China growing in profitability say NZ exporters

Auckland, 29 May 2006

China growing in profitability say New Zealand exporters

Auckland, 29 May 2006 – The latest Export Barometer by DHL, the world’s leading express and logistics company, finds that exporting to China is becoming increasingly profitable for New Zealand companies.

The fifth DHL Export Barometer has revealed that China is now the third most profitable destination for New Zealand goods and services, pushing the Pacific and the United Kingdom down to fourth and fifth place. China was the seventh most profitable country in the November 2005 issue of the survey.

Although Australia continues to be the most lucrative destination for New Zealand goods and services, followed by North America, the number of exporters perceiving it as the most profitable has dropped to 40 per cent from 48 per cent. Australia’s decline was also reflected in the six per cent drop in the percentage of exporters trading there in the last six months.

Developed by DHL Express in consultation with New Zealand Trade and Enterprise (NZTE), the DHL Export Barometer remains the only large-scale evaluation of export confidence within this country. The results gauge the opinions of experienced New Zealand exporters, with 73 per cent of those surveyed exporting for more than ten years.

DHL Express New Zealand General Manager, Derek Anderson, said given the size of the Chinese market and the potential gains to be made in the country it is no surprise that exporters are beginning to reap the rewards.

“The May 2006 survey shows that it takes time to develop a successful presence in China,” he said. “Of the companies that export to China and view it as the most profitable market for their business, 67 per cent have been exporting there for ten years or more. The results also show that 43 per cent of these exporters are from the services sector, and 23 per cent are agriculture or food and beverage exporters”.

“However despite this positive perception from exporters, New Zealand’s exports to China have remained steady and did not increase in the last six months,” he said.

New Zealand Trade and Enterprise Chief Executive, Tim Gibson, said that he is extremely encouraged to see these results, which reflect that exporters are beginning to see real benefits from this market of 1.5 billion people.

“The results underline the importance of planning for the long term before launching into China and broader Asia. It is vital to take the time and build strong relationships in the market, and not expect an immediate return,” he said.

“The China market is large and dynamic and a New Zealand Inc approach targeting key sectors is vital because we don’t have the volume or scale to compete across the board. NZTE has successfully supported businesses under the New Zealand New Thinking banner in several recent initiatives in the region, showing that a joint approach can make the difference.”

Cavalier Bremworth has been exporting premium quality carpets to China for over ten years and the product is now being fitted into four and five star hotels across the country. "It's all about being patient and making sure you return to the market as often as you can. Taking the time to select the right partner and then developing the trust and cooperation you need is crucial to building a profitable business," said Bill Doody, Export Manager Asia.

"At Cavalier Bremworth we spend a lot of time on agent training because our products are a bit different, better quality than local carpet, so we have to make sure our agents can explain what makes it better and why it's more expensive."

Views differ on China Free Trade Agreement
However, the prospect of a Free Trade Agreement with China still has a tendency to polarise exporters. While most New Zealand exporters view Free Trade Agreements (FTAs) in a positive light, the China-New Zealand agreement does not fit this mould.

Views differ across the sectors, with exporters in the manufacturing sector showing concern that a trade agreement with China, which produces cheaper manufactured goods, will have a negative impact on their businesses. In contrast, almost half of New Zealand exporters (49 per cent) believe that the China-New Zealand Free Trade Agreement will have a positive impact on their businesses.

China moves up in profitability, other markets remain similar
Despite the emergence of China as a major player, New Zealand’s key export markets remain largely the same. The good news is that many of these markets have seen increases in trading in 2006, including the United Kingdom (up by nine per cent), Eastern Europe (up by five per cent), South and Central America (up by six per cent), and Korea (up by six per cent).

South East Asia, South Asia and the Pacific (including Australia) are the key geographic regions for exporters, with 88 per cent of those surveyed saying they exported to these regions and that they have been the most profitable for their businesses. Exporters also expect the highest increase in export orders in the next 12 months (55 per cent) will come from these regions.

A significantly higher proportion of New Zealand companies export to Europe, Middle East and Africa (57 per cent), compared to the previous six months (50 per cent).

ENDS

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