China Business: All roads lead to China...

The first five years of the FTA have delivered some significant learnings, says Michael Barnett.

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

Since the signing of New Zealand's Free Trade Agreement with China, the opportunity to boost our trade with an economy growing mostly in double digits has been too attractive to ignore.

Even in the cloudy moments of that relationship, when Fonterra's botulism incident threatened New Zealand's brand values and representation, both countries' leaders issued the aspirational challenge of lifting trade between China and New Zealand from $20 billion annually to $30 billion.

There was no "how" we might do this, but obviously there was a continued dependency on commodities and growing tourism.

For other than the large commodity sectors, the opportunity to participate in this export potential of China is fraught with risk. As we review the first five years of our Free Trade Agreement relationship, New Zealand businesses might like to consider how they want to do business for the next five years and understand what success might look like.

Though New Zealand may have a formal China strategy, the first five years of the China relationship has delivered some significant learnings for small and medium enterprises (SMEs).

My top three learnings look like this:

• We are culturally different

This does not mean that one is right or wrong, but it does mean we do things and interpret things differently. New Zealand's small and medium businesses want to take their innovation and creativity to the world in the form of new products, services and technologies. Our Chinese partners, with a belief in self-strengthening, will look for control of knowledge and supply rights to a huge market and may have a different view to the ownership and rights to innovation, so we need to acknowledge and respond to this.

New Zealanders may believe that free trade is exactly that, but as many sectors have already discovered, the introduction of special accreditation in order to access the China market can be restrictive, as to who does export into that market and who owns the supply chain.

A small or medium enterprise in New Zealand may well believe that a Government-negotiated Free Trade Agreement will leave no exporter worse off than their local competitors, but this is not so. For the future, we need all our government agencies to be enablers of access, not simply regulators in a partnership for free trade.

• A trusting relationship

The challenge for all relationships is how you approach this critical value. Should you trust until you know you shouldn't, or don't trust until you know you should?

For business this is a part of the risk in doing business anywhere in the world, including China. Small and medium businesses are not rich in resources, so they need to be able to prioritise who they will have relationships with and ensure that these relationships offer the richness in contacts and networks needed to succeed in a market.

Advisors, bankers, shippers, lawyers, copyright and supply chains on the home side are all institutions you trust and have built relationships with. We speak the same language, have lived in the same communities and understand their values.

We need to remember this when we start making judgments on who we will establish relationships with and why. Accept there is a cultural difference. We will then know the interpretation we apply to ownership of property, ideas or intelligence may well be interpreted differently by an intended partner.

Should you trust? Of course you should, but remember the process you unwittingly may have gone through to trust your partners at home and then determine when.

• Take your time

For a small and medium business entering China there can be no rush. There is a need to visit more than once - to understand the region where you may be doing business; to learn how the supply chain works; who the competition is; how they operate and price; to introduce you - who you are, what your strategy is and how you intend to operate in this huge market of opportunity. It all takes time and has a cost - you need to be able to sustain this.

Once you are on this road to China try not to be distracted by the many opportunities you will see. Stay focused on your core business and do not be seduced into committing beyond your emotional and financial capacity. You will never fully understand China or the Chinese the way you understand New Zealand and the people in business here, but you do bring the uniqueness of a Western education and New Zealand values.

You can make these a competitive advantage - enjoy the journey.

• Michael Barnett is chief executive of the Auckland Chamber of Commerce and Industry.