Market Information

The Chinese will be drinking New Zealand-roasted coffee following a deal done by the Kiwi owners of the Esquires coffee house franchise.

Brothers Stuart and Lewis Deeks own the Canadian-developed coffee house franchise for everywhere outside of Europe and North America, and have expanded from New Zealand to the Middle East, Fiji and India.

Now they have sold the master franchise for China to a large investment company in Yunnan province in the country’s south.

Yunnan Metropolitan Construction Investment (YMCI) - part-owned by the Yunnan government and listed on the Shanghai stock exchange - will open 250 Esquires outlets over the next 10 years. The first store opened in the central business district of Beijing a month ago.

Source: NZ Herald

Unicon’s first wine shipment arrived in Beijing last week and the sales team are busy presenting the wines to our retail and Hotel network.

Wineries currently represented by Unicon in Beijing are:

Morton Estate
Astrolabe
Wine Growers of Ara
Paddy Borthwick
Distant Land
Coopers Creek

 www.unicon.co.nz

The meat industry is targeting China as an emerging market for lamb.

Alliance Group chief executive Grant Cuff told a meeting of shareholders last week that the industry had also looked at the potential of Russia and India but found China to be the most promising.

High import tariffs ruled out India.

The industry would look at Russia once China had been assessed to identify consumers, product forms, brands and logistics.

“We will look at Russia, but all the stars lined up better for China.”

Cuff said the industry intended targeting high-worth Chinese consumers with high-value products.

It could take six to 12 months of further research to find and work out how to target those consumers.

New Zealand’s recent free trade agreement with China offered little assistance in removing already low red meat tariffs, but Cuff said its real benefit was helping to deal with bureaucratic red tape and establishing distribution networks.

 Via: NZ Herald  China targeted for lamb exports

Here’s a good link for businesses thinking of exporting to China. It includes simple steps to assess if you’re ready for the challenges of China as well as information, case studies and support for those wanting to look at the opportunities China offers. Link

Details on tariff cut programme in trade deal with China.

The deal eliminates tariffs on 96 percent of New Zealand’s current exports to China by 2019.

For other than specified “sensitive” goods - kiwifruit, some meat, sheepskins and dairy products - the following programme will apply:

* When the deal comes into force - probably October 1 - 35 percent of imports from New Zealand which currently face tariffs of up to 5 percent will be duty free;

* Duties in the 6 to 20 percent range will be phased out over five years until 2012; and

* Tariffs greater than 20 percent will be reduced to 20 percent on day one and then phased out by 2013.

Dairy

* Some dairy products - infant milk formula, casein, yoghurt and whey - will be phased out over 5 years;

* China’s tariffs on butter, liquid milk and cheese will be phased out over the 10 years to 2017;

* Skim and whole milk powder will be removed over 12 years; and

* There are mechanisms to delay the tariff reductions if exports exceed certain quantities.

Meat

* Tariffs on beef and sheep meat, and edible offal will be removed over 9 years.

Fruit

* Apple tariffs will be removed by 2012 and kiwifruit over 9 years.

Wool

* A duty free quota of 25,000 tonnes of wool and 450 tonnes of wool tops will be set increasing by 5 percent a year for 8 years. The initial quota is 75 percent of current exports or $122 million a year in tariffs.

Wood and paper products

* China will be bound on the zero tariff on logs and sawn timber and a limited number of pine products will also be given preferential status.

* Some processed wood and paper products accounting for 4 percent of New Zealand’s exports to China will not be covered by the trade deal. This is because under WTO rules is China gives preferential status on the products, they must be applied to all WTO members.

What China Gets from New Zealand.

* All tariffs will be removed by 2016;

* Currently 37 percent of China’s exports to New Zealand are tariff free;

* An additional 2 percent of exports with a tariff of five percent or less will be duty free from October 1;

* Tariffs on most textile, apparel, footwear and carpet products will be phased to zero over seven years or nine years. Tariffs on heavily exported goods in clothing and footwear will be phased out by 2016, lesser traded goods by 2014; and

* Tariffs on all other goods (including steel, whiteware, plastics and furniture) will be mostly phased out by 2012 with the remainder by 2013.

* Ian Llewellyn is in Beijing with the assistance of the Asia New Zealand Foundation.

via:  Details on tariff cuts in China trade deal

3:30PM Monday April 07, 2008

Winners China will lower tariffs on most imported NZ agriculture and manufactured products to zero (over time), saving our exporters a total of at least $100 million annually.

With Chinese tariffs running at about 10 per cent for milk powder (yoghurts and cheese top 15 per cent); 12-20 per cent on sheep meat and 15-20 per cent for kiwifruit, the upside is considerable. But there will a lengthy phase-in period for dairy as China fears its own fledgling dairy farming industry would be squashed.

Manufacturing exports ranging from machinery through to light industry, whiteware, automotive parts, steel and aluminium products will benefit to varying degrees. But reciprocal liberalisation will ultimately make the local scene more competitive.

Losers Wool: China is NZ’s biggest market for wool products which enter at very low-duty rates (1 per cent under a tariff rate quota system).

But out-of-quota exports face a 38 per cent duty. China strenuously argued going to zero would wipe out the livelihoods of its sheep farmers in frontier regions. A special quota arrangement is expected.

Forestry: China is one of the world’s largest forest product importers. But complications under a provision in China’s WTO accession deal with the US proved a sticking point. Some co-operative element may emerge.

Textiles and apparel manufacturers: Will have to up their game when NZ speeds up remaining tariff reduction in these areas, opening the way to stiffer competition from Chinese imports.

Electronics: A separate agreement will be signed to ensure co-operation on conformance assessment for electrical and electronic equipment. Some retailers are nervous NZ’s safety standards may become compromised.

Movement of people
Working-holiday programme for young professional Kiwis to go to China.

NZ business people will find it easier to get short-term visas; an advance record system will ultimately be promoted to ensure important enterprises and organisations on both sides get timely entry visas.

More exchanges of experts, scholars, students and technicians and intra-corporate transferees.

Chinese traditional medicine experts, acupuncturists, Mandarin teachers and chefs will be allowed into NZ under a constrained quota.

No invasion of unskilled Chinese workers into NZ. Trade Minister Phil Goff strenuously opposed a push for Chinese labourers to work on NZ construction sites; Chinese workers must be paid NZ rates while here.

Trade liberalisation services

Winners
Tourism and education ex-China are major money-spinners for NZ. An agreement to facilitate two-way tourism traffic is expected. Education earnings fell away after the collapse of English language schools and the appreciation of the NZ dollar. Look for more NZ educational institutions running schools in China in co-operation with Chinese authorities in areas like biotech, management and telecommunications. NZ students may also be encouraged to study in China.

Forestry: China is one of the world’s largest forest product importers. But complications under a provision in China’s WTO accession deal with the US proved a sticking point. Some co-operative element may emerge.

Textiles and apparel manufacturers: Will have to up their game when NZ speeds up remaining tariff reduction in these areas, opening the way to stiffer competition from Chinese imports.

Electronics: A separate agreement will be signed to ensure co-operation on conformance assessment for electrical and electronic equipment. Some retailers are nervous NZ’s safety standards may become compromised.

via: So what’s in it for us   

NZ Herald

CHINA’S domestic consumption has replaced investment to become the biggest driver of economic growth for the first time in seven years. Last year, domestic consumption contributed 4.4 percentage points to the 11.4-percent increase in the nation’s gross domestic product, compared with 4.3 percentage points of investment and 2.7 percentage points of net exports, said China Securities Journal yesterday, citing unidentified official with the National Bureau of Statistics. Data released earlier showed the nation’s retail spending rose 16.8 percent to 8.92 trillion yuan (US$1.24 trillion) in 2007, up 3.1 percentage points from a year earlier. Fixed asset investment expanded 24.8 percent to 13.72 trillion yuan, 0.9 percentage point higher compared with a year ago, while the trade surplus grew 47.7 percent to US$262.2 billion, 26.3 percentage points slower in pace. “The rise of domestic consumption is the result of many years of efforts to support spending while curbing investment, with a goal to reduce dependence on external factors,” said Ba shusong, a researcher with the State Council Development Research Center. Since the Asian financial crisis in 1997, China has earmarked a strategy to reduce reliance on investment and exports and turn to consumption through tax cuts, minimum wage rises and improved education, welfare and health care. But investment had still remained a leading driver of economic development despite various efforts in the past decade. In 2006, investment contributed 4.6 percentage points to GDP growth, 0.3 percentage point higher than consumption. Zhang Xinfa, an analyst with China Galaxy Securities Co, estimated consumption will contribute more to the economic growth in the future. However, some analysts suggested that higher consumption growth does not mean a weakened investment sector. “In five years at the minimum, investment and exports will still be major contributors to China’s economic growth, at least of parallel importance to consumption,” said Li Maoyu, an analyst with Changjiang Securities Co. Last year, disposable income for city dwellers jumped 17.2 percent to 13,786 yuan and earnings for rural households rose 15.4 percent to 4,140 yuan, according to official data.

Source: Domestic consumption drives GDP for 1st time

via Shanghai Daily: Business by Wang Yanlin on 1/31/08

New Zealand is close to a free-trade agreement with China and Trade Minister Phil Goff is confident a deal will be signed in April after final details are worked through.

Source: Goff confident of China trade deal

via: NZ Herald

1. Take the get rich quick stories lightly: A launch in China, while holding phenomenal potential also takes a lot of heart to see through. There are dangers like misreading Chinese consumer habits, copycat competitors setting up faster than lightning, long periods of no visible returns, struggles with a workforce from a totally different culture, the list rolls out continually. Once the down sides are understood however, the potential sales campaign (considering good points and bad) can be conducted with a clear mind.

2. Look at your strategy: Does your company really want to explore new sales market? Total commitment is needed to break into a Far East Asian market place such as China. How far into the future do you look? The “We’ll clean up quickly here” mentality is often followed by excessive cash burn and a bemused collapse. Give yourself a 5 to 10 year horizon to build a worthwhile business; patience pays untold dividends in China.

3. Compare your offering: You will be going head to head against others in the most fiercely competitive market in the world. Your product or service offering needs firstly to be something that’s hard to emulate, secondly, have equal or better quality than theirs and thirdly, have something of the mystique of being foreign to the Chinese consumers. Foreign companies that reach kudos level in the Chinese high street have these traits (e.g. KFC, Starbucks).

4. Do your Market Research: The Chinese middle class is growing fast. While perhaps around 50-100m people right now, some predict it to be 250m people by 2011 and 520m by the year 2025. The clever ones are starting now, testing and learning, finding out what works and what doesn’t. When your learning period has identified your sweet spot in the market, then you can roll out wider scale (note: B&Q have used this strategy for the last 7 years to great effect).

5. Do your sums: No company can survive for long selling at less than cost price. Plan your financials thoroughly. Start with a 5 to 10 year ball park long range forecast, blending it with your overall company objective. Then break this down to the quantifiable first 2 years, getting real figures supplied by real people in China. Make sure that these figures are not being supplied by potential suppliers that could be understating costs so as to maximise the chances of getting your business.

6. Do your due diligence: This is a high priority in China. It’s a long distance from here and there are many pretenders. Make sure the business partnerships you build are with competent people who are in the place they say they are, can do the things they say they can, and have a good track record of getting things done properly. Get copies of their business licence, check references thoroughly, go to their office, meet them, and ask them the tough of questions before any deals are struck.

7. Talk to other operators: These tend to be the closest relating people to you that you will find in China. Although some of them could be in competition with you, most Brits I have met in China have been very helpful. There are many expat and business chambers that will lend a supportive hand and help out with knowledge. US and European organisations are also very helpful.

8. Watch the high street first hand: Spend some time watching how the Chinese shop. If you can take a local Chinese friend along to help you understand the mechanics of how people do business in the high street do so, it will expedite your understanding of how it works..

9. Formalise your network: Pay particular attention to your Chinese partners. Don’t forget that this is their market and you are the outsider. They are helping you to come into their world. When the time comes, spend time training them to fit well with your company but remember always that they’re the ones who really know the people who dwell in this market, not you. Make him or her earn your trust by complying with solid company procedure, and then trust them to do the job.

10. Keep learning: The fact that nothing stands still in China opens up some veryinteresting opportunities for fit businesses. Mighty western giants sometimes have toperform tactical withdrawals while small sole traders can sometimes build hundred people companies. Why? Because the small guys ask questions and listen for answers and some of those giants think that they already have the answers because they are successful in other markets, this almost guarantees spectacular failure. If you want to sell successfully into China do yourself a favour; never stop learning about the market and the interesting people in it.

For more information visit the Modern Management Worldwide website at

www.momaworldwide.com

China’s largest free-trade harbor area with the most preferential tax treatments started operation in the northern port city of Tianjin Tuesday, a further move in the country’s opening up strategy

Dongjiang Bonded Harbor Area, close to Beijing and located in the Bohai-rim region is set to enjoy the most favorable policies in taxation and foreign exchange polices and offers comprehensive services in international shipping, purchase, trade, processing and logistics

Source: China opens largest free-trade harbor area in N port city

from China Business