China goes flying into the future

It's like China has taken a jet flight and left the rest of the world behind, says Liu Feng. Photo / Supplied

The past few years have seen quite a few Chinese investment setbacks in New Zealand - the Crafar farms deal is a case in point. Some may jump to conclusions, arguing Chinese investors have had more than their fair share of the controversies. But it's not that simple.

Public opinions

Just as Chinese traditional wisdom has said for hundreds, or perhaps thousands, of years, word of mouth can do harm. Right now word of mouth worldwide is not particularly favourable to Chinese investors. It has cost them a fair chance to compete in overseas markets. Last year, China's telecommunication giant Huawei was blocked from bidding for multi-hundred million dollar communication infrastructure contracts in Australia on the grounds of national security concerns that sound plausible to me as appearing only in James Bond movies.

The West, particularly the United States, has been trumpeting the China threat for decades. As early as the mid 1990s, Cosco (China Ocean Shipping Company) was denied a terminal development project in a US West Coast port. Guess what happened then? Local newspapers spread fears that Cosco would install surveillance equipment on the gantry cranes, and would use them as missile launchers. Very imaginative, isn't it? Who could have conjured up such a conspiracy theory except those who have indeed conspired?

Obviously, against such an international backdrop, the New Zealand public and media can't possibly be immune. But to be fair, the trauma Shanghai Pengxin had to go through over the Crafar farms deal is the exception rather than the norm. New Zealand remains one of the more friendly territories for investors from China. We owe this to many politicians, past and present, government organisations and NGOs for their vision to think independently, and act in the best interests of New Zealand to engage with China more extensively and intensively.

The jet lag

It's wrong to blame the public for buying the China threat fantasy. The sudden rise of China does pose an element of intimidation and it's a big challenge to manage it. They say the same thing happened to Japanese investors here a couple of decades ago. But China is so much bigger, and it develops really fast, perhaps too fast. It's like China has taken a jet flight and left the rest of the world behind.

Just like jet lag, when you arrive in a place after a 10-hour flight, it's not your whole being that has arrived, but only your body. Your mind or your spirit is yet to catch up. Right now the world has this jet lag to deal with, too, and it needs to get used to a more developed China on its map. Before it has experienced what it's like to have a vastly different and powerful China around, it's just human instinct to remain cautious. Chinese investors need to understand this very well.

It's also up to China to show the rest of world what it would be like when we are developed and more powerful. We may cite the Zheng He's seven epic voyages in the early 15th century, during the early years of the Ming Dynasty when China was said to account for one third of the world's GDP. And loud may we sing the tune of a peaceful rise and harmonious world. But I don't think that's of any use. It's what we do that counts. Unfortunately, China is made up largely of peasants and their second or third generation offspring - we do not carry ourselves in the manner of the Victorian English upper class, not that we should. In fact, 150 years of wars and revolutions have thrown off many of the legacies of our history, let alone conserving the protocols of manner and conduct. And it does not help either if some of us understand copyright as the right to copy, which is correct, grammatically. So blame the English language. But note how many instances it takes for people to start stereotyping. It can be as few as one. That is jet lag part II. Our own spirit also has a catch-up to do. The faster this happens, the sooner the rest of world will be relieved of its concerns about China as a superpower.

It never rains but it downpours

That's also how I would describe Chinese overseas investments in recent years. We seem to move all at once for more or less the same (few) targets. Chinese investment was rarely heard of just 10-15 years ago. All of a sudden it's the talk of the town. A few years back, I was approached by numerous log buyers contemplating investment all the way upstream in forestry. But that did not last long, overnight it all went dead silent. Now it's the turn of the dairy farms.

We all know patience is gold. This is no less true for investment. But how can you afford to be patient when you move with the crowd? To avoid being with the swarm, you must have good vision and lots of surplus cash. The first is a rare virtue, and the second a luxury few businesses can afford.

In an ordinary business, money always goes after the opportunities of highest return, and resources such as forests and farmlands are long-term strategic assets that are not usually associated with high yields. It's not quite right for businesses to invest in such resources' assets. They are where funds should come in. Chinese investors certainly have some surplus cash. I just hope they have the vision to match their deep pockets.

The beach head

Overseas investment is like landing in a foreign territory. Before sending the landing craft out to the unknown, you need to carefully plot where you would like your beach head to be. Not all our investors have done that right.

Some have not been well counselled, as they go the cheap way by engaging a broker who earns his living by commissions. The investor has himself to blame if he places his beach head at the wrong location.

Spend money before you decide, not after

I know it's a strange comment, but I mean the money spent on consultants, lawyers and accounting firms.

It seems to me our Chinese investors don't always get the order right. Some have made up their minds before they engage consultants, lawyers and accountants. They always seem to come determined with a clear purpose. But when you have made up your mind, you are less open to different ideas. Money for consulting will then be less likely to be money well spent.

Liu Feng is managing director of Cosco (New Zealand) and chairman of the Chinese Chamber of Commerce in New Zealand since 2008. This is an abridged version of a speech he delivered in Auckland to mark the Chinese New Year.