Experience in China gives NZ the edge

Merv Stark returned home to Auckland in 2001 to retire - but that was short lived. Picture / Martin Sykes

After 10 years of successfully doing business in Asia, New Zealander Merv Stark tried to come home and retire - fortunately he failed.

"I tried to retire ... but I got bored," he says.

As New Zealand Trade and Enterprise regional director for North Asia, Stark is the Government's man on the ground in China, but he is no bureaucrat. He worked with multinational cosmetics companies in Thailand and China through the 1990s.

At a time when the country was still something of a wild west economy and a graveyard for a number of big foreign investments, Stark established three manufacturing plants and more than 20 distribution operations throughout China.

Luckily, shortly after returning to the quiet life in Auckland in 2001, NZTE started the hunt for a North Asian representative with enough commercial expertise to inspire some nervous Kiwi companies.

Stark fitted the bill.

Now based in Hong Kong, he is dedicated to helping New Zealand companies emulate his success.

While his commercial experience - and contacts - are invaluable to New Zealand businesses looking to make their mark, being part of a Government agency has its advantages in China, he says.

As a Government agency NZTE can open doors that might not otherwise get opened. "In China the Government is really respected," Stark says. "If you say you are with the Government then people will take notice ... probably the reverse of this part of the world."

The Chinese are very receptive to New Zealanders, he says.

"We are perceived as people of integrity and people generally like working with us."

The biggest challenge is gaining the confidence of New Zealand companies - many of whom are daunted by stories of a complex bureaucracy, piracy of intellectual property and cultural misunderstanding.

The hangover from high profile failures - such as Lion Nathan's ill-fated attempt get the Chinese drinking Rheineck - still make some New Zealand companies wary, probably too wary. But companies such as Lion went in on their own.

The key to Chinese success is in finding a good partner, Stark says.

"It is not much different from going into any new market. It's about selection of partners, the ability to set up legal structure. We encourage that as the first consideration."

It was extremely important to pick your partner based on where you had identified a market for your product "not because you've got a friend or a cousin in one particular city who can help you".

Recruiting good management staff can be difficult but if you recruit somebody with a link to New Zealand they have a lot of loyalty, Stark says. There are a lot of links. There are people who had children educated here and it is prestigious to work for a foreign company.

"Generally speaking once you get good staff you can keep them."

NZTE has 65 staff in North Asia - including Japan, Taiwan and Korea - all but nine are local employees.

"There is fantastic staff loyalty. They are extremely passionate about New Zealand - more passionate about what we can offer than New Zealanders are."

The local staff get directly involved in helping New Zealand businesses make good contacts in China.

They will help with translation, and if a New Zealand company says it wants to meet five local companies NZTE staff will go out and meet those companies to determine if they are legitimate, and if there is potential for a workable partnership.

The theft of intellectual property is still an issue for companies setting up in China. It is vital to register brands and take the right advice in respect of legal structures to protect IP, Stark says. "Legislation is in place now for IP protection but effectiveness has a long way to go yet."

Despite some pitfalls China is changing rapidly. "When I first started going into China on behalf of the Thais it was really basic," Stark recalls. "When it came to establishing a factory you even had to train people how to use the toilets. ... But it has become very sophisticated very quickly."

Traditionally Chinese companies were family companies but now they are very entrepreneurial companies.

There are a lot of younger entrepreneurs emerging, he says.

"The younger generation - anyone from 45 down - has really captured the opportunities on offer."

But the capabilities that New Zealand has to offer are also changing all the time, Stark says.

For example, the education sector has suffered as the dollar has risen, prompting NZTE to look at how it markets the sector.

"Our emphasis is going to change from acting as a delivery agent for English language schools," Stark says.

"The emphasis is now on vocational training institutions - business to business, hospitality, tourism, aviation, marine, nursing - those sort of areas where we think New Zealand has capability and can try and go up the value chain for education."

By international standards New Zealand lacks capability only in size, he says. "New Zealand can never be a large manufacturer of anything. So we need to look at the possibility of transferring technology to these markets. In New Zealand we might be able to manufacture 10,000 widgets in a day, in China we could manufacture 10 million widgets in a day."

In the value chain manufacturing has the lowest profit point, Stark says. The margins are made at the R&D and marketing end.

"Look at what the US has done for the last 100 years - they've been basically exporting IP. We should be looking at ourselves almost like a Switzerland of Asia."

That means encouraging New Zealand companies to invest overseas, in manufacturing plants that can get them into third countries, he says.

One thing Stark is confident about is the future growth of the Chinese economy. "I just know that China is going to be the biggest economy in the world. The Asian economy is going to be integral to New Zealand survival. We have to become integrated with that economy. We will most probably never be an Asian country as such ... but we will be increasingly dependent with the emergence of China."