David Mahon: NZ needs to build on fledgling relationship

For New Zealand the latest recession has been a warning that the country must change in order to survive.

We cannot look solely to the developed markets of Europe and North America, or even to the impressive economic integration with Australia for the impetus for much needed change. We must seize the evident opportunities to do business with China facilitated by last year's free trade agreement.

So far, New Zealand companies are vacillating. Countries with much more to offer China are negotiating similar FTAs and the advantage of New Zealand's opportunity will diminish.

Trade with China has increased by 30 per cent in the past 12 months, but this has more to do with the fall in the value of the New Zealand dollar and the lowering of tariffs than any burst of entrepreneurialism. This trend needs to be consolidated and expanded to bring long-term diversity to our trade portfolio. China is not just somewhere to sell products; it is a platform on which New Zealand's economic future may be built.

As the world's economy recovers, there may be more focus on value than on raw growth and New Zealand can sell its technology and expertise as key agents in delivering that value.

Chinese companies in the food supply chain, shaken by melamine and other safety scandals, are looking for ways to reassure anxious customers that their products are safe. New Zealand has a reputation for being a country dedicated to food safety. The good reputation we enjoy was reinforced recently thanks to the courage of Fonterra China and the New Zealand Government in dealing with the melamine crisis.

New Zealand companies need to participate in the supply chain within China's borders where they can, even if it means managing the safe distribution of their products. New Zealand companies, whether they are selling lobster, kiwifruit, meat, wine, technology or education services have opportunities to etch the image of brand New Zealand firmly on the consciousness of the Chinese consumer. To do so they must be established in China itself.

Now is an excellent time to establish "brand New Zealand" in China. New Zealand is partially guaranteed natural neutrality by the very fact of its small size and geographical isolation. The challenge will be for New Zealand companies, who seldom think collaboratively, to build a brand as a collective national identity as a priority over individual company ambitions.

There is a role for Government to play in facilitating deeper integration with China. Some of the resources committed to trade promotion, financial assistance to New Zealand companies and even education might be redeployed to support commercial exchanges with Chinese companies. Managers willing to learn Chinese and who want to understand the workings of the Chinese economy could be placed in Chinese companies in second- and third-tier cities. As long as their New Zealand employers are prepared to pay part of the cost, and had cogent China strategies, New Zealand Government funds could be effectively used to subsidise such a scheme.

If our companies can see this recession as a catalyst for change they will not only survive, but will wake up to the fact that New Zealand can fulfil a different and even greater potential. Deeper engagement with engines of economic growth such as the Chinese economy would be a good start.

* David Mahon is managing director Mahon China and chairs the China Beachheads programme.