Colum Rice: How to make a good relationship great

4 comments
We do not have sufficient businesses with the scale to take on the China challenge, but we cannot ignore the gravitational shift of the global economy towards China. Photo / Supplied
We do not have sufficient businesses with the scale to take on the China challenge, but we cannot ignore the gravitational shift of the global economy towards China. Photo / Supplied

What the global financial crisis (GFC) has shown us is that, if a country wants to enjoy the schools, hospitals, education, welfare programmes and lifestyle to which first world countries aspire then the country needs to pay their way and earn these privileges.

We pay our way through successful trade and investment.

At some point, in the near future, China will become the largest economy in the world, driven by its significantly higher growth rate.

Over many decades, New Zealand has built a political relationship with China which is the envy of many of our trading partners.

Physically we are closer to China than Europe and the US. There are many other factors in our favour. While trade between the countries has blossomed by comparison, investment has struggled, both inbound into New Zealand and outbound to China.

Trade is critical. The fact we have survived the GFC far better than most countries is in large part due to the strength of the Chinese economy and New Zealand's strong position in that market.

Yet, trade is temporary but investment is permanent. To perpetuate the economic relationship and ties with China, as a country, we need to grow investment to reflect the strength of the trading relationship.

For years, there has been focus on "inbound" or "outbound" investment. We can now christen a new category of "rebound".

The best example is the investment by Haier into Fisher & Paykel Appliances. A New Zealand-based business now has full access to Haier's sales and distribution network, not just in China, but globally. Combining market access with vastly improved access to capital has unshackled F&P.

Though it may be preferable for New Zealanders to have retained an equity stake, we can still benefit enormously as F&P brings high value design and research jobs and experience of operating in China and other global markets to New Zealand.

Fonterra aside, New Zealand does not have companies with the scale and reach of Haier. The size of the New Zealand economy makes it challenging to grow companies with global scale.

Our firm recently hosted a forum for senior Chinese business people; one of the key themes discussed was how New Zealand can be relevant to China? I believe we can be relevant, but it is up to us to make this happen. China's economic power and growing financial wealth are obvious and around the globe companies and their respective governments are looking to strengthen their trade and investment links to China.

If we do not make and keep New Zealand relevant, then the strength of our current position will be eroded.

So how does New Zealand do this? Firstly, we must be welcoming of trade and investment with China and appreciate how important our actions now are for our economic wellbeing of future generations.

If we are not prepared to be genuinely welcoming then we should stop there, but in doing so we need to understand as a country the consequences that flow from that decision. Not just immediate short-term consequences, but the long-term impact on our economy.

Secondly, we need to be more proactive and co-ordinate; be prepared to select those with potential to succeed and back them. This requires greater collaboration between government and businesses.

We do not have sufficient businesses with the scale to take on the China challenge, but we cannot ignore the gravitational shift of the global economy towards China. To overcome the structural weakness from lack of scale, we need to examine how New Zealand can be made relevant to China.

What, beyond milk powder, logs and commodities do we have that can benefit China, and what does China need that we can supply?

Energy? Design? Brands?

What smart technologies sit within our companies, universities and CRIs could be supercharged through access to Chinese capital and the Chinese market.

Once opportunities are identified, the challenge then is doing intelligent deals, including joint ventures and partnering with Chinese organisations, deals that align our long-term interests.

The Partnership Forum is an opportunity for us to clearly signal to China not only do we value the historical partnership but we have ambition for the future, and how we want that ambition to be fulfilled.

Colum Rice is a PwC New Zealand Partner and China Sector Leader.

- NZ Herald

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n2 at 19 Sep 2014 06:22:33 Processing Time: 1515ms