China more than big numbers

BEIJING - New Zealand companies have had their share of business successes in China - but there are also tales of companies bleeding red ink before finally cutting their losses and running.

Kiwi Roger Dutton, who has been in China since 1992, said most companies that failed made the same mistakes over and over again.

"Number one is they don't do the basics. They don't do their market research," he said.

They got enticed quickly and easily by the smell of the numbers - China is, after all, home to 1.3 billion people with an economy worth $2.31 trillion.

"Sure the numbers are there, but there are a lot of poor people among those numbers and the wealthy Chinese do not chuck their money away.

"They are cautious about spending money. That is why they have got so much. In that respect, it is a very rich country. The average saving rate is 40 per cent."

Since opening up the economy 20 years ago, China has experienced staggering growth rates as it has moved from undeveloped to the world's sixth-largest economy.

It is New Zealand's fourth-largest trading partner, taking $1.74 billion in exports last year.

New Zealand is in the midst of negotiating the first free-trade deal with China and Prime Minister Helen Clark will discuss progress in those talks with Chinese President Hu Jintao and Premier Wen Jiabao when she visits this week.

Many early forays into China were joint ventures that ended in failure, with each side disenchanted with the other.

"The Chinese say, 'Same bed, different dreams'," Dutton said.

Another New Zealander said success was all about getting connections with Chinese partners right. "It's all about relationships, relationships, relationships," she said. And Dutton said many Westerners relied on good contracts and approvals from central Government, but the reality on the ground could be quite different.

"If you get the nod from central Government with regard to legislation, regulations, licences and encouragement, you may find there are roadblocks in the provinces."

Contract law was also not as strong as it was in the Western world.

Although many joint ventures in the past had had limited success, China was now allowing more wholly owned foreign companies to set up business and they appeared to be having more success. Matt Lewis, who runs two gyms in Beijing, said it was necessary to have the time and financial capital to ride out unforeseen events, such as the Sars illness that swept Asia early this decade.

"When Sars happened, they closed down the gyms for two months. We had no say, there was no right of appeal and no compensation. Luckily, people came back after the ban, but it was hard."

Another time, Government labourers cut off the gym's hot water supply.

"It took two weeks to get the water back on. They didn't care how long it took, because their jobs weren't on the line. No showers in a gym is not good, but we rode it out."

With the banking sector heavily protected, things taken for granted in New Zealand - automatic payments and co-operative bank staff - are virtually non-existent.

While different languages, different cultures and different rules could make life difficult for the outsider, Dutton said it was a case of now or never for the international world.

"Thirty years from now I am more worried for the rest of the world than I am for China," Dutton said.

- NZPA