Benefits for N.Z. in China’s trade policy

Press, 20 August 1982, Page 12

Benefits for N.Z. in China’s trade policy

This is the second of three articles by BRUCE ROSCOE, Tokyo correspondent of “The Press,” who visited China at the invitation of the AlLChina Journalists Association to mark the tenth anniversary of the resumption of diplomatic ties between the People’s Republic of China and New Zealand.

New Zealand is riding on the wave of a Chinese Government move to foster consumerism, a policy shift that is opening doors for nations wishing to sell products to the world's most populous nation. For example, China may not need to import wool, but someone in the Government appears to have made the decision that if consumers want woool, they can have it.

The result for New Zealand: wool sales to the People's Republic last year totalled nearly SUSIOO million, a 100 per cent increase on 1980 sales. The new policy of catering to a certain level of consumerism stems from an acute awareness of the need to improve living standards, and is being facilitated by higher foreign exchange earnings from more exports. A quick glance through China's economic indicators in a recent edition of the “China Trade Report” bears out efforts to satisfy consumer demand. Last year, for example, China produced 40 million radio sets, 35 per cent more than in the previous year, 623 million cameras (67 per cent more) and 17.5 million bicycles (up 34 per cent).

New Zealand’s trade with China, though less than 0.5 per cent of China’s global trade, in the space of just 10 years has leapt to about SNZI7O million in exports, and about SUS3S million in imports.

The great New Zealand leap forward into the Chinese market does not mean that a big range of New Zealand-made products is filtering into Chinese households. Probably no New Zealand products ever will, at least not for some decades. The Chinese Government is managing at least two economies, the first of which is the production of basic goods and services priced within range of an average salary of roughly JNZ3O a month. Obviously, New Zealand pro-

ducts cost too much to fit into an economy of that scale, and even if a saleable item were produced that could turn a profit from such a market, what New Zealand industry could meet a demand expressed not in hundreds or thousands of a particular item, but in millions or tens of millions? China is a nation,of more than one billion people, onefifth of mankind, but it is by no means a market of one billion people. For New Zealand, the partial exception to this are the products- China processes from wool, hides and skins — these should be available to at least some Chinese city residents — and light machinery that is bought by the central or provincial governments for a form of heavily subsidised lease to communes or factories. It is the second Chinese economy that New Zealand has penetrated most, the economy that must provide for nearly eight million tourists a year (including Hong Kong, Macau and overseas Chinese) for whom goods and services are priced not at domestic but at international levels within China. ,

Take, for example, the lunch menu of the ultra-modern Jianguo Hotel in Peking, which offers a New Zealand sirloin steak for about SNZ2O (more than twice the price of any other dish on the menu) or. the hotel rooms’ shaving plug fittings, from the Christchurch firm PDL, Ltd.

This economy also imports raw materials, including New Zealand wool, for processing and re-export. Both the tourism and re-export industries are vital for China, serving as a principal source of foreign exchange, for which China admits it is desperate. After visiting a shop in Peking for foreign tourists and having the special bank notes issued to foreigners virtually snatched

from one's hand by the cashier, one realises how desperate.

A deputy director of the China Council for the Promotion of International Trade says that because exports this year are expected to grow by at least 10 per cent, so will the volume of imports. China was trading in order to be able to afford more overseas products. “We won’t keep the money in the bank. We'll buy more," he said. This meant "there must be an expanding market for New Zealand."

In an “informal exchange of views,” a woman official of China’s Ministry of Freign Economic Relations and Trade, who supervises commerce with New Zealand, said her ministry needed more catalogues of New Zealand products. “We are aware only of about 12 New Zealand commodities, and we are hoping to find new commodities," she said.

She told me her ministry was not worried that the bilateral trade was running more than five to one in New Zealand’s favour. China's policy was to balance, global,- not bilateral trade,- she said. (China’s world trade last year was almost perfectly balanced, with imports of $U521.059 billion, and exports of $U521.053 billion.) She said New Zealand in a short time had enlarged the scope of its exports from just wool and tallow, to pulp, paper, timber, hides and skins, and, of late, dairy products (used mainly in confectionery and for the hotel industry), and could expect to vary the range more.

The trade council cites potential export growth areas as timber, paper, pulp and logs,

whose import tariffs were reduced this year. New Zealand’s log trade ’ broke down over price disagreements last year, and timber exports this year appear to have ground to a halt.

Good long-term prospects are seen for radiata pine, however. Although the wood still is regarded in China largely as a packaging rather than building material, a New Zealand trade commissioner in Peking believes that a “great market" for pine will appear in about eight years time “if New Zealand gets to work developing it now.”

Dealing with China, though, is like dealing with a great wall of government. As the State is the only purchaser, governmental trading corporations can bask in the knowledge that all foreign sellers can come knocking on only one door — theirs. In New 'Zealand's case, where more than one concern is selling the same product (wool and pulp, for instance) a sure method of winning the best possible terms of trade is to adopt a unified price and closely co-ordinate sales approaches. An arguably surer method in dealing with China is to use China's own system: appointed single sellers for individual products.

Such is not a New Zealandlike method, but unconcerted, individual approaches, which typify more the New Zealand style", can only play deep into the hand of. the celebrated Chinese strategy of setting as many sellers as possible in competition against one another.

There are also formidable bureaucratic and technical restrictions in selling to China. Tariffs are astronomical in manv cases (about 80 per cent for New Zealand tallow, for example), though China s reported application for observer status on the Geneva-based General Agreement on Tariffs and Trade may signify an intention to conform to more internationally accepted tariff levels.

Perhaps the most inhibiting restriction of all is the frequent unwillingness on the part of government traders to offer anv estimate of the expected demand for a particular product.

“It is too early to talk about next vear's demand as import plans’are published only at the beginning of each year.' is a typical response in Peking.

As a result, manufacturers producing for short-term export to China can put their business at risk each time they switch a production line into gear.

The trade ministry official admitted there were problems in trade with New Zealand, which China would “try its best to solve” but she also held the view that it was “normal to have problems when you are making progress."

One such problem may relate to shipping, all of which is undertaken by Chinese or Chin-ese-chartered vessels using Chinese crew. New Zealand shipping cannot hope to compete with Chinese operating and labour costs, but if the two-way trade continues to expand at its past rate (17-fold in 10 years), New Zealand seamen "inevitably will argue that they are entitled to a share.

Chinese trade officials, some of whom have a remarkable degree of consciousness of New

Zealand as an "expert" farming nation and farm equipment supplier, emphasise most that a pressing need of their nation is equipment to develop agriculture, under a broad policy of increasing investment in light industry, spending less on heavy industry, and boosting agricultural production.

New Zealand can help China realise its agricultural goals, the officials say, by supplying equipment suited to Chinas needs. Items such as milking machines, whose demand is growing because of a big rise in milk production, are seen as obvious choices for New Zealand exporters.

China, for its part, has in New Zealand an outlet for more than 50 categories of products, with clothing, manufactured articles, toys, woven fabrics, tea. and chemicals looming largest.

The trade council believes that if New Zealand had more information about Chinese goods, such as machine tools, they would have a quick sale. Price competitiveness is China's forte, and its range of products is becoming more sophisticated, a trend witnessed by its first export of computers (to West Germany) last week.

China, at least, is finding explosive potential in New Zealand for one range of products.

China's sales of fireworks to New Zealand last year almost quadrupled to $NZ341.800, from the $NZ92,814 worth it sold the year before, suggesting that "the People's Republic has staged a coup d'etat in suddenly ousting other suppliers from the New Zealand market, probably Taiwan and Hong Kong. From the people who invented gunpowder, what else could you expect?