China strategist Alan Carroll says New Zealand businesses need to get on board with the big commercial game in China
KEY POINTS:
The New Zealand FTA is big news in China, Alan Carroll said in Beijing recently. The FTA will be a magnet for foreign companies who want to leverage New Zealand's increased access to the vast China market.
"You've got a window others would die for," he said. "It's way ahead of where Australia got to on its own FTA negotiations, but you've got to get on and get that first-mover advantage.
New Zealand businesses are mere minnows compared with the big transnational foreign companies who have made a packet by plugging into the global value chains of the global technology manufacturing grid or, as Carroll characterises it, where the boxes are made.
His own country, Australia, is experiencing a boom as Chinas sucks in resources: minerals and natural gas to feed its rapid industrialisation. "We're the quarry, you're the farm," he says, highlighting the fact that New Zealand's high-quality protein foods will be in demand as China's middle class grows.
The key for Kiwi businesspeople wanting to leverage the FTA is to understand China is now intent on building a science innovation grid which will ultimately transform the world's largest global industries: health (red), energy (white) and agriculture (green).
He singles out companies like Fonterra, Sealord and The Warehouse as best-of-breed firms who have had major successes in China. He notes:
* New Zealand businesses need to realise China is not a single homogenous market but multiple markets where they can find valuable niches.
* The value equation for New Zealand is in agribusiness and genomics (as long as political objections and regulations don't cloud commercial judgment)
Carroll points to eight global big trends (and bends) that New Zealand businesses should study before figuring out how much of their business to devote to China.
* Ageing: The average age for Chinese will be 44 by 2050. If you think that's positively sclerotic, think again. In Europe, the average will be 55. Ageing populations could mean a shift in global power balances and also key consumer markets. China may not be the target, but other younger Asian markets;
* Refugees will be on the move. Increasingly they will seek better economic futures rather than refuge from political tyranny:
* Price stability will remain a fact of life in some areas as continuing global over-capacity and competitive pressures, combined with globalisation, keep prices down.
* The rise (re-emergence) of China will continue;
* The IT revolution will enter a new era as the falling costs of communication impacts;
* The biotechnology revolution will continue;
* There will be widespread water shortages;
* Plenty of conflict and imbalances as the US loses its pre-eminence as the hyper-power and religion become the new ideology and stateless actors drive conflict.
Carroll predicts that China will be at the forefront of several of the trends: ageing, price stability, China's rise and engagement and water shortage.
But per capita incomes will continue to grow; it will remain a destination for foreign direct investment and average import tariffs will also decline.
Even though China is huge, it accounts for more than one-third of global growth, he says. Its share of global GDP continues to rise and it is a force in commodity markets.
New Zealand's future is now inextricably bound to the effect China is having on the region and the world.
Carroll, executive director of China Access 2008, is running a joint-venture with Beijing Municipal Government's Investment Promotion Bureau to introduce $US1 billion of new foreign direct investment.
His business partner Andrew Gilkes ran a successful programme in Australia during the 2000 Olympics.
Their gruelling schedule in the run-up to the Olympics has already resulted in significant investments in some of the designated sectors: biotechnology, IT, telecommunications, electronics, energy and environmental protection and new materials.
But its not all dry, business stuff.
They're also promoting The Three Divas who will sing in Beijing during the Olympics.
