Sharing pitfalls of trading in China

Flagstaff Alpacas owner Andy Nailard, of Dunedin, was one of the speakers at the Central Otago District Council's second export forum for people interested in sending product to China. Photo by Yvonne O'Hara
Flagstaff Alpacas owner Andy Nailard, of Dunedin, was one of the speakers at the Central Otago District Council's second export forum for people interested in sending product to China. Photo by Yvonne O'Hara
If you grab the dragon by the tail, make sure you have a plan for the teeth, says New Zealand China Council executive director Pat English. He was speaking at the Central Otago District Council's second export forum in Alexandra last week.

It focused on exporting to China and speakers included Flagstaff Alpacas owner Andy Nailard, of Dunedin, and SBS regional manager Patricia Muir, who also had a business exporting fresh fruit and vegetables to China.

The CODC's economic development manager Warwick Hawker said China was New Zealand's second largest trading partner, ''and we haven't seen nothing yet''.

''We are starting to see massive growth,'' he said.

Mr English said he spent 12 of the past 16 years in China and also worked on the New Zealand Free Trade Agreement (FTA). China was the second largest source of tourists and foreign students for New Zealand.

''The key for China is it can't feed itself and it has 6% of the world's arable land,'' he said.

''There is a growing middle class that is adding 10 million to its number a year.

''They need protein and need to secure access to protein.''

He said it was important to have the strongest possible relationship between New Zealand and China and to ensure that relationship achieved its potential.

''However, there were issues that potential exporters needed to consider when looking for markets. Business there was over-regulated and complicated.

There was a ''discriminatory enforcement of regulations''.

''It is an increasingly sophisticated, complex market and not a cheap place to do business,'' he said.

One of the disparities between China and New Zealand he said was that New Zealand had a high level of trust [when doing business] and a low level of regulation compared with China, while the reverse was true for China - a low level of trust and a high level of regulation.

He advised potential exporters to have representatives on the ground, as well as extensive supporting documents for products.

''If you fill out a document wrong it is like shooting yourself in the temple.

''You have to get it right because if you have not got it right, it will hurt.

''It is an expensive place to do business with transport, accommodation, licensing costs and they are increasing all the time.''

Mr Nailard, who had up to 300 alpacas near Dunedin, said they had received an approach by China to export alpaca fibre-filled duvets there as they liked the authentic product and the complete New Zealand package.

''About 20% of of our sales are overseas,'' Mr Nailard said.

However, he identified the lack of scalability of alpaca product as there were only about 25,000 alpacas in New Zealand and therefore a limited supply of fleece as a key limiting factor.

They realised it was important to establish relationships and an online presence was also important.

They visited China to explore the market and held meetings with potential buyers.

As well as ensuring they were punctual and brushed up on their small talk skills, they realised meetings were going to take far longer than expected.

''We were complete amateurs at negotiations.

''The biggest mistake was when we said we were going to see the competitors later that day and [by saying that] we lost face.''

In addition to the CODC, the Regional Business Partners Central Otago assessor Tara Druce and SBS Bank also hosted the forum.

- by Yvonne O'Hara