(Yicai) July 29 -- New Zealand companies are optimistic about the Chinese market, especially in terms of long-term growth opportunities, according to the annual report of the New Zealand Business Roundtable in China.

Seventy-six percent of the 60 New Zealand firms doing business in China polled by NZBRiC have a positive view for the coming year, while 93 percent expressed optimism about the next three years, according to the survey published on July 25.

NZBRiC is a non-profit organization that brings together parties who share a common interest in the success of the trading relationship between New Zealand and China. In the past few years, it also supported New Zealand businesses in the China market through challenges created by the Covid-19 pandemic.

"The Chinese market remains an important and profitable opportunity for New Zealand businesses," said Mark Anderton, chairman of NZBRiC. "China's scale and breadth, and New Zealand's market access offer growth prospects which are hard to find elsewhere." 

E-commerce, profitability, and the regulatory environment are other areas where the long-term view is significantly more positive than the short-term one. The percentages of New Zealand companies bullish about China in the above three areas in terms of growth opportunities in the next one year were 33 percent, 55 percent, and 26 percent, respectively, compared with 67 percent, 85 percent, and 48 percent in the next three years.

Some 83 percent of the surveyed businesses ranked China in their top three priorities for global investment plans, with over a third saying it is their number one investment priority.

Aligned with this, 84 percent of respondents said they increased or maintained total investments in China in the past three years. Eighty-eight percent intend to hike or maintain China investments in the coming three years, with one-fifth planning to significantly increase investments.

As a result of their expansion plans in China, 61 percent of New Zealand companies anticipate increasing their China-based headcount in the next three years. Meanwhile, 37 percent of these firms have experienced workforce growth in the past three years.

In terms of China sales revenue, two-thirds of the survey respondents maintained or increased their sales revenue in the world's second-largest economy in the first half of the year from a year earlier, despite the challenging economic conditions, according to the NZBRiC.

"China was our largest country market,"Ivan Kinsella, Vice President of Corporate Affairs atthe China head office of New Zealand kiwi producerZespri, told Yicai. "China was our highest-returning market last year and also the one where we are seeing the fastest growth.

"This year we're expecting a further 40 percent increase in our sales volume for the market" Kinsella noted.

New Opportunities

In addition to opportunities from well-established industries, New Zealand companies can also focus on new growth points in the Chinese economy.

While not one of the top opportunities that New Zealand companies are prioritizing, 60 percent of respondents said they are experiencing increased interest from customers and partners around sustainability, the NZBRiC report showed. This increased level of interest is likely linked to China setting a target to peak its carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. 

"As a result, organizations are accelerating their green and low-carbon transformations, and initiatives are being implemented to encourage the public to choose green and low-carbon products," Anna-May Isbey, executive director of the NZBRiC, told Yicai.

"There is also a significant opportunity in the field of health and wellness," Isbey added. “While there may be some cautiousness regarding the short-term outlook, there is a relatively high level of confidence in the long-term prospects.”

Chinese consumers are becoming more conscious about health, especially since Covid, she explained. Therefore, there is a rising demand for supplements and different types of food and beverages to complement healthy lifestyles.

"A number of different supplement brands from New Zealand are selling and growing in China," according to Isbey. Many New Zealand dairy, beef, and fruit companies are also well placed to complement a growing healthy Chinese lifestyle. 

"There are also opportunities in China from the changing demographics" Isbey said, adding that a more aging population has different needs for some products, and New Zealand companies are focusing on that.

The growing middle class is also bringing about many opportunities for New Zealand businesses.

Recent Chinese policy directives indicate that the central government is planning to share the collection of consumption taxes with local governments, which would stimulate local consumption while shifting away from the focus on local production, Xing Zhaopeng, senior China strategist at Australia and New Zealand Banking Group's China economics team, told Yicai.

Challenges

While significant opportunities exist, the NZBRiC survey also found that concerns exist around a number of prominent risks and challenges in the Chinese market.

"A slower than anticipated post-COVID-19 economic recovery, tepid consumer confidence, and a fragile property market are also top of mind for businesses," said Anderton.

The survey showed no new entrants in the Chinese market in the past year. This is reflective of the growing challenges of establishing in China.

New Zealand firms recognize the significant profits to be gained in China, but the set-up costs and the capabilities required to conduct business in the country are challenges that many New Zealand small and medium enterprises may not possess, Isbey said. Therefore, some SMEs opt for more accessible markets, like Australia or Southeast Asia, before eventually entering China, she added.

"In five to 10 years' time, SMEs may have the capabilities and expertise to take on China properly," Isbey pointed out. “ New Zealand companies already in China see continued opportunities in the medium-to-long term.”

Another growing concern for New Zealand business is the fierce competition in the Chinese market, according to the NZBRiC survey. Twenty-nine percent of the respondents cited increasing domestic competition as their primary risk, and nearly three-quarters ranked it within their top four risks.

With regards to the sustainability opportunities in the Chinese market, NZBRiC noted that despite the developments in this field, many New Zealand businesses still face challenges in converting the increased interest or awareness from Chinese customers and partners into tangible value or stickiness in relationships.

Moreover, New Zealand companies in China also face challenges in recruiting suitable talent because of talent shortages, hiring freezes, and layoffs in the Chinese labor market, according to Kourosh Asghari, vice president of Cornerstone Global Partners and head of the recruitment agency's consumer team.

Editor: Futura Costaglione