China country brief

In 2008, New Zealand became the first and only OECD country to conclude a Free Trade Agreement (FTA) with China.  Since the signing of the FTA, New Zealand’s exports to China have grown by 152 percent, a figure which substantially exceeds pre-FTA modelling of potential export growth.

Economic reforms and the opening up of China to the outside world have transformed Chinese society, and in 2010, China overtook Japan to become the world’s second-largest economy in terms of gross domestic product (GDP).  For New Zealand businesses this transformation provides unprecedented opportunities.

New Zealand’s exports to China are predominantly primary sector products such as wool, dairy, meat, seafood and wood products. 

Opportunities

• The New Zealand China Free Trade Agreement will over time eliminate tariffs on 96 percent of New Zealand exports to China.

• A growing middle class, that is well educated and familiar with non-Chinese cultures, is aware of latest global trends and has high purchasing power.

• Rising disposable incomes means Chinese urban consumers can afford better quality products and there is a growing appreciation of Western food.

• Demand for healthcare and related products will continue to rise. 

•  Most interest from Chinese looking to study abroad is around undergraduate, postgraduate and vocational study. New Zealand providers, especially tertiary institutions, are increasingly being asked to deliver programmes in China.

• For New Zealand companies looking to manufacture in China, the move should be based on taking a strategic international position, not on cutting costs. 

Challenges

• Companies must take time to research and understand the Chinese market before making any commitments.
• Companies entering China need to ensure that management is 100 percent behind the approach. They then need to resource the move with both the right people and sufficient funds.
• There is no ‘China market’. China consists of many different markets broken down by region, city and niche.
• Costs and management issues around contract manufacturing in China are often not appreciated.

Cultural and business tips

• New Zealand Trade and Enterprise recommends travelling to China on a business visa. In most cases exporters will require a letter of invitation from a Chinese company.
• Business cards are an absolute must in China.
• Building up a good relationship is important for conducting business in China.

Learn more about what China's five year plan means for business on the McKinsey Quarterly website.