doors for kotahitanga, whanaungatanga) – which accompanied by significant investment in sectors in China. A common set of messages is commercial engagement.” is inherent to Māori goods and services, bilateral science projects. required for NZ Inc to use in engagement with and Māori ways of doing business. China so that the value proposition is clear. Similarities include a values-based Supporting the goals: New Zealand’s approach to business, the importance “This is an under-leveraged global value value proposition Existing New Zealand and Māori brands will of building strong relationships and an proposition, not only for the Māori be protected. intergenerational perspective when Achieving the strategy’s goals requires better economy but for New Zealand. Overseas considering investment. New Zealand branding in China. We need TPK is working with NZTE and MFAT to focus markets are increasingly responsive to cultural distinctiveness such as Māori China to understand the unique opportunities on south/west China, to tap into opportunities In 2011, Comer returned to China with arising from collaboration with a smart, lean, for Māori businesses. a delegation of senior Māori leaders, branding. Branding is vital to tell the story innovative nation like New Zealand. We also visiting Guizhou, the cities of Guangzhou of the product/service, to explain its Ways to build knowledge of China in need more Kiwis who are literate in China’s and Shenzhen and Hong Kong. This visit whakapapa – this adds value and creates New Zealand will be explored. This is important languages and culture. progressed a number of Māori business a niche product/service.” to help New Zealanders feel more comfortable projects and further strengthened Maori culture offers a point of difference which with engagement with China and are equipped Comer says a number of successful Māori relationships between Māori and China. benefits New Zealand companies offshore. In to succeed, and to ensure New Zealand is a exporters are paving the way for other 2010, Maori Affairs Minister Pita Sharples visited welcoming place for Chinese business people, www.tpk.govt.nz Māori enterprises. the large and fast-growing province of Guizhou. migrants, investors and tourists. “China could represent... of the world’s 35% total growth… in GDP over the coming four years. This growth will raise disposable incomes to an extent never before seen in any other market anywhere – pulling tens of millions of households into the middle class and beyond.” Boston Consulting Group Opening Doors to China 33

Doing Business in CHINA

Most New Zealand business leaders are well aware of the potential in China, but are less confident of how to enter and conduct business in the market.

Some are paralysed by the scale of a market where information about preparing for China. a government housing project involves building However, here are just a few tips: 36 million homes over four years. China is a far cry from the domestic New Zealand market – it is • Relationships are vital for success and, in spite 36 times the size of New Zealand, has a population of what you may be told, genuine relationships over 300 times larger and a growth rate that sees can’t be bought. Foreigners should create their its economy double every seven years. own Guanxi (networks). Chinese will usually prefer to be introduced to you by a trusted (ie The reality is China is several large not paid) go-between. Although the issue of regional markets and many niche and relationship-building is sometimes overstated, micro-niche markets. Compartmentalising you must invest in building durable the market makes China more accessible relationships. Actively seek ways to deepen to New Zealand businesses. and broaden your network.

• Seek local advice and lots of it. Then, “Many companies have bet high stakes in always ‘calibrate’ that local advice using your own experience, personal instincts China only to realise disappointing returns, and best judgment. often because of the complexity of China’s • Ask lots of questions and seek clarification. Never assume there is mutual understanding. markets.” Boston Consulting Group Leave nothing to doubt, interpretation or speculation. Clearly summarise While there are difficulties in doing business in understandings and expectations in writing. China, companies already in China see problems • Be realistic. While there are potentially huge as fewer in number and of lesser importance gains to be made, there is no longer any low- than those looking at China from New Zealand. hanging fruit. China will require hard work The decision to manufacture in China shouldn’t with less certainty of significant gains. be made to chase cost reductions. As labour • Be patient. Getting started in China will rates rise swiftly, along with tax rates and other be time-consuming and take significant compliance costs, commentators advise a move into Chinese manufacturing should be based on resources. Don’t expect Kiwi efficiency other factors, such as proximity to the market, and overnight results. Success is unlikely scale, lead time and quality. to come quickly or easily. It is a costly and unfortunately common mistake to assume New Zealand Trade and Enterprise’s website you will seal a deal or come anywhere close – www.nzte.govt.nz – has a vast array of to it on your first visit to China. Clockwise from top left: Bridge at night in Shanghai, Chinese student, Chinese lanterns, fresh fruit and vegetable market. 34 Opening Doors to China Opening Doors to China 35

Top FIVE business tips – John Cochrane

New Zealand’s trade commissioner to wins the contract more often than not, China, John Cochrane, spent several even if they are more expensive, and the years operating in China with successful Chinese are unlikely to trust someone “Asian growth is an undeniable, inexorable, megatrend New Zealand business Commtest. Here, who is barely known or rarely seen. he summarises his five top tips for building that is fundamentally and permanently changing the a base in China: tip number three face of this world.” Service Success In Asia report, Victoria University Protect your intellectual property. tip number one and Ministry of Science and Innovation • It is easier, faster and cheaper than Do not enter China for a one-off deal, no you probably think. matter how appealing such a deal appears. • Local decision-making can drag on ‘forever’, Preparing for China • This won’t stop all IP problems, but • You must be in China for the long game. but in the end the action happens very without legal protection you are truly quickly, so expect spurts of frantic activity China’s markets are very price sensitive. • Negotiations surrounding lucrative inviting IP problems. after long periods of what appears to be You need to have done the research to one-off deals and the adjacent resource validate the potential and the investment. drain on your company can be enormous. tip number four ‘analysis paralysis’. The Chinese are experts at the game of Be prepared to re-create and re-engineer • Press hard for periodic metrics of progress. As with other markets, breaking into China out-lasting the opponent. your original entry strategy. You must measure progress, not just activity. requires considerable funds. China is full of hidden costs relating to language and tip number two • The wisdom gained from the market • Accept contradictions and last-minute cultural issues, the time you need to spend entry experience will strengthen your Don’t assume you will be able to changes without frustration. These are building relationships and intellectual long-term strategy. successfully run your China operation from an expected and accepted part of doing property protection. home. You must make a total commitment business in China. tip number five Think hard and seek advice about whether to local presence – go in boots and all! At • Be sociable. The real deals are done outside China is right for your business. If China the very least, appoint a permanent China Recognise that China will not change to suit the office and outside normal business hours. wants your product, you’ll be there tomorrow. relationship person (bridge person) as your preferred method or approach. China soon as possible. has spent 5,000 years as a non-egalitarian society. The Chinese are not like us, and • This person must love and embrace the they don’t want to be, so get over it! China Business Training China challenge. • Chinese business is strongly hierarchical, • This person should be comfortable with layers of complex loyalties to Over 400 people have taken part in NZTE’s While China is an exciting place to do spending lots of time in China. manage and navigate. China Business Training aimed at helping business it requires focus and commitment businesses crack China and succeed. to succeed. New Zealand businesses are • They could be Kiwi or Chinese national, • Family loyalty comes first, then true well regarded and respected in China, but but in either case they must be culturally Participants came from a variety of ‘friends’, then the ‘village’, and strangers a gap in knowledge and understanding adaptable. are on the far outside. companies and gave the course a 100 can be a stumbling block for some. percent approval rating, with some • Their presence is vital as new competitors • First-time suppliers are not considered companies booking customised It’s critical that businesses learn from – foreign and domestic – can appear peers of their desired customers. sessions for staff. those who have in-depth knowledge and ‘overnight’. Nurture and prune – tend the Be prepared to approach potential experience in the market. NZTE is looking garden – of personal relationships. customers as a subordinate would. The training offers extensive information at ways of developing the course for firms on cultural aspects of business conduct, • Recognise that anonymity and absence • Pay genuine respect to protocol and venturing into or already doing business key regulations relevant to New Zealand are the deadly silent assassins of both tradition. A begrudging or patronising in China. relationships and deals. In complex approach will be easily detected by businesses and examples of how to corporate deals, the most trusted supplier the Chinese. overcome problems encountered. www.nzte.govt.nz 36 Opening Doors to China Opening Doors to China 37

"As Chinese consumers become more demanding about food safety, the competitive advantage of international manufacturers, and their ability to charge higher POPULATION & GDP

prices can only increase." Euromonitor Population figures are for 2010. GDP (Gross domestic product) is per capita. Liaoning Population 43,746 GDP 6,578

Inner Mongolia Beijing Population 24,706 Population 19,612 If China is ambivalent about your product, you’ll On the ground GDP 7,427 GDP 11,060 be hard pressed to make the market profitable. Tianjin While the use of English in business and trade Population 12,938 A business visa is recommended for travel to GDP 11,084 circles is increasingly common, you should Jiangsu China and in most cases you will need a letter Population 78,660 have a Mandarin-speaker or paid Mainland Shandong of invitation from a China-based company to GDP 8,187 Population 95,793 Chinese interpreter on your team. You must Zhejiang GDP 6,478 get one. understand exactly what is being said, and Population 54,427 GDP 7,876 Shanghai If you are going to be a regular visitor to China, meant, particularly in negotiations. Population 23,019 Guangdong GDP 11,540 it will pay to get an APEC Business Travel Population 104,303 A qualified interpreter will cost $100-$200 GDP 6,864 Fujian Card which provides accredited business Population 36,894 a day. They are more expensive (and usually GDP 6,127 people with streamlined access to better) in the main cities. In Beijing or Shanghai Hong Kong participating APEC countries (including Population 7,097 a good simultaneous interpreter (one who GDP 11,540 China). Go to www.dol.govt.nz to apply. interprets at the same time as you or your Although China spans five time zones, there Chinese counterpart speaks) can cost about is only one standard time – Beijing Time. $2,000 a day. Source: Chinese National Bureau of Statistics 2010, currency in US dollars (map is of China customs territory) New Zealand is four hours ahead of Beijing Take the time to learn a little Mandarin before time, or five hours ahead during New Zealand you go – it will go a long way towards impressing daylight saving. There is no daylight saving your hosts. in China. New Zealand Central, Shanghai You may be met on arrival at the airport or at Make sure as many of your meetings as possible New Zealand Central is a world-class is by invitation only to guests of the the first meeting by the main participant on the are prearranged, you have addresses for the business centre in Shanghai that offers host organisation. Chinese side, with other participants following meetings and you have information on the people a range of services to New Zealand in descending order of seniority. Businesses can take advantage of informal you are meeting with. Reconfirm meetings a day companies wishing to explore or expand and formal meeting rooms, seminar, in advance, get a map to the company or office on opportunities in China. Greeting ceremonies may also take place at conference and short-term office space, you are visiting and have the address written meeting venues or restaurants. Sometimes The facility was set up by NZTE as a and enjoy silver service dining for up to in Chinese characters for the driver. people will stand up when being introduced. showcase for New Zealand and as a facility 60 people. While Chinese generally prefer to be formally When meeting your Chinese hosts, the most for doing business in the world’s fastest Client packages are available to suit both introduced to someone new, cold calling senior person in your delegation should be growing market. frequent and casual visitors. Applicants (self-introduction) is becoming more common. first in the reception line. Others should must be New Zealand registered If you decide to make a cold call, it’s useful to The venue has a range of rooms to suit follow in order of seniority. Sort this out companies, sponsored by New Zealand first contact the company in writing – both in different business needs, whether it is before the meeting. registered companies or be allies of NZTE, Chinese and English – outlining the reason a wine tasting, exhibition, seminar, gala and agree to terms and conditions of use. you would like to meet. Be flexible and don’t be Your interpreter should stay close to the head dinner or product launch. Attendance at surprised if last-minute changes take place or of the line to introduce your most senior person. New Zealand Central events and functions www.nzte.govt.nz meetings are cancelled. Those greeted should move down the line Opening Doors to China 39

shaking hands, without pausing too long Try to bring a gift that represents New Zealand Detail from the Temple of Heaven for conversation. or your company. Explain its meaning. in Beijing (left), the Beijing New Zealand wine and art are popular, as are Shaking hands is now the standard form of National Aquatic Centre (right). products made with paua shell or Omega 3. greeting in China. Always shake hands – a short, not too firm handshake is the norm – with the Generally, formal dress is a sign of respect. Danny Chan most senior person first. It’s also the safest option if you’re not sure what to wear. For formal business in China, Danny Chan is a businessman and third years, so you will need patience. Business cards (called ming pian) are essential conservative suits are the norm for men and generation New Zealand Chinese. “The Chinese tend to assess you first and so have a good supply printed in English on take their time. It’s a different mentality. one side and Chinese on the other. Check that women. Ties are commonly worn. As a 13-year-old, he had his first brush you can use your company name in China and It’s not that they are sceptical. They just Most importantly: whatever you do in China, with international business as a Chinese translate your name, job title, company name, don’t like to go into business with people seek quality advice. Locate people who can interpreter for New Zealand businesses. they don’t know.” special qualifications and your professional title. help you tell the difference between a business Now 62, he has had almost 50 years • Advance your relationship, and potentially Gifts and gift-giving are important. strategy and a custom. experience in business between fast-track your timeline for that crucial New Zealand and China – from interpreter relationship-building, by organising an Gallagher Security to company chairman. He has been a introduction or recommendation from a director of Airways Corporation and mutual associate. “They will check you out Peter Francis, Asia Pacific and Middle East the New Zealand office has quality AgResearch and is a director of many by talking to others. That will shorten the regional manager for Gallagher Security, information about local developments companies including Abano, ASPEQ and timeframe for consideration as a friend.” says it is vital to build a near-constant and needs, Francis says. Academic Colleges Group. presence in-market when following the • Don’t start talking business as soon as you Gallagher Security is enjoying oft-repeated advice about commitment He is chairman of Flowerzone International sit down. “They like to talk about other compounding growth of 10 percent per to relationship-building in China. Limited, one of New Zealand’s largest things. By talking they can assess your annum in China, selling its software-driven exporters of fresh cut flowers. In the personality and whether you are genuine. His experienced team in Gallagher security management systems into large 1980s, he ran the Taiwan office of Fidelity Quite often in China the deal is done at Security’s regional office in Hong Kong organisations such as banks, airports Investments of USA, the largest fund the end of the meal, after a few drinks." works to a structured schedule of meetings and universities. management company in the world. He is • Pay top money for a top translator – one in key markets such as Mainland China. fluent in Mandarin, Cantonese and English. Francis says each trip to the market should who can not only translate words but can Every week, most key clients across China take full advantage of the 24/7 nature of With this background, Chan has had ample provide context and meaning. “Don’t use will see one of the Gallagher team. Chinese business. Be prepared to meet opportunity to observe New Zealanders a mate’s daughter. Get an experienced prospective business associates in social “People are seeing more and more of conducting business in China. These are his translator.” settings on evenings and weekends. us. They keep seeing people from top tips for new entrants to the market: • Make the translator’s job easier by not Gallagher. You need to keep going “Put some time and effort into it. Don’t just • You must go to China. using slang and acronyms, talking slowly, into China continually.” go up there on Monday morning and come and keeping your sentences concise and back on Friday.” • Get to know the people you hope to do simple. Try to avoid the Kiwi habit of Not only do these visits advance business with. This may take up to five rambling on. relationships, but they also help ensure www.gallagher.co.nz 40 Opening Doors to China SYNLAIT

Tony McKenna travels to China on average McKenna says New Zealand’s relative every six weeks, for 10 days. As the head inexperience in marketing sophisticated of Synlait Milk’s market and product dairy products compared with many development, he’s charged with bedding European competitors is offset by down the company’s move into the giant New Zealand’s formidable reputation Chinese infant formula market. in commodities and the valued ‘100% Pure’ branding. Canterbury-based dairy company Synlait Milk is 51 percent owned by Chinese McKenna says smart Kiwi businesses will company Bright Dairies. The minority approach potential Chinese partners with partner, Synlait Limited, includes the Kiwi a sharp focus on what they can offer that founders of the dairy company. is special. “The Chinese are incredibly business Synlait Milk’s 130 dairy farmer suppliers savvy. They understand their markets and average 1000 cows each – large they know what is required to make their New Zealand dairy herds producing quality business successful. They are very price milk for products exported to over 40 focused. You have to bring something to countries. Late in 2011, Synlait opened a the table that’s unique, that they want $100m infant formula factory in Rakaia to and which gives them an edge.” capture the growing demand for quality infant formula in China. www.synlait.com

CTC Aviation Training (NZ) Ltd

Whatever your industry, CTC chief executive While China accounts for about 10 percent Ian Calvert says those contemplating China of CTC’s earnings, the market consumes need to move now. “It is a huge market about 40 percent of Calvert’s time. This you can’t afford to ignore because your includes frequent trips to establish solid competitors will get in. It’s an opportunity relationships. “There is no way around it. Sources which won’t come along again.” You can’t do it by phone. You can’t do it • New Zealand Trade and Enterprise • World Trade Atlas by email. It’s not somewhere you can go • Ministry of Science and Innovation CTC Aviation Training (NZ) Ltd is a • McKinsey Global Institute privately-owned pilot training company. in quickly, get a deal, and walk away and • Statistics New Zealand • Boston Consulting Group it will look after itself.” Its UK-based parent group has five • Tourism New Zealand • International Monetary Fund subsidiaries worldwide, each of which has Calvert’s top tip for business leaders • Wine Intelligence a speciality area from entry-level pilot • Euromonitor wanting to engage with China is to utilise • Chinese National Bureau of Statistics training to airline captain qualifications. • Victoria University New Zealand’s Chinese-based resources. CTC New Zealand’s specialty is initial • Ministry of Foreign Affairs and Trade training. It employs 73 staff, including He says Chinese are impressed when 45 instructors, and has around 200 government officials, such as New Zealand Useful links predominantly international students ambassadors or trade commissioners, are brought to banquets or meetings to each year. • China Customs, • General Administration of Quality Supervision, support a New Zealand company’s bid. english.customs.gov.cn/publish/portal191/ Inspection and Quarantine (AQSIQ), Calvert says two factors are driving “It has a major impact. If you are respected http://english.aqsiq.gov.cn/ interest from China: the exploding middle by your own government, the Chinese • New Zealand – China Free Trade Agreement, class and resultant travel and leisure www.chinafta.govt.nz • Investment Promotion Agency, www.fdi.gov.cn feel that you are someone who should be activities, plus the lack of infrastructure listened to.” • Ministry of Commerce, • China Council for the Promotion of International for training pilots. Despite its size, China http://english.mofcom.gov.cn/ Trade, http://www.bizchinanow.com/ lacks aircraft, instructors and maintenance Calvert says he has also made good use • Chinese Embassy (Wellington), capability to establish flight instruction of aviation trade missions to make contacts • State Administration of Foreign Exchange, www.safe.gov.cn/model_safe_en/ www.chinaembassy.org.nz/eng capability. “It’s inevitable that China will and establish foundation relationships develop in this area. We want to establish with potential partners. • State Administration of Industry and Commerce, • Asia New Zealand Foundation, such a strong relationship that when they www.saic.gov.cn/english/Home/ www.asianz.org.nz do, we will be part of it.” www.ctcaviation.com • Bank of China, www.bank-of-china.com/en/index.html For more information on NZ Inc Strategies visit www.mfat.govt.nz

For more information on doing business in China visit www.nzte.govt.nz

For travel tips visit www.safetravel.govt.nz

© Copyright New Zealand Trade and Enterprise (NZTE) and Ministry of Foreign Affairs and Trade (MFAT) 2012.

No part of this publication may be distributed or copied for any commercial purpose nor incorporated in any work or publications (whether in hard copy, electronic or any other form) without the prior written consent of NZTE or MFAT.

DISCLAIMER: The information in this publication is general and by no way of forecast. It was prepared by NZTE and MFAT from publicly available sources in 2012. NZTE and MFAT accept no liability for the information contained within this report or for any reliance placed on it.

February 2012