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China investment demands high level understanding

8 September, 2006

China investment demands high level understanding

The prospect of an early free trade agreement between New Zealand and China lends urgency to the need for New Zealand companies to get and maintain a high level understanding of Chinese business practices says veteran China trader Victor Percival.

“During the 50 years I’ve been trading with China a most notable feature has been the inability of major New Zealand companies to secure their place in China after investing large sums of money on business projects there.

“There is a long list of joint venture projects that have been tried and failed including entry into steel making and meat processing,” he said. “A common factor has been difficulties in sorting through practical on ground issues with Chinese partners and an exhaustion of funds in working these issues through

“It suggests to me that an essential element for the future of business dealings between the two countries is a good practical understanding at director level of the market, its business practices and varying cultural perceptions. It is not an easy market place.

“Responsibility for oversight of executives charged with bringing projects to a successful conclusion demands a sharp first hand knowledge of the market in action. This is because our Kiwi companies that have failed to consolidate a hold in the market after investing large sums have relied on their own New Zealand-based executives to see it through.

“They are right to have their own people in the thick of it. But the assessments these representatives make of complications and business differences need to be thoroughly tested by directors with a close understanding of the market. That is the lesson of past failures. Shareholders should take account of the need.”

Mr Percival, a former President and Honorary Life Member of the China Trade Association, played a lead role in achieving the sale of titanomagnetite from New Zealand iron sands to Chinese steel mills and the sale of a Fisher and Paykel white ware production line to China.

ENDS

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