With trade exceeding $31bn, businesses says they’re taking realistic approaches to dealing with China – not just idealistic.
Plastic-free beauty products company Ethique recently launched into the Chinese market through e-commerce giant Alibaba’s Tmall platform.
Ethique’s founder Brianne West said Covid-19 pushed the company to enter the market six weeks ago, after years of deliberation.
“China’s been very interesting to us but I guess we’ve been overwhelmed because it does seem that little bit complicated,” West said. “I’m learning very fast about all of the intricacies involved in the China market.”
She said as the pandemic halted bricks and mortar trade, Ethique was left with a void only e-commerce could fill.
With more than 850 million internet users, and a rapidly growing middle class with more disposable income shopping online, China’s e-commerce economy has been the ideal market for Kiwi exporters.
“It is a wonderful idealistic viewpoint that you wouldn’t trade with anyone who doesn’t 100 percent align with everything that you do. In that case New Zealand would trade with no one.”
– Brianne West, Ethique
And Ethique, along with hundreds of other New Zealand companies, had its sights set on China.
West was at the recent China Business Summit, speaking at a panel about the brand’s journey into the land of 1.4 billion, alongside Alibaba Australia and New Zealand managing director Maggie Zhou.
West said she felt “intimidated” sitting next to an executive of one of the world’s leading e-commerce companies.
Her takeaway from the summit was that while trade had its own place, and politics had its own, you can have views on different things without losing out on trade.
At the summit Prime Minister Jacinda Ardern spoke about just that. Ardern said differences between both countries on issues such as human rights concerns over the treatment of China’s Uyghur minority need not “derail” the bilateral relationship, while former prime ministers Sir John Key and Helen Clark defended New Zealand’s stand on trading with China.
Meanwhile Chinese Ambassador Wu Xi flatly denied allegations of forced labour in Xinjiang, dismissing them as fabricated. “We hope New Zealand can hold an independent and just position and abide by international laws and not interfere with China’s internal affairs so as to maintain sound development of our bi-lateral relations,” Xi said.
Longtime Asia analyst Rodney Jones said New Zealand businesses had to hold two contradictory ideas when dealing with China.
“Morally we can be appalled by what is happening but what are we to do?”
– Rodney Jones, Wigram Capital Advisors
Jones, who is principal at Wigram Capital Advisors, said it would be easier to take a simple moral position when dealing with China but that was just not realistic, given it was our largest trading partner.
“Morally we can be appalled by what is happening but what are we to do?” Jones said.
“Australia feels more comfortable morally right now but what happens when China grows for another decade and is even more dominant. What we have today is not a steady state, China will grow stronger and more powerful.”
Also at the summit Nelson businessman Paul Morgan pointed out how New Zealand’s lobster had its best year last year “thanks to Australia” after China imposed sanctions on some seafood and wine after it called for an independent review into the origins of Covid.
China’s economy grew more than 18 percent in the first quarter of 2021, compared to the same time last year. The country aimed to meet its pre-Covid growth rate of 6 percent by the end of this year, Chinese Premier Li Keqiang said in March.
Statistics New Zealand data shows annual trade between both countries exceeded $31 billion last year despite Covid-19, down from $33b in 2019.
“Last year those businesses that pivoted to online immediately, survived and are doing better than before.”
– Maggie Zhou, Alibaba
West took a similar “realistic” view on China.
“It is a wonderful idealistic viewpoint that you wouldn’t trade with anyone who doesn’t 100 percent align with everything that you do. In that case New Zealand would trade with no one,” West said.
“It’s important to have an opinion and have a stand and to make those points clearly in a non confrontational way. We absolutely need trade, it’s ridiculous to assume we don’t. But we can still put across our viewpoints on things we disagree and leave them as separate conversations.”
“If you’re looking at something from a purely idealistic viewpoint you might come to a different conclusion, but there’s not a single country that you can agree on everything they’re doing.”
West, whose business has become the fastest selling shampoo bar brand on Amazon, said she hoped change could come from working together rather than confrontation.
“We absolutely need trade, it’s ridiculous to assume we don’t. But we can still put across our viewpoints on things we disagree and leave them as separate conversations.”
– Brianne West.
For instance, Ethique’s popularity on Amazon helped it influence one of the e-commerce giant’s biggest distributors to make its warehouse complete plastic free by the end of the year.
“That’s not something that would happen if we didn’t work with these people. Those are the sorts of things that have real impact, not just about what we can achieve but also our partners, to change the supply chain for instance.”
Last month the Chinese government fined Alibaba 18.3b renminbi (NZ$3.9b) for anti-competitive behaviour.
The company was found “abusing its dominant position” by preventing merchants from using other platforms.
Business in Asia chair Siah Hwee Ang, at Te Herenga Waka Victoria University of Wellington, said the fine made the Chinese government look more transparent and fair to a global audience.
It was an opportunity for the Chinese government to show it did not have favouritism over its own multi nationals, he said.
“We must always remember when we deal with the Chinese government, they always want to have this good look. They want to build the soft power and in order to do so you have to show you are fair globally.”
He said the fines and Chinese Community Party restricting its large tech companies should not be an area of concern for New Zealand businesses.
For Ethique, West said China was its new frontier.
“If you do China right, you can really go from zero to tens of millions in a year. But if your marketing isn’t right, messaging is wrong, you don’t do anything, you don’t go anywhere. It’s a market that requires a lot of investment in infrastructure, logistics.”
Alibaba Australia and New Zealand managing director Maggie Zhou said building trust between both countries was crucial to giving New Zealand businesses more confidence to enter the Chinese market.
On the Government’s fine to Alibaba, Zhou said it wasn’t something New Zealand businesses needed to worry about.
She said the free trade agreement upgrade earlier this year was promising for relations between both countries.
At the China Business Summit on Monday, Zhou said the only certainty over the past year was the growing digitalisation of retail.
“Last year those businesses that pivoted to online immediately, survived and are doing better than before.”
She said more people were shopping online, including older consumers who were more inclined to shop in stores.
Zhou said New Zealand businesses should be confident in knowing these behaviours were here to stay.
Last year New Zealand ranked as the seventh best-selling country to China. It’s been climbing up the ladder each year since ninth place in 2018.
