20 March 2009
by Rod MacKenzie, Group General Manager – North Asia, New Zealand Trade and Enterprise.
Even the long queues of excited mainland Chinese lined up outside the Louis Vuitton and Chanel stores on Hong Kong’s Canton Rd can’t disguise the underlying difficulties that Asian businesses are experiencing.
On the one hand it could be argued that the continuing surge of consumerism in Hong Kong and, more recently, the masses of Japanese travelling to Korea to spend up large on luxury goods, are signs that there is still a great deal of optimism in the North Asia region. But, like many aspects of commercial life in this part of the world these are distractions, and probably temporary ones, that belie the true nature of the situation.
Put a group of Hong Kong or Chinese business-people in a room and ask them how they see the next 12 months and they will all put their heads down and say that things are going to get harder before they get better – but not that hard that they’re ready to throw in the towel. Try the same thing with a group of Japanese or Koreans and the atmosphere is likely to get much gloomier.
To some extent this is a factor of the different approaches that the respective countries are taking to the worsening economic environment. Of all the economies in the region it is the Chinese and Hong Kong Governments that are taking the most aggressive and substantial steps to maintaining confidence and stimulating activity and, by and large, people are paying some attention. Even the gloomiest of predictions for the Chinese economy, after all, has it growing at 6.5% for the next 12 months. The Chinese themselves are hoping for 8%.
Nevertheless, the symptoms of a receding market can be seen everywhere. Even in a country with 1.4 billion people it’s hard to ignore 20 million being put out of work in the space of a single month.
The practical aspects of doing international business are also showing signs of stress. Payment terms from some of the leading businesses in the region are being blown out, in some cases to 120 days or more. Letters of credit are indisputably harder to get and orders are being cancelled or scaled back across the board. A little more insidiously there are signs of self-initiated barriers to trade being erected in some parts of China where the smallest details are being used as excuses to reject imports or hold them up for unsustainable periods.
The rising interest in North Asia amongst New Zealand companies has, therefore, to be tempered with these realities.
There are ways through this although none that are particularly easy or straightforward.
First, in this part of the world when the going gets tough the tough stay put. Relationships are the rock on which successful business is achieved throughout Asia and friends don’t abandon each other in hard times. In China substantial guanxi can be achieved by hanging in with your suppliers and customers when all are experiencing the same strictures.
Secondly, this is the time for greater diligence, attention to detail and meticulous planning. Very little happens spontaneously here at the best of times and right now caution is fundamental to every business decision.
And thirdly this is the time for New Zealand companies to play to their unique strengths. Generally speaking New Zealand origin is seen as a significant advantage, particularly in food & beverages and natural products (despite what has been reported in the NZ media over recent months) and there is no better time to be making the most of that.
There are, right now, New Zealand businesses that are doing very well in North Asia. In every case they are adopting these approaches and, for the meantime anyway, are maintaining solid volumes and reasonable margins.
Rod McKenzie is based in Hong Kong. This article was first published in the Independent Financial Review.
