New Zealand exporters struggling to meet Chinese demand for commodities such as milk powder, logs and lamb flaps, should look to market more premium products to an increasingly worldly, wealthy Chinese consumer, according to Shanghai-based economist Mary Boyd.
"Given the importance of agriculture in the domestic economy here and the success that New Zealand has had in promoting agricultural products in China it is really looking at what additional sales can be made and these may not actually come in the form of volume of goods," Boyd told BusinessDesk after a luncheon in Wellington hosted by the New Zealand China Council and the Asia NZ Foundation. "It could be in the form of a 'premiumisation' marketing effort and also extending the range of products that are sold from New Zealand,"
China's emerging middle class has helped drive New Zealand's terms of trade to a 40-year high as the nation gained favourable access to the world's second-largest economy following the 2008 Free Trade Agreement. China became New Zealand's top trading partner in November last year and annual two-way trade exceeded $20 billion for the first time in May, ahead of the government's 2015 target.
Last year, New Zealand overtook Russia as the biggest exporter of logs to China, shipments of lamb flaps used in Chinese hotpots have risen to a record and dairy farmers boosted production to benefit from record milk prices driven by Chinese demand for milk powder. Analysts have said New Zealand producers are struggling to increase volumes any further to meet "insatiable demand" from China.
The FTA with New Zealand, China's first with a developed country, was "a great accomplishment" and has left the nation well positioned with its access to market, said Boyd, who works for the Intelligence Unit of The Economist and has lived in China for more than 20 years. "The public image (of New Zealand) is a very favourable one. The 'clean green' campaigns have been very effective and certainly in terms of a tourist spot or as a source of clean, green wholesome ingredients, it has been very successful."