Robert and Andrea Darroch in Shanghai
In the past 12 months, CEO Robert Darroch of Napier’s Future Products Group (FPG) has spent about 20 working days in China. He started doing business in China in 2006.
“The only ones who are successful [in China] are the ones who have made more mistakes than the others.” robert darroch Amanda Liddle replied: “Relationships. Relationships. Relationships. Don’t just go over, set up your distribution channel then leave it to the agent or whoever is working for you to run. You need to keep going back, visiting you customers and understanding the market.” HB Exports to China It’s frustratingly difficult to get one’s arms around the scope and size of Hawke’s Bay’s trade to China today (this
Percentage of exports that are exported to China by trade type Dairy Products
19%
Hides, Skins & Pelts
40%
Lamb
23%
Logs
59%
Sawn Timber
47%
Wine
9%
Wool
52%
Total Exports (tonnage)
27%
Source: Napier Port
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Bee in the know ~ sep/oct 2013
Darroch easily qualifies as one of Hawke’s Bay’s most astute China business practitioners. Does he know the ropes yet? “The more you go, the less you know”, he replies. “The only ones who are successful are the ones who have made more mistakes than the others.” Lawrence Yule has made 18 visits to China during his mayoral tenure, including two so far this year. He’s totally hooked on our China trading potential. Ngahiwi Tomoana, chairman of Ngäti Kahungunu Inc has made ten relationship-building trips to China over the last three years, and has hosted six Chinese delegations in that time. His China agenda is even more ambitious. And these veterans are joined by a small but growing band of Hawke’s Bayto-China road warriors, slowly gaining a toehold in that vast market. The spurt in New Zealand’s trade with China began with the signing of the Free Trade Agreement (FTA) between the two nations in 2008. Today’s exports to China are valued at $5.8 billion, with $1billion growth for each of the last four years. By 2019, 96% of NZ exports to China will be tariff free. Importantly, this was the first FTA China had signed with any developed country. As such, the agreement carries huge political symbolic significance in China. And in China, where political favour leads, commerce follows. The higher the stakes, the more desperate the currying of political favour. Indeed, the NY Times recently reported in an article titled, Many Wall St. Banks Woo Children of Chinese Leaders, “bankers and lawyers said the practice of hiring the children of government officials was so widespread that banks competed to see who could hire the most politically connected recent college graduates.” That’s the extreme. However, to a person, every Hawke’s Bay exporter to China stresses that building personal relationships, while important to doing business in any situation, is vitally important with their Chinese associates. Asked about key ingredients for being successful in China, Export NZ’s
article is focused on our exports only). Overall, our export volume through Napier Port (all destinations) is about 3 million tonnes per year; 27% of that goes to China. However, businesses are reluctant to disclose commercial information, and government data is not broken down by regions. Our chief categories of traded goods to China present no surprise – logs and timber products, lamb and wool, hides etc, and wine. Trade types not in the adjacent table are inconsequential in current volume. The HB companies establishing our China presence include more familiar names like Ovation, Progressive, Apollo Apples, numerous winemakers, and less familiar companies like CSI Foods (processed veggies) and Darroch’s FPG. The consensus amongst those interviewed is that fewer than 100 Hawke’s Bay companies are presently trading in China. A major project of Business Hawke’s Bay (BHB), aimed at identifying Hawke’s Bay’s ‘export ready’ companies, and within that group, those pointing toward China, has been delayed awaiting the appointment (recently made) of Business HB’s new chief executive, Susan White. White says “international trade development including China is a high priority” and adds: “The goal for the China trade development project is fundamentally about supporting and accelerating market entry for those businesses who aspire for growth from China, or indeed other international markets. The theory is straightforward: identify interest and ‘export-readiness’ amongst potential Hawke’s Bay exporters to China, assist with building their trading know-how, identify collaboration opportunities, help make introductions into the market. In practice, not so easy. As one experienced China trader said: “Many Hawke’s Bay companies would have difficulty exporting to the South Island, let alone China.” Without exception, practitioners BayBuzz interviewed stressed the complexities of getting started in the vast and culturally unfamiliar China market. Most agreed that China was not the market where an eager new exporter should lose their exporting virginity. Robert Darroch, whose FPG Shanghai has earned ‘foreign-owned enterprise’ status in China, notes that even with a Chinese manager on the ground it took his company three years to sort out its supply chain, and as long to gain access to the lower ‘China price’ (as opposed to the price charged outsiders) on goods and
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