Liam Dann 's Opinion

Business editor of the NZ Herald

Liam Dann: NZ firms must lift game with China

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Since John Key's celebratory mission there in April, there have been a series of difficult and costly issues dogging New Zealand trade with China.
 Photo / APN
Since John Key's celebratory mission there in April, there have been a series of difficult and costly issues dogging New Zealand trade with China. Photo / APN

As we approach the fifth anniversary of the New Zealand-China free trade deal in October, it is starting to feel as if the honeymoon period is over.

Since John Key's celebratory mission there in April, there has been a series of difficult and costly issues dogging New Zealand trade with China.

We've had meat stuck at the border through some mysterious bureaucratic bungle, Zespri in trouble for its invoicing, and the former chairman of Fonterra warning about trusting the Chinese generally.

Sir Henry van der Heyden has apologised for his choice of words and explained his point wasn't to make a sweeping generalisation, but still, the timing was terrible.

We'd also just had Winston Peters' sounding off in his typical welcoming style.

Meanwhile it turns out we've had Chinese television news crews in New Zealand filming critical investigative stories about local infant formula exporters.

New Zealand has benefited hugely from its special relationship with China since 2008.

Exports have tripled and underpinned large chunks of the economy while traditional markets in the United States and Europe have been in recession. China is now our largest trading partner.

In the first quarter of this year, exports to China jumped 32 per cent to $2.3 billion and imports rose 2.8 per cent to $1.8 billion.

So before we panic it is worth remembering that those numbers reflect hundreds of business deals that are going right on a regular basis.

Most of them don't make the news. The handful that go wrong always do.

Stuffing things up in China is a long-established tradition in New Zealand business.

I've been covering New Zealand failures there for 15 years - back as far as Lion Nathan's ill-fated attempt to take over the Chinese beer market with Rheineck.

We are getting better at trading with China now and we won't see growth in trade slow any time soon.

But there is a new dynamic emerging in our relationship with the Chinese market and that is putting some pressure on New Zealand exporters.

It is being driven by growing consumer awareness amongst middle class Chinese.

Chinese consumers are demanding much greater scrutiny of the products they are sold - in particular food products.

They are becoming more savvy and literate about marketing and advertising.

Slapping a scenic New Zealand landscape on a product is no longer enough to assure them that what they are buying is guaranteed clean, green and healthy.

And why should it. In many cases, certainly for infant formula, New Zealand companies are selling product at enormous premium to the price in this country.

If we expect Chinese consumers to pay for quality then we should expect them to demand the same standards and guarantees as consumers in places like Europe.

There is a tendency to lay a lot of blame for New Zealand business failure in China on "cultural" differences.

There may be some traditional differences in the way we do business but then the same is said of Australia - where New Zealand business also has a long track record of failure.

When we talk about Australian cultural differences it is usually in admiring tones. They are tougher and more hard-nosed than us - they play to win at all costs.

In China we also face a hard-nosed business culture but we do so with the added issue of the language barrier.

How many senior executives and directors in New Zealand companies that export to China actually speak mandarin? How many are learning to speak it?

As long as the high-level strategic thinking on Chinese business deals is being done second hand via translators, New Zealand business will be at a disadvantage.

Platitudes and niceties are easily translated but the subtle nuances of expectation are not.

Face to face, from the politicians to the small businessmen and women, we talk a lot about friendship and special relationships between China and New Zealand.

But beneath that - it is still business. It is a tough game.

As the stakes rise in our trading relationship, complaining about "cultural differences" won't cut it. The onus is on New Zealand business to overcome those differences.

- NZ Herald

Liam Dann

Business editor of the NZ Herald

Liam Dann is the Business editor of the New Zealand Herald, overseeing all our business content in print and online. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy.

Read more by Liam Dann

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