Victor Percival’s faith in trade with China is now paying dividends

Press, 2 August 1985, Page 17

Victor Percival’s faith in trade with China is now paying dividends

By

KEN COATES

Victor Percival, of Auckland, is very much an old China hand. He foresaw New Zealand’s now-ex-panding trade with the People’s Republic, and when he was hooted off the air in a radio talk-back 30 years ago as “a bloody communist” that was part of being ahead of his time. As a young executive of a trading company in the 19505, he saw New Zealand’s future in Asia rather than in Europe. He resolved trade should be built up with China

— the most backward and most populous of all countries in the region.

It was not a popular road a few years after the communist revolution, but now, after varying success and having learned much about doing business with the Chinese, Mr Percival has China’s new open-door policy and New Zealand’s urgent need for new markets on his side.

He predicts that our exports to China will rapidly increase, especially wool, pulp and paper, live animals, and dairy products. In 1990, China will be this country’s fifth largest trading partner, behind Japan, Australia, the United States, and Britain.

In the early days, Mr Percival was virtually on his own as New Zealand did not recognise the warravaged country and its regime led by Mao Tse-tung.

The then Minister of Industries and Commerce, Mr Eric Halstead, offered little encouragement. The New Zealand trader would cross the border at his own risk, and once inside China would be on his own. If anything went wrong, the Government would be powerless to help. Anxiously, Mr Percival asked the Chinese what would happen if the New Zealand Government caused him embarrassment, or if a war broke out. They told him he would be an invited guest and they would guarantee his safety until he recrossed the border. He obtained from an Australian businessman friend the address of the China National Sundries Import and Export Corporation of Shanghai. The necessary invitation to visit China to do business was agreed and in 1956 he arranged imports of textiles and food products, such as tinned mandarin oranges, sold through Woolworths. On this second visit, two years later, he took two maps, one of the world showing where New Zealand is, and the other of this country with the main ports named. “The Chinese refused to ship through Japan because of strained relations after the war, Hong Kong was vetoed because Taiwan was also using the port; so eventually our goods were shipped through Singapore,” recalls Mr Percival. By 1958, involved in the export of tallow and wool, he signed the first counter trade or compensatory agreement whereby New Zealand bought a certain volume of Chinese goods in return. “We were the agents or en-

trepreneurs. When I returned, I was asked to go on radio talkback,” recalls Victor Percival. “When asked about living conditions for the Chinese, I would say they were improving. Then people would phone in and demand that that ‘bloody communist’ be taken off the air.” Business people encouraged him to stay with China, but they were not game to go out and trade themselves. It was all too new, and too complicated as regards finance, payments, and shipping. Normal commercial systems were not geared to trading with China. Mr Percival can speak some Mandarin, the official national language. When he first began visiting China he tried to learn various local dialects and admits to becoming quite confused. He endured a period of “trial and tribulation” until he passed the test and became accepted. In the past, all business had to be done the Chinese way; today there are changes, and a rapid adoption of Western business practices. Clear specifications are being given, products are being rigidly examined before they leave the country, more attention is being paid to packaging, acknowledged international letters of credit are

being accepted, and patents and trade marks are being honoured. China is also protecting Western firms against technology introduced into one part of the country being transferred to another region; a form of trade piracy. Nike sports shoes, for example, are being manufactured in four big factories in China, but regulations prohibit other provinces from borrowing the technology, design, and know-how to make the shoes as well. What are New Zealand’s chances of increasing its trade with this vast nation? Late last year, Victor Percival accompanied the trade mission led by the Minister of Overseas Trade, Mike Moore. It was clear then that the one material China needs in increasing quantity is wool. “The Chinese, with more than a billion people, have decided to mix wool in with cotton, of which they are a major producer, silk, and a variety of man-made fibres,” says Mr Percival. Since the mission’s visit, several woollen industry groups from China have visited New Zealand. “The second most important product in the future for New Zealand will be pulp and paper,” predicts the trader. “The Chinese are educating their people better and this

requires more paper for textbooks. “At present, people almost have to fight at the street stalls to get a copy of a daily newspaper. When they develop their newspaper industry using modern technology there will be a colossal demand for paper. “The pulp and board used in modern packaging is also replacing wooden boxes and cartons.” There is a four-to-one trade imbalance in New Zealand’s favour and Victor Percival puts that down to Chinese inability to meet competition from European and other countries in terms of range, quality, and delivery times. “With China, there are always delays, but this is also changing and will continue to change,” he adds. “Production units are improving their quality and inspection procedures, and China as a matter of national policy is buying her way into Western technology and compensation trade.” In deals of this type, China buys a manufacturing plant, imports materials, and arranges to retain, say, 60 per cent of production, exporting 40 per cent. Banks in the participating country arrange finance over say five years; payment is in the finished product from China. Mr Percival’s advice to anyone planning to do business with the Chinese is: ® Don’t be too impatient. • Know your own business thoroughly. His firm has set up a China trade consulting division so that the experience of more than 30 years of trading can be handed on. “It can be very tricky in China and building blocks have to be used,” the trader explains. “As much depends on a network within China, to be known and trusted by a senior person is important. He can guarantee your status and integrity.” New Zealand’s future relations with China will loom large in agriculture, according to Mr Percival, who predicts a dramatic increase in exports of live animals and dairy products in the next five years. He says China will develop large dairy farms, using New Zealand expertise, with the object of ultimately becoming self sufficient. Another prediction is that China will remain politically stable, “though no-one with any sense could absolutely guarantee this.” A recent development of China’s free market policy is the freedom private citizens now have to set up in business, including lawyers, accountants, civil engineers, consultants, and doctors. Even the drab Mao suits worn by billions are out of favour at weekends. On Sunday, most people appear in brightly coloured clothes and fancy shoes in Shanghai streets. Only about 40 per cent still wear the blue uniform suits.