Mainfreight boss Don Braid sees fresh opportunities in China's Belt and Road initiative, writes Bill Bennett.
"We've been in China for 20 years. It only represents a small part of our revenue, but it is growing fast," says Mainfreight group managing director Don Braid. He expects that growth to accelerate on the back of President Xi Jinping's Belt and Road initiative.
The Belt and Road initiative is a plan to recreate the ancient Silk Road that connected China to Europe. It involves investing billions of dollars every year on road, rail, maritime infrastructure.
There are also investments in power grids and steel production. The project involves 152 countries including most of Asia and Europe.
China's official aim is to bind Europe and Asia into a more integrated economic and trading area. What isn't said is that the Belt and Road initiative places China as the trading area's lynchpin.
Critics say it's a bid to dominate trade through most of the world.
Braid says that from Mainfreight's point of view, the initiative will open many more freight routes to Asia and Europe. Often land routes will replace long distance sea routes.
That's important to Mainfreight.
"We already use rail in China and Europe. It means better transit times and more realistic costs. There's another reason: the shipping lines face a problem with the bunker oil fuel they use. It's dirty and contains sulphur which is polluting and harmful to the environment.
"The IMO [International Maritime Organisation] wants to limit the amount of sulphur ships emit from next year. So logistics companies like us are looking for alternative modes of transport.
"We're a great believer in railways. Now we're taking our experience of using them offshore."
It's not the only supply chain logistical expertise Mainfreight has exported.
The company trades widely around the world. Braid says there are operations in 24 countries, with more to follow.
"It gives us the ability to be part of global trade. It's exciting and invigorating to take part in the way trade is developing," he says.
There are 10 Mainfreight branches in China and the business there employs more than 400 people. Braid says Mainfreight is on the lookout for opportunities in other cities.
"Our strategy there is to intensify our network. We aim to be as close to customers as possible," he says.
Last year Mainfreight booked $140 million in trade to and from China. That may be small compared with the company's $2.6 billion total revenue, but Braid says the China trade is growing at 10 to 15 per cent a year. "There's an ability there to grow faster", he says.
Braid's optimism comes despite talk of the Chinese economy moving down a gear.
Braid says: "We don't see any sign of our business slowing. We're small in that market by international standards and we're mainly interested in global trade. So, if anything, this change gives us an ability to take more market share. Our style of doing business is winning us market share in markets around the world."
While China no longer has stellar growth, it is still growing at 4 or 5 per cent. It's a huge market and Mainfreight has lots of freedom to operate. Braid says there is still plenty of opportunity.
"You see freight on every corner in China. This is what excites us. We are a minnow compared with some of our competitors. They continue to underestimate us and that allows us to win business from them. Unlike them, we're looking to build for the long-term. We want a 100-year business.
"We'll continue to test the waters in smaller cities.
"Once the volumes are there, we'll open a new branch."
Braid is equally relaxed about the implications of the well-publicised trade spat between China and the United States or, for that matter, any talk of trade tension between New Zealand and China.
He doesn't see either as a barrier to his company's growth. In fact, he says the changing China-US trade relationship could have a positive effect for Mainfreight, with more opportunities to grow the business.
"The media might read more into the China-US discussions than is the case. There are probably good reasons to put some tariffs on some products.
"And, anyway, it seems the two will come to an agreement. The Chinese are resourceful enough not to be shut out of the US market."
Braid says from Mainfreight's point of view there's been no noticeable change in the trade between China and New Zealand.
"We read suggestions there were issues with interest, but we have a government and public service that understands trade. There's plenty of commercial nous at NZTE and MFAT. If anything happened it was a blip and blown out of all proportion."
Likewise, Braid says the previous government did a good job and the change of government hasn't done anything to damage that.
"We can't take New Zealand's trade relationship with China for granted. It's taken hard work to get here and we need to keep working hard.
"There are issues, but we can continue to trade there without losing sight of our values. Our success to date in China is because of those values. We get respect from China and the rest of the world for having them.
"China doesn't want or expect us to be any different. It understands the value of our business," he says.
Late last year some US policy-makers called for the deliberate decoupling of the country's economic relationship with China. They argued this would be in America's economic and security interests.
Braid says it is understandable people in the US thought there was too much reliance on China.
Yet, he says he trusts businesses will find a level of engagement that's right.
"The US is a free market. Business there will decide how it trades and will continue to trade. It will decide who it gets to trade with.
"That is something that's embedded in their genes. It's on us to trust that those businesses know what they are doing."
At the moment, one area of opportunity for Mainfreight is intra-Asia trade. Braid says this remains strong. He says that, in particular, there's a pick-up in trade in Southeast Asia and Vietnam is a highlight.
"The region is already benefiting from China's Belt and Road initiative and Braid says he sees an excitement around trade development and there's a willingness to make relationships work.
Braid says the global supply chain, and China's role at the heart of it, is dynamic and constantly changing. In recent years there's been a rapid rise in air freight and online e-commerce services now play a far bigger role. He says it is a challenge for businesses like Mainfreight to keep up with these changes.
"That we do, is a testament to our people,"
Part of the company's ability to stay on top of these challenges lies in Mainfreight's decentralised approach.
Braid says he expects the people working closest to customers
to make decisions about how best to deliver what they need.
"If they can secure the business then they can negotiate direct, it doesn't always need to come through head office. It's up to them".
PORT OF CALL
Xi'an in Northwest China's Shaanxi province is rapidly emerging as one of China's most important inland ports. The city's Xi'an International Trade and Logistics Park has overcome its geographical constraints by promoting a new mixed logistics network, which combines sea, air and rail services. Former Prime Minister Sir John Key took a business mission to Xi'an in 2016 to inspect the development.