The New Asian Ascendancy and New Zealand

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The New Asian Ascendancy and New Zealand

• Tim Beal
• School of Marketing and International Business

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Environmental correctness

• The importance of recycling
• Presentation to Asian Studies, University of
  Otago 18 May 2006

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Outline

• Asia in global economy the historical
  perspective
• Importance of Asia to NZ
• Chinas expansion into global markets
• India joins China The Indian Market
• Research Project
• Opportunities for New Zealand Business in India
• Work in progress - some tentative conclusions

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ASIA IN THE GLOBAL ECONOMY THE HISTORICAL
PERSPECTIVE
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The Old Order, or our perceptions of it

• Example of pre-modern China
• Self-sufficient, complacent, autarkic
• Eg Qianlong emperor to King George III in 1793,
  rebuffing attempts to open trade relations

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The Celestial Court has pacified and possessed
the territory within the four seas. Its sole aim
is to do its utmost to achieve good government
and to manage political affairs, attaching no
value to strange jewels and precious objects.
The various articles presented by you, O King,
this time are accepted by my special order to the
office in charge of such functions in
consideration of the offerings having come from a
long distance with sincere good wishes. As a
matter of fact, the virtue and prestige of the
Celestial Dynasty having spread far and wide, the
kings of the myriad nations come by land and by
sea with all sorts of precious things.
Consequently there is nothing we lack, as your
principal envoy and others have themselves
observed. We have never set much store on
strange or ingenious objects, nor do we need any
more of your countrys manufactures
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Mad?

• Whilst this condescension and incomprehension was
  to lead to disaster, the emperor had a point, as
  we shall see
• Look at graphs of GDP and trade
• The dominance, decline and resurgence of China
  and Asia

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Rise, decline and resurgence of Asia

• Two sets of data
• 1 Long term trends in the world economy
• Angus Maddison, OECD (2001, 2004)
• 2 Rise of Asia in world trade
• World Trade Organisation

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Wealth and population

• Maddisons regions
• Asia includes Middle East, not Central Asia
• Former USSR
• Western offshoots US, Canada, Australia, NZ
• Not Latin America
• Here regions conflated to allow focus on Asia
• Maddisons money 1990 international
• Comparability over space and time

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Figs 1-5

• 1 Regional distribution of world GDP, 0-1998
• 2 China and West Europe population 1 2001
• 3 China and West Europe GDP, 1-2001
• 4 China and West Europe pc GDP, 1-2001
• 5 NZ in East Asian context pc GDP, 2004

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Fig 1 Regional distribution of world GDP, 0-1998
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China and West Europe

• AsiagtgtgtChina
• West Europe Offshoots gtgtgtWest Europe
• China, West Europe in columns, Y-axis to left
• Relationship (China as of WE) in line, Y-axis
  to right
• 100 line (above ChinagtWE)

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Fig 2 China and West Europe Population 1-2001
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Fig 3 China and West Europe GDP, 1-2001
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Fig 4 China and West Europe pc GDP, 1-2001
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Fig 5 New Zealand in the East Asian context pc
GDP, 2004
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Asia and Trade

• Asian resurgence not in isolation, but connected,
  primarily through trade
• Trade
• Trade in Services
• Eg tourism, education..
• Merchandise trade goods
• Focus here

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World Trade Organisation data

• Fig 6 Share of world imports, 1948-2003, Asia
  and NZ
• Fig 7 Share of world exports, 1948-2003, Asia
  and NZ
• Fig 8 China and NZ in world trade, 1948-2003

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Fig 6 Share of world imports, 1948-2003, Asia
and NZ
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Fig 7 Share of world exports, 1948-2003, Asia
and NZ
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Fig 8 China and NZ in world trade, 1948-2003
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IMPORTANCE OF ASIA TO NZ ECONOMY
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Interaction between NZ and Asia

• Decline and rise of Asia
• Now economic interaction between NZ and Asia
• Asia important to NZ in early days of European
  settlement
• 1792 sealskins to China
• jumping off point for China trade
• Importance declined, then revived

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NZs trade with Asia

• Fig 9 Direction of NZ exports, 1859
• Fig 10 Direction of NZ exports, 1859-1997
• Fig 11 Direction of NZ imports, 1859-1997
• Fig 12 NZs top twenty export markets, 2004
• Fig 13 Top 25 source countries for NZ imports,
  2004

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Fig 9 Direction of NZ exports, 1859
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Fig 10 Direction of NZ exports, 1859-1997
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Fig 11 Direction of NZ imports, 1859-1997
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Fig 12 NZs top twenty export markets, 2004
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Fig 13 Top 25 source countries for NZ imports,
2004
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Trade in Services

• Tourism
• Educational services

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Tourism

• Fig 14 Asian share of tourism to New Zealand,
  1985-2004
• Fig 15 Provenance of tourists to NZ, 2004, by
  region
• Fig 16 Share and change in tourism from Asia,
  2002-04

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Fig 14 Asian share of tourism to New Zealand,
1985-2004
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Fig 15 Provenance of tourists to NZ, 2004, by
region
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Fig 16 Share and change in tourism from Asia,
2002-04
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Educational services

• Fig 17 Continental provenance of global
  international students, 2001/2
• Fig 18 Provenance of international students in
  New Zealand, 2004

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Fig 17 Continental provenance of global
international students, 2001/2
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Fig 18 Provenance of international students in
New Zealand, 2004
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CHINAS EXPANSION INTO GLOBAL MARKETS
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Contemporary geopolitical context

• Need to position it within the China-US
  confrontation
• US fearful of rise of China
• Eg purchase of Unocol by CNOOC
• my China page has many articles
• US strengthening US-Japan, US-Taiwan alliances
• Forcing China and Russia together
• South Korea gtgtChina
• Papers in
• November 2005 Asian Affairs
• December 2005 NZ Journal of Asian Studies

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Chinese manufacturing

• For some years China has been known as the
  factory for the world
• Now seeing corporations, and their brands,
  surging onto world stage
• EG Haier, Lenovo and Shanghai Automotive
  Industry Corporation
• Faster, and less expected, than Japans
  expansion in 60s and 70s

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Entering world markets

• Two ways
• Low-end producers of labour-intensive products,
  eg textiles
• Manufacturing components and products fro foreign
  brands
• Following Japan, S Korea
• Will remain mainstay of exports for some time

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Something new

• Acquisitions
• Brand expansion
• Often connected

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Acquisitions

• Lenovo buys IBMs PC division
• Formerly Legend
• Highly symbolic act end of an era

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Chinese brands

• Shanghai Automotive
• Kelon fridges
• Galanze microwaves
• Guangdong Donlim kettles
• GD Midea rice cookers
• TCL TVs and DVDs
• Hisense TVs
• But the big one is.

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No, Haier

• Qingdao home of Chinas first global brand,
  Tsingtao beer
• Also home of Haier

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Haier stands out

• Incorporated 1984
• Rapid growth
• Diversification across industries
• Aggressive global expansion
• 78 annual sales growth 86 categories of
  products, 13,000 specifications, 160 countries
• Entered US in deal with Wal-Mart and Target, but
  under own name
• Started production in the US

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Japanese parallels

• Japanese moved production to US to circumvent
  protectionism
• True for Haier, but also desire to establish
  perception as American company
• US regions now vying for Chinese FDI as sought
  Japanese in past

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Hai'er charisma

• Dynamic leader Zhang Ruimin
• Member of Central Committee of Chinese Communist
  Party
• (Haier part owned by Qingdao local government)
• Spawned a film, a book, scholarly articles and
  Harvard case studies

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Chinese expansion

• Rapid, taken most observers by surprise
• But in historical perspective not so surprising
• Asia was centre of world economy
• When regained independence, made transition to
  modernity then resurgence to be expected

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Asian successions

• Japan
• 4 (Little) Dragons/Tigers
• ASEAN
• China
• India

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The Indian Market

• Like China, India has long been fertile breeding
  ground for myths
• For centuries, even millennia, both countries
  have been seen as large and rich
• The GreeksgtgtgtMarco PologtgtChristopher Columbus

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Fig 1 Long-term changes in the share of global
GDP China and India, and the West
Source Maddison 2001
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Decline and resurgence

• Decline during rise of European expansion and
  imperialism
• mid-20th century both countries regained
  independence, and began economic resurgence
• Relatively slow growth, especially in India
  Hindu rate of growth

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Opening Up and Liberalisation

• Late 1970s China began opening up
• 1990s liberalisation in India
• Great expansion of foreign trade and investment,
  general economic growth
• Unasked questions - At what costs? To whose
  benefit?

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Indian economy

• One of worlds largestand fastest growing

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Source CIA World Factbook, updated 29 March
2006, accessed 11 April 2006
Table 1 Growth in GDP, 2004-5
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Table 2 World imports, 2005
Source CIA World Factbook updated 29 March 2006
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The India market

• All this makes India an attractive market

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Winners and losers

• Although imports are growing, performance is
  uneven

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Table 3 Changes in share of imports into India,
2001-2005
Source Reserve Bank of India trade database,
accessed 23 December 2005
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New Zealand asks why

• Asia NZ Foundation commissions research into
  Opportunities in India for NZ business
• Awarded to School of Marketing and International
  Business, Victoria University of Wellington
• Interviews in NZ, and India
• Video interviews, still being processed

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NZ case companies

• Interviewed by Val Lindsay and Fergus McLean
• Glidepath
• Manukau Institute of Technology
• Gallagher Group
• Hayes International
• Beca International
• Robinson Seismic
• Fisher and Paykel Healthcare

• Vista Entertainment
• Beca Carter Hollings and Ferner
• Cadmus Payment Solutions
• Solid Energy
• Tait Electronics
• (Tim Fowler, formerly VUW Vic Int in Australia)

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Interviews in India

• Tim Beal and Michel Rod
• Saw it as part of Doing Business in India
  Project
• Interviews in South Korea, North Korea, Japan,
  Malaysia, and Hong Kong
• India February 2006
• 25 interviews Delhi, Mumbai, Bangalore, Chennai

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Interviewees - NZ

• NZ officials
• High Commissioner, Trade Commissioner (NZers)
• Senior Trade Development Manager (Indian)
• Honorary Consuls in Mumbai (also tourism),
  Chennai (Indian)
• Honorary Adviser to AsiaNZ Foundation (Indian)

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Interviewees - Indians in NZ companies

• All of Indian ethnicity
• 3 NZ companies
• Air New Zealand (Mumbai)
• Tourism New Zealand (Mumbai)
• Fisher Paykel Healthcare (Bangalore)
• 1 Joint Venture Britannia NZ Foods Pty Ltd
  (dairy products)

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Interviewees Indian businesspeople

• Forestry/Wood
• Education
• Fruit
• IT
• 1 Software for multiplex cinemas
• 2 Building security hardware and software
• Coal
• Wool
• Wine

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Two perspectives

• NZers focus on Indian problems
• Bureaucracy, trade barriers, infrastructure,
  corruption
• Indians poor marketing by NZ companies

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Poor marketing - Education

• Australia main competitor
• NZ less active
• NZ slower turnround time for applications
• NZ immigration requires police clearance
• Other issues work opportunities, immigration
  possibilities, length of courses
• Quality of education not a major consideration

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Underlying issue

• Sustainable comparative and competitive advantage
• Mutual benefit for India, NZ
• (What benefit for ordinary Indians?)
• Especially evident in IT sector
• Wine as example

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Wine - now

• Growing market for wine in India
• High tariffs on imports
• Increasing domestic production
• Like NZ, initially poor quality
• Grown in wrong places, lack of viticulture
  skills, undiscerning customers
• If NZ can develop world class wine industry, why
  not India?

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Wine future

• Quality of Indian wines will improve
• Develop an export market
• (watch out for competition from China)
• As (if?) barriers drop growing niche market for
  NZ wines
• Some NZ wines will have sustainable advantage
  based on land and climate

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What do we make of India?

• Indian market is growing fast, but opportunities
  are tempered by challenges
• Challenges
• Complexities of market,
• Foreign competition (education- Aus apples
  China)
• Domestic competition (wine)

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New Asian Ascendancy and NZ

• Vital, importance growing, but unevenly
• Need to analyse, understand, and prioritise
• Large but complex and difficult markets
• Need understanding and skills
• hence Asian Studies
• Finally, a commercial

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