Market Information

Fonterra has already benefited from the newly inked free-trade pact with China.

It has signed a deal worth more than $300 million, The Press newspaper reported this morning.

Fonterra’s Japan-based general manager of trade for Asia, Philip Turner told a Parliamentary select committee - hearing submissions on legislation to give effect to the trade deal - that the contract was to supply “a major multinational customer” with nutritional milk powders.

Mr Turner said the “commercially very valuable” deal came within weeks of the signing of the agreement in early April.

“We’ve been able to conclude a deal recently on the basis of the FTA being signed, which results in a considerable volume of business and processing being done in New Zealand that would otherwise have gone offshore, in this case to Singapore,” Mr Turner said.

Fonterra’s written submission said the deal would generate more than $300m in revenue over four years.

“These value-added dairy products will be manufactured in New Zealand factories, using New Zealand milk, capital, labour and technology,” it said.

“Without the FTA with China, lower-priced product from New Zealand would almost certainly have been processed offshore in Asia.”

Trade Minister Phil Goff welcomed the news.

“Fonterra’s submission to Parliament, and its announcement of this deal only weeks after signature of the FTA, is further evidence of the value of that outcome to New Zealand,” he told The Press.

China is New Zealand’s fourth-largest export market for dairy products, earning $523m last year, up from $144m in 2001.

The phase-out of tariffs on all dairy products under the deal over the next five to 12 years will save Fonterra $56m on current export values.Fonterra inks $300m China deal after FTA

Via: Fonterra inks $300m China deal after FTA

Comprehensive information for New Zealand food and beverage companies doing business in China. Special thanks to Otago University and NZTE

PRINCIPLE FINDINGS FROM THE REPORT

The principle findings of this study, thus far, are as follows:

• New Zealand companies need to make time to investigate and conduct market research before proceeding with any market entry strategy.

• Understand which market segment they wish to target, who their competitors are, the market trends which are evolving and the risks that the market poses.

• New Zealand companies need to enlist the support of the NZ government officials and through them Chinese local and central government officials to ensure that their objectives are in alignment with the policy objectives of the Chinese Government both local and central.

• New Zealand trade and diplomatic officials must be thoroughly conversant with the policy objectives of local government and have effective communication channels between themselves and local government officials. They must also be conversant with Central government policy and be able to readily access information channels to follow the development of central government policy objectives.

• It is vital that New Zealand companies have a contingency strategy in place prior to entry. That is, ensure that exit rules have been at least thought through if not developed.

• Enter the market with a long term perspective and be committed to tackle the hurdles when they present themselves. It is important that New Zealand companies think not five years ahead but fifteen to twenty.

• Ensure a balanced recruitment strategy, ensuring the employment of local indigenous staff, alongside expatriate staff. The employment of local indigenous staff with bilingual skills is an obvious asset.

• It is important to overcome the language barrier. New Zealand companies need to ensure that effective and timely communication systems are established. Open communication with the Chinese partner is important to the ongoing development of the relationship and integral to smoothing out any problems which may arise.

• Cultural empathy and understanding is important, New Zealand companies must accept and understand the ways of their Chinese partners and embrace the cultural differences with understanding, tolerance and pragmatism.

• New Zealand companies should look at where they can offer assistance and add value to their Chinese partners, opportunities to work more closely with partners enables firms to better understand the nature of business in China. Moreover, it fosters goodwill within the partnerships and plants the seed of trust.

• New Zealand companies need to be highly vigilant in maintaining superior quality Food and Beverage produce standards, in order to protect and enhance the New Zealand brand / image.

• It would appear prudent and advisable for New Zealand Food and Beverage Companies to work together to where possible to facilitate greater synergies and lift the profile of New Zealand in China and the wider Asia markets.

In conclusion, if the optimists are correct, China will move inexorably toward a free market economy during the next decade. Competition will increase and foreign free-market influence will support this process. However because of China’s geographical, political, and economic complexities, China’s transition to a full market economy is yet to be accomplished, for example the establishment of clearly defined property rights. Therefore, we believe that for the foreseeable future there will be a continuous evolution in the institutional arrangements that support a market economy. This suggests that the key success factors identified in this research are likely to remain valid for the foreseeable future.

CLICK HERE FOR FULL REPORT

A $1 million Chinese order for socks, hats and gloves from Norsewear is being cited as an early spin-off of the free trade agreement signed last week.

Norsewear says the order, within 48 hours of the signing of the pact, came out of the blue and was a result of the higher profile New Zealand was enjoying in China. The company’s general manager Sandra Shilling said the company has manufacturing links in China but was not marketing its New Zealand-made garments there at all.

“It’s not something we planned on or predicted,” she said.

“The Chinese have ordered three times the annual numbers we currently produce. The good news is that means more jobs for New Zealanders as all the products will be manufactured locally. Already our contract manufacturers are looking for new staff to help fill the order.”

She said if the Chinese were happy they planned to increase the order.

“Goodness knows how we will cope with that! The export potential is absolutely mind boggling. We are talking in the multimillion-dollar region so it’s all systems go for us right now.”

Via NZ Herald: $1M Norsewear deal an early winner

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

New Zealand’s largest bilateral trade agreement is due to be signed with China on April 7th by Prime Minister Helen Clark and China’s Premier Wen Jiabao.

It’s the result of three years of negotiations and is believed to give New Zealand exporters increased access to the world’s fastest growing economy.

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Read Helen Clark’s take on the Free Trade Agreement
Will a Free Trade Agreement with China be good for us? Here is the latest selection of Your Views:

 Thanks to NZ Herald

 Via Will a Free Trade Agreement with China be good for us?

NEW Zealand’s annual trade deficit narrowed to the smallest in almost three years as soaring prices for dairy products buoyed export earnings. The shortfall shrank to NZ$4.41 billion (US$3.5 billion) in the 12 months ended on February 29 from NZ$4.8 billion in the year through January, Statistics New Zealand said in Wellington yesterday. It was the narrowest gap since the 12 months ended in April 2005 and was less than the median estimate of NZ$4.54 billion in a Bloomberg News survey of 10 analysts. Reserve Bank Governor Alan Bollard is looking to exports, which make up 30 percent of the NZ$104 billion economy, to buoy growth as he keeps interest rates at a record high to curb domestic demand. Growth may miss the central bank’s forecasts as drought and falling world prices curb dairy exports, which make up a fifth of all overseas shipments. World dairy prices soared to a record in November amid surging demand from China. Prices have fallen 6.6 percent in the past three months, and drought has hit milk production, according to Fonterra Cooperative Group Ltd.

Via:   Dairy exports lower NZ trade gap

via Shanghai Daily: Business by Tracy Withers on 3/28/08

Property prices in major Chinese cities remained high, but rose at a slower pace in February, according to the National Development and Reform Commission. The average housing price in China’s 70 large and medium-sized cities climbed10.9% in February
Source:  Housing prices rise 10.9% in major Chinese cities in Feb.

via China Business on 3/18/08

A COURT in the southern Guangdong Province has fined a five-star hotel after holding it responsible for leasing space to a seller of knockoff Louis Vuitton products. The Intermediate People’s Court in Dongguan City ordered the hotel to pay 100,000 yuan (US$14,124), in combined compensation with the shop manager, to the French luxury goods producer. The court also ordered the shop and the hotel to stop selling the products and destroy any remaining counterfeit items. The court documents didn’t name the hotel but said it collected a monthly rental of 20,000 yuan from the shop. The documents said the salespeople in the shop wore hotel uniforms. “There were no signboards or any notices in the shop for customers to be able to identify that its management was independent from the hotel,” the court ruled. Louis Vuitton demanded compensation of 500,000 yuan from the hotel and a public apology. But the court said the hotel hadn’t caused widespread market harm to the brand. The French firm has also won a suit against a Chinese handbag producer for copying its trademark design, sources within the No. 1 Intermediate People’s Court in Beijing said. The court heard the handbag company obtained a Chinese patent in October 2003 for a bag design, but Louis Vuitton said it was too similar to its trademark design. It took the Chinese company to court in April The court said it had no jurisdiction over the validity of the patent, but could order the firm to stop using the design because it was being disputed.

Source: Bag maker sues fakers

via Shanghai Daily: National by on 3/19/08

China food safety agreement
Following a number of cases of contamination involving Chinese products imported from China, the United States and China have now signed an agreement designed to improve the safety of food exports.

Essentially, the document covers registration, certification and verification. It requires Chinese food and ingredient producers to register with local authorities, who are themselves required to share data with the Department of Health and Human Service (HHS), and it also requires the authorities to notify their counterparts of events affecting the food chain. It is also understood that the Chinese authorities are to develop an electronic tracking system to follow products from production to export.

Source:  www.functionalingredientsmag.com

SHANGHAI’S consumer prices continued to accelerate by posting a 5.9-percent increase in January, fueled mainly by food costs, said the Shanghai Statistics Bureau yesterday. The growth was slower than the national average of 7.1 percent, but 0.5 percentage point faster than the city’s figure in December which settled at 5.4 percent. “The rise of food prices remains the main driver of the city’s CPI growth,” said Liu Hui, an official with the bureau. Last month, food prices in Shanghai jumped 14.9 percent from a year earlier, contributing 4.9 percentage points to the overall index growth. In sub-categories, the cost of edible oil climbed 34.1 percent year on year, growing for the ninth straight month, while vegetable prices rose 12.9 percent from a year earlier. “Oil prices were boosted by increased demand during the Spring Festival and higher prices on the international market,” said Liu. “Vegetable price increases were mainly due to the unexpected snowstorms,” Liu added. To stabilize food prices, the city’s government has helped farmers to replant vegetables after the snowstorms and offer them more subsidies to cover the losses. Unlike previous analysis which said inflationary pressure was confined to food sectors, more products saw their costs rise last month except for traffic and telecommunications, entertainment and education. “It is worthy of attention that inflation is spreading into other parts of the economy than food,” said Li Maoyu, an analyst with Changjiang Securities Co. The costs of clothes grew 1.4 percent year on year in January, household appliances jumped 6.6 percent while house rentals increased 6.2 percent, the bureau said.

Source: Increase in food costs raises city CPI to 5.9%

via Shanghai Daily: Business by Wang Yanlin on 2/26/08