China prospects still rich

David Porter, Bay of Plenty Times Business Reporter

China still represents tremendous opportunities for New Zealand companies, despite signs of a recent economic slowdown, experts told a seminar organised by ExportNZ Bay of Plenty in Tauranga this week.

But exporters have to get their ducks in a row and be well prepared before entering the market. In particular, they need to pay close attention to intellectual property protection, where China is rapidly upgrading enforcability to further its own international development ambitions (see story below).

NZTE China business development adviser Mike Arand, who recently completed a term as trade commissioner in Shanghai, told the group of Bay of Plenty exporters that China's economic growth needed to be seen in its historic context.

While in the late 1970s and 1980s China experienced spectacular double-digit GDP growth, that was initially off a base of around RMB1trillion ($0.25trillion) annually.

However, the predicted growth in coming years of 6 to 7 per cent annually was off a RMB10trillion base. China was still on track to be the world's largest economy by 2026.

"China has continuing strong growth prospects, based on the rising middle class and ongoing urbanisation," he said. "On top of that, there's been quite a shift from an export-led economy to developing a country based on consumption. Much of the new employment growth is driven by services and the private sector is becoming a key driver of job creation."

In 1979 less than 19 per cent of the population lived in urban areas. That had now grown to around 54 per cent and was tracking to reach global developed-country levels of 75 per cent by 2020.

Today 112 Chinese cities had populations larger than New Zealand's, and every month, the equivalent of Auckland's population was moving into urban areas.

"There's an increase in consumers wanting a better lifestyle, better eating habits and better fitness," said Mr Arand.

There was also a heightened awareness of environmental issues, he said, noting that this year 138 cities in China banned the traditional Chinese New Year fireworks because of environmental concerns.

China continued to face massive environmental issues, with some 20 per cent of farmland estimated to be polluted. But there was much greater grass-roots awareness and concern about the problems, said Mr Arand.

Key factors for exporters included keeping a close eye on the development of e-commerce, which now represented 10 per cent of overall retail sales, with more than 600 million users online.

And more than 80 per cent of the population now accessed e-commerce through their mobiles, which was potentially disruptive of traditional supply chains.

WeChat, a Facebook/Twitter hybrid launched in 2011, was now the largest social media platform in China and used for everything from booking doctor's visits to paying for them.

"A lot of people no longer want your business card. They want to scan your QR code - it's a very powerful tool."

Key sectors for New Zealand would continue to include the food and beverage area to meet China's demand for more protein and healthier food, and food safety and traceability were major consumer concerns.

New Zealand has done really well in positioning itself. They are changing their life to adopt a more green lifestyle and that's a great opportunity for us

Ronnie Butt

There were also opportunities in agri-tech as China moved to improve food self-sufficiency.

"Clearly, based on sheer size and trends there's an opportunity to meet China's needs, which are very much aligned to the products and services we can supply."

However, Chinese middle-class consumers were very well informed, and relied strongly on social media for information because of a longstanding distrust of traditional media. They were well educated, travelled more, and for those in their 20s and 30s, had never really known hardship.

"They have a myriad of choices. China is tough. You need to be well prepared, able to persevere, find good partners, and have a real passion for being there."

ExportNZ BOP executive officer Melissa Conrad, who recently returned from an Asian trip which included time in China, said the organisation worked closely with the Tauranga City Council to drive international trade and economic development opportunities for exporters and the region.

"Exporters looking to explore China need to ensure they are ready for the challenges that come with such a large and complex market," she said.

"Because New Zealand products are highly trusted and sit as premium goods within China in most cases, there certainly is a demand which we can maximise. But for any potential exporter, there needs to be a lot of investment, resource and due diligence completed before undertaking the move into this market.

"China is not an easy export market for NZ companies - the culture, the language, the regulations and the business landscape is so different. Spending time up front to research, build focus and strategy, as well as spending time in the market, is key."

There is no specific data available on bilateral trade between China and the Bay of Plenty region. However, many Bay exporters are in the market and it is a key target for major local companies such as kiwifruit marketing entity Zespri, and for honey and health products company Comvita, which has been in Hong Kong and China for two decades.

Comvita general manager direct marketing Ronnie Butt, who was born in Hong Kong and worked in China before relocating to the Bay of Plenty this year, said Chinese consumers were changing rapidly.

"The chance to get more information has changed their life," he said.

"In the last 10 years the middle class group has grown very quickly. And instead of working long hours every day, they are now looking at their life differently. They are hoping to increase the happiness of their lives and improve their work-life balance."

That meant more travel inside and outside China, a desire for healthy foods to meet the traditional Chinese love for food, and increased demand for facial, beauty and health products.

"Living a healthy lifestyle is part of their self-fulfilment," said Mr Butt.

"New Zealand has done really well in positioning itself. They are changing their life to adopt a more green lifestyle and that's a great opportunity for us.

"Choose your focus market and dig deep," he said.