New Zealand Herald March 2010
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10630015
Rich rewards behind China's door for those with a little patience
By Arran Boote
New Zealand businesspeople need to get over our beach, boat and BMW mentality, and get on with doing business in China.
Why? For a start, China will overtake Japan this year to be the second
largest economy in the world. Eventually, it will be No 1. It
officially had 8.4 per cent economic growth over 2009 - in a period of
global economic crisis.
Its people have come from poverty and are keen to make money. That
creates unlimited opportunity for New Zealand businesspeople, and with
recent trade agreements, it has never been easier to get established in
this marketplace.
In
November our governments agreed new closer economic partnership (CEP)
arrangements for Hong Kong and New Zealand. They also entered into new
CEP arrangements that provide further relief for wholly owned foreign
enterprises entering China via Hong Kong, such as new special tariff
relief and investment incentives.
The CEPs serve to make an already attractive gateway into mainland
China even more so. On top of strong foundations as an international
trade, business and financial centre, Hong Kong has no capital gains
tax, no withholding tax, no dividend tax, and no GST.
So what's in demand in the world's emerging No 1 economy?
The need for intellectual property services, systems, and design is
rapidly on the rise. Our own firm has a growing practice in Asia
advising non-New Zealand clients on business systems, tax matters, and
finance. The projects range from assisting a Chinese kiwifruit venture
to set up trading operations, to raising €57 million ($110 million) for
a Ukrainian company to establish its international operations. We are
advising shoe manufacturers in Xiamin city on financial systems and
mergers and we have also been consulted by officials of Guangdong
province on growth strategy.
With a population of 19 million, plus 80 million migrant workers,
Guangdong is a powerhouse. Its exports exceed that of Russia. Its
challenge is to maintain 10 per cent growth in an environmentally
sustainable way. It wants to move up the production chain from low cost
to high tech. The other item on the agenda is they now realise that an
economy totally focused on exports leaves them subject to global
problems, so they want to emphasise domestic supply.
Professional services, environmental services, education, and
agriculture are all sectors making headway in China. There are also
great opportunities in design and manufacture. New Zealand business
such as Orca - and many others that wish to stay under the radar to
maintain a competitive advantage - are enjoying huge success with their
Chinese operations.
I met the New Zealand owner of one company who is running a small
business, designing and manufacturing in China with a trading arm in
Hong Kong. It is turning over $800,000 a year. There are dozens of
those types of businesses.
Beyond making use of Hong Kong as an entry point, the other important
piece of strategic know-how that New Zealand businesses must learn is
patience. You simply can't get used to China until you go there many
times, and when those visits pay off with a signature on a contract,
that may only be the start of negotiations. But the benefits from
patience, and perseverance, will be worth it.
A tax partner with O'Halloran HMT based in Auckland, Arran Boote
is an executive member at HKNZBA. Arran spends a significant amount of time in Asia and has helped numerous New
Zealand businesses establish manufacturing opportunities and trading
operations in China, via Hong Kong. He also advises non-New Zealand
clients on business systems, tax matters, and finance.
About HKNZBA
Hong Kong
and New Zealand are strong trading partners with two way trade currently worth
around $823 million. At the end of November 2009, exports were up by 14.7% on
the previous year. NZ and HK have agreed to a Closer Economic Partnership, which
is expected to drive that growth further.
The Hong
Kong New Zealand Business Association (HKNZBA) has been helping foster business
links since it was founded in 1988. Membership has grown to include major
corporates, SMEs and individuals, some whom have joint membership with its
sister organisation the New Zealand Chamber of Commerce in Hong Kong.
HKNZBA works
with ‘Hong Kong Inc.’- Hong Kong Trade Development Council, Hong Kong Economic
and Trade Office, Invest Hong Kong and Hong Kong Tourism Board – to provide its
members with a solid network of contacts in Hong Kong and substantial knowledge
databases.
Similar links
are in place with the Ministry of Foreign Affairs and New Zealand Trade and
Enterprise.
HKNZBA is a
member of the Hong Kong Federation, a unique network of 32 Hong Kong Business
Associations in 24 countries with over 11,000 individual associates, which
offers membership advantages in Hong Kong. HKNZBA welcomes new members
with business links with Hong Kong.
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