Asia view: In China, try not to bite the wax tadpole

By VAUGHAN YARWOOD

In March, Carter Holt Harvey announced a courageous foray into China. It had taken a 25 per cent holding in China-based paper distributor Pacific Millennium Paper. Its parent, International Paper, had taken an equal stake.

The move was brave because China has been something of a burial ground for antipodean ventures. One of the worst involves brewer Lion Nathan - yet another victim of big numbers - which last November wrote down its China businesses by $A120 million, citing overcapacity in the market. Since entering China in 1995, it has failed to make a profit there and the prognosis is grim.

Carter Holt may do better.

Buying into an established operation poses fewer risks than launching a start-up, and for a commodity producer control over distribution is a big plus in a country as complex as China.

The right mental map also helps.

In many ways, it is better to view China not as a country but as a continent - a cluster of distinct regions totalling 9.5 million sq km.

These regions are separated by culture, climate, dialect and differing levels of economic development. The net binding them is a weave of shared history, common written language, centralised authoritarian rule and, lately, intense, often strident, nationalism.

The population falls into two groups: a vast rural population of 900 million with an income of under $US100 a year, and a largely east coast band of 400 million with a per capita income of about $US800 a year.

The distinction is crucial. China is not, and never will be, anything like a single market. Nor will doing business there ever be easy.

Its entry into the World Trade Organisation will reduce tariffs, improve market access and introduce greater legal transparency. But foreign companies will continue to draw the short straw against state-owned-enterprises and the need for patience with central bureaucracy, plus local government connections, will continue for some time.

Europe's largest retailer, Carrefour, discovered this to its cost in February when it faced having to close its 27 Chinese megastores - a penalty for short-circuiting bureaucratic red tape when it arrived in China six years ago.

Of course, as with any business environment, change also throws up fresh opportunities for streetwise companies. China's 10th five-year plan (2001-2005), for example, highlights environmental protection as an area for likely development and investment. Trade New Zealand has already identified CNG equipment, wastewater treatment, eco-friendly building products and consultancy as opportunities.

China is also targeting transportation and communications, and has made rapid progress modernising its telecommunications infrastructure.

The number of cellphone users almost doubled from 43 million in 1999 to 85 million last year. In the same period, dial-up internet accounts tripled to 9 million. Some 3000 companies now offer internet services which can be used to get news and market data, research products, advertise and undertake online transactions.

A number of internet-based trade portals give foreign buyers access to Chinese products, among them Alibaba.com, GlobalSources.com and MeetChina.com. Some offer a complete business package, including verification of supplier competence, financing, insurance, shipping, customs clearance and integration with the buyer's inventory system.

The internet also offers an answer of sorts to China's snaggy language hurdle with Netat.net, a snappy translation site.

The free service is said to be able (after a fashion) to translate websites and e-mail in English, Japanese, Chinese traditional and Chinese simplified written languages.

When heavyweight Coca-Cola entered the Chinese market, Netat.net did not exist. Coca-Cola, which now leads the Chinese soft-drink market, initially had trouble writing the product's name in Chinese while keeping the pronunciation.

The first attempt is said to have translated to "bite the wax tadpole." Now it effervesces with the new moniker "may your mouth rejoice."

* Vaughan Yarwood can be contacted at hiero@ihug.co.nz