Trade mission signposts ICT openings in China

New Zealand tech companies seek to capitalise on Free Trade Agreement

New Zealand exports to China in the last two years have grown faster than to any other nation over the same period in this country’s trading history. Since the signing of the Free Trade Ageement between the two countries in 2008, exports to China have grown 143 percent and between October 2008 and August 2011 were worth $5.6 billion.

The ICT industry is keen to ensure it grabs a large slice of the pie. A second ICT trade mission to China took place last month, building on the inaugural mission led by ICT Minister Steven Joyce the year before. New Zealand trade commissioner Pat English, who is based in Guangzhou, says that last year the mission visited the capital Beijing and met the heads of various ICT companies while this year’s mission was centred around Chinese provinces where there is a high concentration of technology companies.

In the week-long visit, the mission visited Shanghai, Hangzhou in the Zhejiang province, Nanjing in the Jiangsu province and Hong Kong. Companies that took part were Datacom, Open Cloud, Pingar, Rakon, Tomizone, Pacific Fibre and Catalyst IT (Hong Kong only).

The mission’s “industry lead” was NZICT chair Bennett Medary, and Trade Minister Tim Groser was present for one day. Medary says the ministerial presence lends “practical political support”.

Medary says there was a telco focus to the trip, with the mission visiting China Telecom, China Unicom, China Mobile, Huawei and Alibaba (which Medary describes as “a quasi-Asian TradeMe on steroids focused on creating millions of ‘micro-businesses’”).

He says the size of the mission, around 18 people when visiting mainland China, meant that every company representative had the opportunity to tell their story.

“The trip demonstrated just how important it is to present ourselves as a unified industry and a cluster of world-class innovators (in this case in and around the telco space), especially when approaching huge offshore markets like China.”

Medary says there are around 10,000 technology companies and about 40,000 people working in ICT in New Zealand. This is compared to Chinese companies such as Huawei which employ 128,000 people, and the average age of an employee is 28 years old.

But once the Chinese executives learned about what New Zealand companies were doing they were apparently impressed with the innovation taking place here.

English says the Chinese are sophisticated business people, who put a high value on rigorous business processes and on observing guest etiquette. “Hospitality is massive here,” says English. “In New Zealand a couple of dried sandwiches and orange juice around a coffee table is lunch, with the Chinese its a full 13-course banquet.”

He says that while New Zealanders do the job of five people, in China five people do the job of one person. So it can be hard for businesses to take the time out required to get to know and understand the culture. Although hospitality ‘kiwi style’ is appreciated.

“I love it when delegations go down and the New Zealanders take them home for dinner for BBQ – that’s reciprocating in a Chinese way with Kiwi characteristics.”

The global financial crisis didn’t hit China as hard as the West because of its vibrant domestic market. English says the southern manufacturing provinces have, in 15 years, gone from 75 percent of production for international markets to 74 percent for domestic consumption. “That’s a 180 degrees turnaround,” says English.

Technically, China has a labour shortage, with the demand for labour outstripping the supply, he adds.

So there is plenty of opportunity, but it is not an easy market, English cautions. New Zealand companies wanting to export to China face a long, hard, expensive road.

“Most mistakes made in China start in New Zealand. Companies need to build their internal capability – do you have Chinese staff? Do you have people who can speak Chinese? Do you have people with an understanding of Chinese business culture. Are you well financed – China is an extremely expensive place to do business, the regulatory environments are complex.”

One business determined to make inroads into China is Tomizone, a provider of wi-fi systems. Founder Steve Simms has taken part in both ICT missions. The company was established five years ago and for the past three years it has had an office in China. But Simms says he doesn’t expect a return on the investment in China for another two years.

He says the company is taking a “softly, softly” approach to the Chinese market, which has been in its sights since Tomizone was launched. “Better to eat the meat of an elephant and not chase the mice,” is how Simms describes the company’s approach.

Simms says he was astounded by the sheer scale of campuses such as the Alibaba premise that this year’s mission visited. “I’ve been to the Google campus in the States and this just dwarfed that,” he says.

Simms says he’s not concerned about protecting his IP, because Tomizone has a “KFC approach”, that is “we give them 5 of the eleven herbs and spices and we keep the rest.”

Following the visit to mainland China, the mission visited Hong Kong, specifically the Cyberport, a cluster of technology-based companies and start-ups. Medary says Cyberport is owned by the Hong Kong SAR Government.

He says this is an opportunity for New Zealand businesses to set up a launching pad in Hong Kong before committing to mainland China.

Catalyst IT joined the mission for the Hong Kong leg. CEO Don Christie says the company already has a client based there and wanted to explore further opportunities.

“It seems to be a good fit for New Zealand companies. Similar scale population and economy-wise, good business and legal system and a cosmopolitan, open and friendly culture,” he told Computerworld.

“This was a useful first step for Catalyst. New Zealand Trade and Enterprise did a good job of inviting relevant people to the event and are doing a thorough job of following up with us and people who might be interested in our services. So, encouraging steps and well worth the effort.”

While companies covered the bill for their own accomodation and travel, NZTE spent around $50,000 on facilitating this year’s mission.

Medary says as a result of both missions NZICT is looking at establishing permanent links between the Chinese provinces and the local industry, in between specific trade visits. He says that basing missions around clusters of companies (that is, companies with a specific focus such as health IT or education IT) appears to work well.

A number of delegates from the ICT mission will be presenting at the New Zealand Technology Trade and Investment Forum in Auckland on September 26 and 27. The Forum is being hosted by NZICT as part of the Rugby World Cup.

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