China’s seemingly unstoppable growth spurt elicits combustible mix of euphoria, fear, admiration and cynicism. As American commentator Ted Fishman has noted, companies around the world are daily wrestling with the growing problem of how to keep China happy as customer, efficient as supplier and at bay as competitor.
We asked five CEOs from leading New Zealand organisations what they think about China and its likely impact on world competition and business. In some admirably frank interviews they chewed over series of questions around China’s impact on our country’s place in the world economy in the next 10 years and beyond.
What, for example, are the challenges for New Zealand CEOs in world in which China is becoming more and more substantial presence? Will China’s famed focus on long-term thinking stretch the mental timeframe of our businesses? Is there fear factor regarding China in some business quarters? And, if so, how can it best be managed?
While New Zealand managers wrestle with staff retention, wage pressures, work-life balance, increasing demands for open and transparent governance, and continuous disclosure of financials, Western commentators list among China’s issues big-ticket items such as low wages, human rights and lack of democratisation.
How can our companies marry such differences in lion-filled world? More to the point, how can they do that when operating under tighter restrictions and without the economies of scale enjoyed by their Chinese counterparts? How do our organisations compete on playing field that many believe is far from level?
What will the proposed Free Trade Agreement with China mean for New Zealand business? Which organisations have China policy? Or dedicated China strategist? Do companies with significant Maori perspective on doing business have any advantages in working with China? And, if so, how do they start to build on this advantage?
To date our five selected organisations have all taken different approaches. Regardless of whether they see it as threat or an opportunity to New Zealand, China’s footprint on the world is growing increasingly large and raises some strong emotions.
Donald Stewart, CEO, Skellmax & Skellerup Rubber Products Jiangsu
A recent plane trip from Chicago to Los Angeles brought home to Donald Stewart New Zealand’s place in world increasingly overshadowed by China. Describing our country to the doctor sitting next to him he watched her growing incredulousness as she cottoned on to the fact that New Zealand’s population barely tips four million. In her world that’s less than the city of Los Angeles.
In his recent book China Inc veteran journalist and former commodities trader Ted Fishman notes that China has between 100 and 160 cities with populations of one million or more (anyone who has any dealings with China knows its statistics are notoriously fluid). “America, by contrast, has nine,” writes Fishman, “while Eastern and Western Europe combined have 36.”
Stewart is the New Zealand-based CEO of both holdings company Skellmax and of Skellerup Rubber Products Jiangsu – China-based dairy rubberware and vacuum pump manufacturing facility established by his company few years ago.
They may never meet, but Stewart and Fishman share view that the rest of the world is shrinking as China flexes its international muscles. Globalisation means New Zealand gets smaller every year, reasons Stewart. Asia has awoken and our ranking as world player is slipping through our fingers.
“China is everywhere these days,” writes Fishman as he kickstarts his book. “Powered by the world’s most rapidly changing large economy, it is influencing our lives as consumers, employees and citizens. The words ‘Made in China’ are as universal as money: the nation sews more clothes, stitches more shoes and assembles more toys for the world’s children than any other.”
Moving up the technological ladder, China now makes the most consumer electronics goods, pumping out more TVs, DVD players and cellphones than any other country. “More recently China is ascending even higher still, moving quickly and expertly into biotech and computer manufacturing.
“No country,” says Fishman, “has ever before made better run at climbing every step of economic development all at once. No country plays the world economic game better than China. No other country shocks the global economic hierarchy like China.”
Back on New Zealand soil, Stewart believes it boils down to the Beatles. “They used to come here. Stirling Moss, Jack Brabham, Jim Clark, Jackie Stewart – all of the Formula One guys came here… Now if you want to see the major acts of the world you go to Sydney, Melbourne or New York. That’s how the world has changed. We used to rank. We don’t now. We’re long way away and inconsequential.”
In Stewart’s view, that’s not necessarily bad news. “In some ways, it forces us to move into areas in which we are truly competitive.” For Stewart, our nation’s petite proportions are both our strength and our weakness.
Since it first started looking at the issue three or four years ago, Stewart says his organisation has chosen to be participant in the solution to changing world order – and not part of the problem.
Looking back, he says it wasn’t hard decision. China’s emergence can help sharpen company’s sense of its true strengths and make it drop any pretence of business bulk or overblown ideas about its grip on global market.
A certain amount of trepidation, he says, is understandable when first facing the Chinese market – “a normal fear of what you don’t know. But we’re now part of the market, are gaining in understanding and can participate in what China has to offer.”
Skellmax took the traditional Kiwi route: some initial handholding from New Zealand Trade & Enterprise followed by close work with market-savvy consultants. It recently set up with its own employees in its plant in China’s Jiangsu province on the East Coast where it’s just coming to the end of the first phase of its plan. Manufactured in China, Skellerup’s products are being sold to the company’s traditional markets: New Zealand, Australia and the United States. There’s small amount of trading of the company’s products into the local market too.
Scheduled for roll out over the next year or two, phase two will see Skellerup’s own version of “Made in China” products taken to new global markets.
The fear of copycat production underlies operations, says Stewart, “but the reality is that we produce relatively small volumes – we’re not Nike – so there’s not big incentive for someone to try to knock us off. And, in the main, we’ve got some very powerful brands that give us some protection. There’s more to it than coming out with knock-off product that’s unlikely to be of [our high] standard because they won’t necessarily understand the intricacies of what we’re doing… You do what you can to protect your own IP. That’s all you can do.”
China’s much-touted abundance of low-cost factory workers stops short at experienced local managers with excellent English. So while New Zealand-based managers battle issues of staff attraction and retention at all levels of their businesses they sometimes mistakenly believe shift to China will resolve all their staffing problems.
Nor, according to Stewart, is it open slather in China when it comes to environmental or occupation health and safety requirements.
“We have philosophy that the standards we employ in New Zealand will be the minimum maintained in any of our business environments,” he says, “and that applies in China just as much as it does in the United States, Australia and the United Kingdom.”
It’s something the company does by choice. There is, in any case, two-tier system in operation. Chinese authorities put expat businesses operating in China under much more pressure to ‘behave’ than the local Chinese businesses. Where there are sweatshops, they are owned and operated by Chinese and not overseas organisati
