It may have gone unnoticed to the majority of businesses in New Zealand and other parts of the world, that on January 26th this year, our Trade Minister Damien O’Connor via video link signed an updated Free Trade Agreement (FTA) with China’s Commerce Minister, Wang Wentao. Yes, it’s important for the New Zealand businesses already trading with China (or thinking of exporting to China for the first time), but importantly it’s also beneficial for our economy as a whole.
You may be thinking why is the upgrade is such a big deal when we already have an FTA with China signed in 2008? Here’s three reasons why we should take interest.
1. China remains open for business
In case you were wondering in the current crazy world environment, China is still very much open for business. The country is recovering from the pandemic and it’s arguably a highly opportune time to look at the Chinese market. Yes, as we are all painfully aware, 2020 was tough and the challenges will continue in 2021 (notably the impact of dislocated supply chains), but the market fundamentals remain positive.
The numbers speak for themselves. To illustrate, in 2008 goods exports to China totaled NZ$3.5b and by the end of the 2020 calendar year it had more than quadrupled to NZ$16.63b, according to Statistics New Zealand. That’s no coincidence. Imagine if we could achieve the same rate of growth again (NZ$100b by 2030). Fair to say, I am a glass half full person.
As an open trading nation with a small population base, export revenue is of ever-increasing importance to our future prosperity, which has taken on added significance courtesy of the impact COVID-19 has had on our tourism and international student markets. Exporting to China and indeed other markets should be a key pillar as we look to recover from the effects of COVID-19. Remember, every export dollar earned increases the size of the national pie.
Now could therefore be a great time to consider entering the Chinese market either for the first time (physical goods or e-commerce), or to revisit your existing market strategy as the updated FTA makes China a more practical and potentially lucrative market to consider.
2. The updated FTA makes it easier and cheaper to target China
There are a number of tangible benefits from the FTA upgrade, but the elements that should positively impact the majority of New Zealand businesses the fastest are:
- The further reduction in tariffs, so NZ products can be more competitively priced. It’s probably the most direct and quantifiable change. The plan is for 99% of our NZ$3b wood and paper trade to be tariff-free and all dairy exports tariff-free by 2024.
- Making it easier to export by reducing the paperwork, red tape, and bureaucracy. Simply put, anything that can streamline the export process is invaluable. All exporters will be able to self-declare the origin of their products which removes the need to apply for additional certificates of origin if goods are transited through another country, and local China-based contacts will smooth the process.
- Speeding up the clearing of perishable products (fresh seafood for example) by agreeing to release these goods within six hours where possible, if needed outside standard business hours and by providing appropriate storage.
- Opening the ability for service businesses to expand into China (rather than the stereotypical primary producer). It will now be easier for services such environmental, audio-visual services, real estate, translation and interpretation, private education, and architectural services to enter China.
- Enabling digital trade by allowing electronic authentication and digital certificates to promote paperless trade, and no custom duty on electronic transmissions. There is also a clause safeguarding personal information when stored electronically and online consumer protection. These new additions will give businesses and consumers more confidence when buying and selling online.
Ultimately, all these reasons feed into the opportunity to increase our export revenue exponentially which will benefit all New Zealanders.
Long term there are also other important changes we should highlight. A new chapter in the FTA promotes environmental protection and ensures these standards are not used for trade protectionist purposes (by either country). Plus, the updated rules will assist Māori owned businesses purely due to the fact that Māori operates 50% of New Zealand’s fishing quota, 40% of forests, 30% of lamb production, 10% of milk production, 15% of kiwifruit production, and 30% of sheep and beef production. All key exports to China.
3. More help to target China
Government, councils, large corporates, supply chains, and the financial sector all appreciate the importance over the medium term of supporting New Zealands response to the impact of COVID-19. BNZ in turn is also doing its part to support New Zealand exporters to China.
Connecting China networks, contacts, and advice to local businesses.
Here at BNZ we’re endeavouring to make it easier for your business to either target China for the first time or expand your existing exports by linking you to a team of experts ready to help. We do this by:
- Providing access to dedicated BNZ Asian bankers and BNZ ambassadors to help with understanding the different regions of China, language and translation, Chinese business practices, cultural implications, and specific network and industry introductions.
- Hosting partnership events, for example BNZ and the Alpha Group, to assist New Zealand business selling into mainland China with their local distribution channel, where leading figures in the health, beauty, and wellness sector come together and learn about collaboration opportunities.
- Supporting, funding, and having key people inside BNZ responsible for key industries exporting to China, for example, the technology and agricultural sectors.
- Helping with the little things, such as BNZ staff who speak Chinese.
Exporting to China for the first time can be a daunting prospect. Not only the language barrier and cultural nuances, but all the little things that make up a business relationship including the trust that accumulates from successful and repeated business transactions. We’re endeavouring to make the journey less challenging.
Let’s see if we can get to $100b net export revenue to China by 2030 (or earlier).
The global conditions are right, China is ready to trade (both ways), the local support and networks are in place, and the updated FTA has made it easier, faster, and less troublesome to choose China as an export market.
Got to be good news, right?
To see how we can help visit https://www.bnz.co.nz/business-banking/international/asia-business or contact us at email@example.com
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