China: Facing the Dragon

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China Facing the Dragon

• Patrick English
• China Market Manager

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New Zealand Trade Enterprise

• New Zealand Trade and Enterprise (NZTE) is the
  New Zealand government's national economic
  development agency. Through our network of
  offices worldwide, New Zealand Trade and
  Enterprise aims to grow New Zealand's economy by
  boosting the capability of businesses and regions
  and facilitating their sustained and profitable
  participation in overseas markets.

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New Zealand - China Trade Relationship

• China worlds 3rd largest exporter
• China worlds 4th largest economy (US2.29
  Trillion)
• As a of world consumption, China consumes
  22 of copper, 23 aluminum, 27 iron ore,
  16 nickel
• Chinese consume 51 of pork, 33 rice, 19
  poultry, 19 of ice-cream, 50 of veges (only
  produces 1.5)

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New Zealand - China Trade Relationship

• China is New Zealands 4th largest trading
  partner
• China is New Zealands 3rd most profitable
  export market (2006 DHL Report)
• Bilateral trade has increased 33 since 2003
• New Zealand is Chinas 42nd largest trading
  partner
• 156 NZ companies in 2005, made up 74 of China
  exports

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New Zealand - China Trade Relationship

• NZ first to start finish WTO bilateral
  negotiations with China
• NZ first to recognise China as a market economy
• New Zealand first OECD country to start
  comprehensive FTA negotiations
• China is looking to New Zealand to be 4th
  First

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New Zealand - China Trade
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New Zealand - China Trade
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New Zealand - China Trade
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New Zealand - China Trade
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New Zealand - China Trade
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Information Bytes on China

• Economy grew at 9.9 in 2005 (11.3 last
  quarter)
• 2005 trade surplus US106 billion
• Per capita income will double between 2000 and
  2010
• 2005 Forex reserves at US819 bil, US1
  trillion by 2006
• China competitiveness up from 31 to 19 in 2006
  survey
• Tech trade up over US400 billion, 28.4 of
  exports

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Information Bytes on China

• Contracted to buy 220 A320 and 737 aircraft
• To build 50 airports in next 4 years
• 420 mil mobile phones, 350 mil landlines
• Chinese send 750,000 text messages every
  minute
• 123 million internet users, 77 million on
  broadband 826 million IM users
• 2005, US390 million spent on internet adverts
  
• The worlds third-largest food donor

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Information Bites on China (that bite)

• Air pollution annually causes 440,000 premature
  deaths.
• 25 of Chinas water supplies are heavily
  polluted.
• Pollution costs China 10 GDP annually
• Worldwide in 04 China, 1.9 of cars, 15 of road
  fatalities.
• ING fund lost 56 of fund value to US1.4 bn
  over 3 years, Schroders lost 49 of fund value
  in 3 months, to US299m.
• China Banking system cost government 30 of GDP
  in bailouts annually. As much as US900 billion
  in NPLs
• 1 control 60 of wealth (in US 5 control 60
  of wealth).

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New Zealand China FTA

• Trade and Economic Cooperation Framework
  signed 2004
• Feasibility Study undertaken negotiations started
  2005
• Worth 400 million to NZ per year, 20 years
• Seven rounds completed so far 9th round next
  month
• Leaders have agreed completed 1 to 2 years
• Agreement will be high quality, comprehensive and
  mutually beneficial
• This is the 4th First

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New Zealand China FTA
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New Zealand Trade Enterprise

• What is NZTE doing in China
• FB Retail Channel Development Programme
• CATT Agriculture Technology Transfer Project
• Education-on-going development
  programme/vocational
• Focus Centre Hong Kong (why Hong Kong?)
• Shanghai Wood Innovation Centre
• Business Centers Beijing/Shanghai proposal
  stage
• Shanghai Expo 2010 proposals being developed
  now
• FTA 8 rounds of negotiations held so far
  leveraging
• Air NZ Launch programme, November 7 - 9

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China StrategiesShould you be there?

• China is a strategic decision not a market of
  last resort
• The strategic decision is yes, no or wait
• When developing a China plan, start with your
  exit strategy
• You maybe the best partner for them, but are
  they the best partner for you?
• Luck is an important element in your China
  strategy
• Note NZTE is not advocating that everyone
  should be in China

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China StrategiesGuanxi

• Guanxi networking, links, traditional
• EVERYONE has Guanxi
• Guanxi has serious limitations
• Both benefits and responsibilities favour for
  favour
• Not as a basis for a project, but good for
  enhancement
• Can develop your own Guanxi
• New Zealanders can have their own Guanxi
  networks (E.g. KEA)

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China StrategiesWhat to consider if the answer
is Yes

• You have to kiss a lot of frogs
• Where there is employment, there is stability,
  where there is stability, the status quo
  remains
• China doesnt import widgets - they make
  export them
• China has a population of 1.3 billion (not
  market)
• A bad deal in China is worse than no deal at
  all
• Never believe it until it has been officially
  denied - contradictions abound

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China StrategiesWhat to consider if the answer
is Yes

• If it looks too good to be true, it probably is
• Learn enough to tell the difference between a
  strategy and customs
• Independent verification check and question
  everything
• If you wouldnt do it in Australia, dont do it
  in China.
• Win Win in China is not understood zero sum
  game
• 6 Ps of Preparation (proper preparation
  prevents ps poor performance)

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China StrategiesWhat to consider if the answer
is Yes

• When the contract is signed, negotiations begin
  in earnest
• Cannot underestimate the value of government to
  government relations
• China is Rule by Law, not Rule of Law
• A conflict of interest is a competitive
  advantage
• Cannot manage at arms length will need to get
  your hands dirty

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Consider this
When you grab the Dragon by the Tail
Make sure you have a plan for the Teeth
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