Speech Notes 8pm, 28 February 2002

Polo International Chinese trade seminar, Auckland

Heng Tai chairman Lam Kwok Hing, chief executive Chu Ki, Ken Eagle, Henry Ho, Jock Maclean, Heather Baigent, Ladies and Gentlemen: thank you for the invitation to speak tonight.

It is particularly timely, as I am leaving for a two-week trade mission to China on Sunday.

It will be the second time in two years that I have led a trade mission to China: last year, it was to Shanghai, Xi'an, Chongquing, Chengdu, and Guangzhou; this year, I am visiting Beijing, Harbin, Dalian, Qingdao, and Shanghai.

China is a key market for New Zealand. Personally, I believe this country's future lies with its relationship - trading, economic, and social - with North Asia.

Having said that, China is not an easy market. Nor is it one market. Each province or region has its own characteristics: it is certainly not "one size fits all".

New Zealand exporters need to plan their China strategy carefully, identifying target markets, researching the opportunities and planning their market entry. It is also highly competitive.

The more westernized Chinese cities are now very sophisticated. In Shanghai, the main shopping centres resemble Hong Kong and Singapore, with up-market malls and all the top brands.

A growing middle class has disposable income and a desire to experience new things. Wealthy Chinese are now travelling overseas and bringing back new ideas and tastes. They are also sending their children to overseas schools and universities, which in turn leads to cross-fertilization of culture and life-style.

Last year, about 50,000 Chinese tourists visited New Zealand taking back photos, souvenirs and experiences. Thousands of students from China are currently studying in New Zealand, creating a positive impression of our country.

Chinese people are developing a taste for western consumer goods, such as jams and spreads, cereals, energy drinks, ice-cream, cheese and biscuits. And they have the money to spend on imported luxuries.

New Zealand has a reputation as a "clean, green and healthy" environment. Chinese consumers are rapidly becoming more discerning and actively seeking out products with health or environmental benefits.

I believe New Zealand is well-thought of in Chinese government circles. We have talked straight with their government on issues where we have had concerns, but we have also maintained a close working relationship, particularly on trade and economic issues. This is acknowledged and remembered.

Last November, at the World Trade Organisation meeting in Doha, Qatar, China finally became a member of the WTO, sixteen years after first lodging their application.

We were the first member of the then-GATT to complete our negotiations on China's accession package. This is something the Chinese administration remembers and I had a warm and friendly meeting with their minister at Doha.

Joining the WTO is good for China. It means that they are a part of the world trading system. They don't have to beg for access, they don't have to go through annual embarrassment of arguing their case. They have market access as of right.

We believe membership of the WTO confirms a trade regime based on international rules and will lead to further opening up of China's markets.

China's WTO membership is good for New Zealand too.

The package agreed to, and introduced on January 1 this year, means New Zealand exporters save about $55 million a year every year at current trade levels from now on because China had agreed to reduce tariffs on New Zealand products when it got WTO membership.

As part of its membership package, China had negotiated an agreement with New Zealand that included significant tariff reductions, improved access for several products, especially wool and forest products, and opened the door for more trade.

In the food and beverage area, there are massive opportunities for niche products, differentiated by high quality and our "clean, green and healthy" image.

The Chinese authorities have taken a strategic decision to improve the nutritional status of their people. One result of this is a number of schemes akin to the "milk in schools" programme New Zealanders of my vintage remember from our childhood.

But China, although she is self-sufficient in food overall, cannot realistically expect to supply, from domestic sources, winter and summer, fresh whole milk to all children. Who else can help more reliably, more safely, and more deliciously, than New Zealand, with blends involving fresh local milk, reconstituted powders, and flavoured drinking yoghurts that children love?

We also benefit from novelty - in markets such as Shanghai, consumers are always looking for something new and different.

In 2008, Beijing will host the Olympic Games. This is seen by many as recognition of China's place in the international community and is already stimulating huge interest in foreign goods and services - from learning English to having toast for breakfast. New Zealand needs to be in at the beginning of this marketing boom.

While there are many opportunities, China still remains a difficult market. Tariffs may be lower, but non-tariff barriers are major. Regulations abound and interpretation and implementation varies depending who you are dealing with.

New Zealand exporters need reliable partners in China who can help them with market research, with finding their way round market entry regulations, with making the right contacts to ensure goods get on the shelves, and who will provide support over the long haul. It is not a market for the naïve or for those just out to make a quick buck.

Trade New Zealand should be your first port of call. People like Jonathan Watt here in Auckland have worked in China and can give invaluable advice. Trade New Zealand also has offices in Beijing, Shanghai and Guangzhou who can provide in-market support, including company checks and market research.

But nothing is as effective as visiting the market yourself, seeing where your goods are going and getting a feel for the rapidly changing commercial environment.

China is a market - or series of markets - of huge opportunity that we as New Zealanders cannot afford to miss.

Thank you.

Office of Hon Jim Sutton

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