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Chinese market has untapped potential as well as pitfalls

Jonathan Chilton-Towle jct@pharmacytoday.co.nzFriday 09 June 2017, 10:51AM
Chinese market has untapped potential as well as pitfalls

A growing middle class in China has meant increased demand for New Zealand natural health products. This has brought more opportunities, but doing business in China can be risky. 

Mike Arand, from New Zealand Trade and Enterprise, laid out some of the what-to-dos and what-not-to-dos when trading with China, at the recent Natural Products New Zealand Summit in Nelson. 

Mr Arand has decades worth of experience dealing with Chinese markets. He first visited the country in the late 1980s as a backpacker. 

"Back then, there is no way I could have conceived that China would become the way it is now," Mr Arand told the audience. He illustrated his point by contrasting a photograph of the relatively low-lying Shanghai skyline from when he visited, with a picture of the towering skyscrapers that dominate it today. 

Mr Arand started out in China sourcing products for sale in New Zealand and the rest of the world. He then began selling into the Chinese domestic market. 

He spent over three years as trade commissioner in Shanghai, leading NZTE's biggest and busiest office. At the same time he led the food and beverage team in China, Hong Kong, Macau and Taiwan. 

There are reports of the Chinese economy slowing recently, Mr Arand says, but China's changing demographics present a huge amount of untapped
potential. 

By 2025, China's middle class is expected to grow by more than 200 million to around 330 million. 

This is largely due to the increased economic opportunities currently available to the population. However, this economic success is not present all over China, as Chinese markets are very fragmented, Mr Arand says. 

Although growth in economic centres such as Shanghai are roaring ahead, other provinces are falling into recession. 

Mr Arand is seeing New Zealand companies increasing their efforts to break into the Chinese market. 

Kiwi companies are employing Chinese talent and setting up feet on the ground within China. 

He has also seen growing collaboration between Chinese and New Zealand companies, and more commitment from senior management to learning about Chinese markets. 

The interest is not one-sided, these days it is also common to see Chinese investment in New Zealand which, in turn, increases business capabilities here. 

However, there are many pitfalls and it is important to deal with trustworthy contacts. 

If you meet a Chinese person on a plane who tells you about their excellent connections, they probably don't have them, Mr Arand says. 

Likewise, he has often encountered business owners who have been told they were being offered a unique business opportunity, only to find out this was not the case and the Chinese had been speaking to all their competitors about the same thing. 

There is too much outsourcing to local partners, he says, and this sends the message to Chinese  companies that you don't stand behind your product enough to sell it yourself. 

Many people ask him if there is one "silver bullet" that will solve all their problems when dealing with China. The answer to this question is, of course, no. 

"You need to have the courage to know when you're making a mistake so you can stop making that mistake and move on," he says. 

 
 
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