China’s demographics are changing. Photo / 123rf
China will continue to be a pivotal market for New Zealand exporters in an ever-changing geopolitical landscape, but they have to be very canny.
The latest China Business Summit in Auckland had a theme of: “Seizing opportunities amid global uncertainties.”
New Zealand has a strong relationship and strong connections with China — its comprehensive free trade agreement, the first in the developed world, is now 17 years old — and is well-placed to grow its exports.
But China’s demographics are changing. There is an ageing population, with the number of seniors doubling to 400 million within 20 years. With overall population dropping slightly to 1.4 billion, there is an emerging shortage of working-age people and children want education.
There is a growing middle-class group of 500m people who are more discerning about the goods they consume. Overall, consumers now have an eye to value for money and don’t have the same loyalty to brands. And the fast-food sector is expanding.
China’s economy is still growing at 5%, and growth is taking place in the wider Tier 2 and 3 cities — there are 220 of them with population up to 10m.
New Zealand exporters need to do their homework and pick their “niche” markets carefully, and go deep rather than spreading themselves too wide. Words such as quality, provenance (grass-fed), innovation, digital marketing and fast-delivery spring to mind when sending goods to China.
Prime Minister Christopher Luxon pointed out, at the summit, that New Zealand’s exports are 0.3% of China’s total trade. “We are their 42nd or 43rd trading partner. If we can increase it to 0.4%, then we have grown our business by 25%.”
Luxon, who visited China last month, said “what struck me was their sheer energy, pace and relentless drive for innovation. We are a smart country that succeeds when connected to the world — which is more contested and more complex — and we can build scale and productivity to grow income and create jobs. Our target is to double exports by 2034.
“China is a vital part of the New Zealand economic story. New Zealand is known as a supplier of safe, high-quality food and beverage products, and is well positioned to meet the growing demand of China’s rapidly expanding and highly discerning middle class — especially in niches and premium segments of healthier lifestyle.
“That’s a fantastic opportunity.”
New Zealand’s exports to China have reached $21.5b — two-way trade is $39b — and China takes 31% of the primary sector exports. New Zealand supplies over half of the dairy products that China imports.
Todd McClay, Minister for Trade and Investment, told the summit that “if you look at our export profile, what excites me with the current environment in China is the absolute unbridled opportunities there.
“Every year if I can find a country four times the size of the New Zealand economy and you can buy and sell as much as you want — even at China’s present level of growth — then I say ‘great, let’s get there.
“We were the first country to have a full free trade agreement with China and we had the playing field to ourselves for a long time. That’s not the case now; everyone in the world is there and playing very aggressive catch-ups to New Zealand.
”Although their product is not as high quality and not as tasty as ours, but sometimes it’s not bad either, we can’t rest on our laurels. The Government and exporting companies need to be at their very best.”
McClay said in China there were half a billion younger consumers who were less traditional. They probably don’t cook as much. But they were interested in what is produced and where it comes from — for New Zealand, it’s a provenance story.
The Ministry for Primary Industries chief transformation officer, Jenny Cameron, who is moving to Beijing next year as the deputy director-general China relations, said the role of the food and fibre sector was “absolutely critical” in championing the Government’s economic growth goals.
“China is our No 1 market with $50m of trade a day. The ministry is committed to the trading relationship and regulatory requirements and keeping the certainty going for industry as they walk through those doors.”
Cameron said the ministry had established new trading conditions for New Zealand seafood and deer velvet, upgraded organic certification and established a food safety scholarship programme with Chinese officials.
It has signed an air freight agreement which provides an opportunity for cherries and seafood to get into the Chinese market fast — and there’s fresh chilled access rather than frozen.
After years of engagement, New Zealand has arranged a digital health certificate. This was part of the government’s digitisation goals, said Cameron.
“Can we deepen our trade technology with innovation and sophistication? Absolutely, yes. The pace and change of China mean we need to keep innovating. Dialogue is so important, not just for trade today but for tomorrow,” she said.
The latest New Zealand Business Roundtable in China (NZBRIC) outlook report, presented to the summit, showed 90% of respondents were optimistic about operating in China. The survey covered 60 companies working with China.
More than 60% of respondents reported a positive outlook for revenue potential in Tier 1 and 2 cities and 48% in Tier 3 cities. Optimism about profitability expectations and e-commerce opportunities also scored highly.
Local partnerships are gaining prominence with 23% of respondents identifying collaboration with Chinese firms as a key enabler of business success, and 20% of companies are now producing or sourcing goods within China for the local market to extend their supply chain.
The role of the food and fibre sector was absolutely critical in championing the Government’s economic growth goals.
The report said the perceived challenges to operating in China are seen to be easing, at the same time as New Zealand businesses are demonstrating greater resilience and adaptability.
Expansion into Tier 2 and 3 cities stood out as the businesses increasingly target new market segments to diversify revenue and localise operations.
NZBRIC recommended that New Zealand businesses improve their understanding of the changing retail environment and engage with market research firms; grow beyond major hubs and capture rising demand; and implement policies that enhance mutual cultural and market understanding, including differentiating through authentic Te Ao Māori branding.