Professor Siah Hwee Ang on what's motivating the Chinese to invest in NZ, and why NZ is behind the ball when it comes to investing in China

Professor Siah Hwee Ang on what's motivating the Chinese to invest in NZ, and why NZ is behind the ball when it comes to investing in China

An Asian business expert is calling for New Zealand to look beyond exporting, and focus more on investing in China.

As the debate around Chinese investment in New Zealand rages on, the BNZ Chair in Business in Asia at Victoria University says New Zealanders need to up the ante when investing in China themselves.

Professor Siah Hwee Ang says we’re lagging behind our competitors and need to broaden our approach.

He recognises exporting is the status quo entry point into the Chinese market, but says our exporters should be doing more.

“We need to have the mentality that exporting is not the only solution, or not the only way to engage”, he says.

“Sometimes investment is probably the better way because it’s more committed, because you have to be there to understand your clients.”

One of the biggest mistakes Ang sees exporters make is not connecting closely enough to their market.

He considers exporting to be an inherently “distant approach” towards engaging with another market, as there’s a disconnect between getting the product overseas and distributing it.

He says exporters need to make a greater effort to be involved in the market itself – having a presence there, knowing the language, etc.

“If you ever use a distributor, always try to understand what they do; always try to be engaged with part of what they do, as opposed to saying ‘look I just pass the product to you, you handle the clients’.”

Ang credits the government for setting up various free trade agreements to help promote and facilitate more foreign investment, but says it needs to be doing more.

He finds businesses aren’t always up to speed with the kinds of agreements New Zealand has with other countries, so says the government should work harder to inform them of exactly what policies and agreements are in place to help them.

He also advises exporters not to rush into China. He says it’s a big market, so if you have a good product, there will always be buyers.

Where exporters like Fonterra risk damaging the NZ brand

Ang says New Zealand exporters needs to tread cautiously when using a single desk – having a monopoly marketer of a product with multiple suppliers.

He says a single desk approach, as has been used by Zespri and Fonterra, is good as it gives a number of small organisations the critical mass often necessary to enter and be distributed in another market.

However this once again isolates the producer from their clients and the market their products are being distributed in.

In Fonterra’s case, Ang says farmers bear the risk for Fonterra’s actions, and can’t do anything about it.

“Both parties should be on the same ship, and in terms of structure, they both have to share the cost and consequences.”

More generally, Ang says it’s vital single desks have good governance structures to make sure they represent New Zealand well.

“We can’t afford that single desk to fail, or not do well, because it’ll just come back and bite the New Zealand brand.”

(Fonterra, of course, became embroiled in a melamine scandal in China with Sanlu in 2008).

Property investment through a Chinese lens; 'There's nothing stopping them'

On the flip side of the coin, Ang acknowledges New Zealand isn’t short of Chinese investment.

He explains land is scarce in China, with a lot of it being owned by the government, so people are looking for alternative ways to invest their savings.

He says Chinese people have opted to buy property abroad, rather than invest in the stock market, as it seems like a safer option with a greater guaranteed return.

The Chinese are investing in the likes of the US, Canada and Australia, and New Zealand is just one of these attractive options.

“When they find it difficult to get residency in the UK or Canada, they start to look for an alternative, and that’s where New Zealand comes into play”, Ang says.

“When you have one of them here, 10 of them will come; when you have 10 of them here, 100 will come, and then the price [of property] will keep going up, and it’ll almost never come down.

“They come in bunches… and it’s almost impossible to argue they’ll stop coming unless there’s some restriction in terms of how many Chinese can buy in this country, otherwise there’s no stopping them.”

Despite this, Ang says New Zealand isn’t the easiest place to invest in.

It's about bottom lines not race

Responding to the fallout from the Labour Party estimating the number of Chinese people buying Auckland houses based on a list of buyers with Chinese-sounding surnames, Ang says we need to stop having a race debate, and realise every property sale is simply a business transaction.

“Any property purchased is considered a business transaction, and if you think of it that way, it’s very normal for Chinese to buy land or property here, because a lot of them are very rich and they can afford that”.

He notes the more we single out the Chinese, the more racially-fuelled the business issue becomes.

Furthermore he says, “At the end of the day, any buyer can only buy if there’s a seller, so sometimes you have to think of the supply end of things as well. If there’s no supply, then there won’t be a demand.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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In the case of Japan, manufacturers are pulling out of China. The costs are relatively high, QA is not as great as expected, political tensions are rife, and SEA is also a viable investment option.

Maybe we don't want to buy houses on leasehold land in China as much as we don't want to buy them on leasehold land here - see Maungakiekie St Greenlane

Perhaps we could invest in the Chinese sharemarket instead? Guaranteed returns courtesy of the People's Republic Plunge Protection Team.

Been sideline on enough China productions in the past, and Kickstarter/Indiegogo projects not to trust investing in China (or outsourcing there) without some "good old boys" looking carefully and closely over the shoulders of the foreign contractors.

If investing in China is so great why is so much Chinese money ending up in Auckland? Because the government can change things with a snap of fingers that's why..... so what do they know [do] that were don't [are told]...

“Any property purchased is considered a business transaction, and if you think of it that way, it’s very normal for Chinese to buy land or property here, because a lot of them are very rich and they can afford that”.

He notes the more we single out the Chinese, the more racially-fuelled the business issue becomes.

Furthermore he says, “At the end of the day, any buyer can only buy if there’s a seller, so sometimes you have to think of the supply end of things as well. If there’s no supply, then there won’t be a demand.”

....
That could explain why people don't like economists (i.e that type of nihilistic(?) analysis)?
It sounds like ethnic nepotism to me. Are there any Chinese out there speaking out against foreign (predominantly Chinese) land/house purchases? Ethnic nepotism may be a more useful way of looking at these issues than racism?

What ever happened to

"The land of Ireland, the land of every country, belongs to the people of that country. The individuals called landowners have no right in morality and justice to anything but the rent, or compensation for its salable value."

J. S. MIll

" Are there any Chinese out there speaking out against foreign (predominantly Chinese) land/house purchases? "

Yes they say "Thou Shalt NOT" buy Chinese property in China.

I could sell 1 million residential properties in Auckland to Chinese buyers tomorrow if they could obtain instant rights to enter NZ to live. The demand is off the dial, and supply will never keep up so long as the door has been opened under the Chinese Free Trade Agreement. Nice = because property can only keep climbing in value for those who are into property in Auckland. Today I sold a 2 bed B&T unit in Epsom after a quick repaint for $1.2m to Chinese. Favourite zone for schooling their children, so they pay whatever it takes. Please don't worry people, Auckland central and surrounds will eventually be Chinese and Asian controlled and then you can all leave and find another zone. Its not about Chinese its about 2 simple facts. (1) Chinese now have money that far exceeds NZ incomes and (2) the Labour Govt. Free Trade Agreement opened the door - Helen told us she would change NZ forever. She has managed to do so. And all the people voted for her on the majority - so stop complaining.

The kitchen ATM cannot fail to set off a debilitating C/A deficit to drive the NZD/USD ccy pair to uncharted territory lows and interest rates on an upward trajectory. Who is in charge other than wholesale foreign lenders?

Yes she has sold off our sovereignty, and JK is falling over himself to hold the position she set. National radio had an interesting article on the weekend that identified that under the Chinese FTA NZ exports grew from 2008:$4 billion to 2015$8 billion. Interestingly Australia, who do NOT have a FTA grew by an even bigger amount in the same time period! Tell me again why we have one? It is beginning to look more like a legal way for the pollies to sell off our sovereignty - short term gains for their personal agendas!

Yes they may have increased, but its likely to have been a temporary bump. The current trajectory of exports to China has been one of decline and I expect it will only fall further with Fonterra signalling it will cut WMP production and there is room for prices to decline.

Instead what we're likely to see is increasing FDI from China in Public Private Partnership investment in infrastructure, purchasing of property by Chinese nationals, not only in Auckland, but in regional centres with some prospect of growth (Hamilton, Tauranga, Hastings, Napier, New Plymouth, and Nelson), dairy farmers will face foreclosures and will be snapped up by either cash rich Auckland doctors, accountants, lawyers, or other members of our glorified medieval guilds A.K.A professional associations, older farmers who will buyout their neighbour, just because they can and because its all they know, or Chinese investors with 30 billion dollars at their fingertips.

.....purchasing of property by Chinese nationals, not only in Auckland, but in regional centres with some prospect of growth

A global frenzy, no less?

Fears of housing bubbles in the three Scandinavian capitals are rising, fuelled by unprecedented negative and record low interest rates in Denmark, Norway and Sweden.

Stories of frenzied bidding rounds and record-high prices are causing concern among policymakers and economists, as central banks in all three Scandinavian countries appear set to keep interest rates at historically low levels for several more years. Read more

Yes but foreigner investors aren't the only drivers, plenty of local money sloshing around seeking a home.

"An Auckland University study predicts the property bubble that has seen prices skyrocket will impact on the rest of New Zealand, especially Wellington, Christchurch, Hamilton and Tauranga.

Auckland's house prices hit an all time high this week, with homes selling at an average of just under $810,000, up nearly 50 per cent from $546,488 at the peak of the last property boom in 2007...The projected bubble may already be hitting the Hamilton property market.

Jeremy O'Rourke, managing director of Hamilton's Lodge Real Estate, said increasing demand from the Auckland market was starting to affect prices.

He said houses in the $300,000 – 380,000 range were being targeted. Three groups were involved. Young people who could not afford Auckland prices were buying in Hamilton but renting in Auckland where they worked."
http://www.stuff.co.nz/business/money/68222217/Aucklands-housing-bubble-...

I wonder who at Fonterra is responsible for the strategic genius that changed Pahiatua's expansion from cheese to WMP?

I'd imagine it was the 40 million dollar man and his sidekick.

http://www.nbr.co.nz/article/fonterras-40million-ferrier-revealed-dw-129525

Simply claim that restrictions on foreign land grabs are consistent with the FTA and let China prove that it is not the case. Can go to some kind of arbitration council or even court and will - experience tells - stuck there for many years. In the meantime the AKL bubble cools down so much that the Chinese will find another toy to play with.

The problem is really that the key shapers of public opinion, the NZ media and politicians have long sold their souls to Chinese glass beads. Real estate for a pile of rubbish the Chinese woud not even buy themselves. How sad.

I find it hard to believe that house sales are linked to a free trade agreement. You would at least try to get out whether you had the right or not (technically) because morally no politician has the right to make such a deal.

Don't believe they are

There is an underlying legal principle in any "agreement" called "True to Title"
The FTA is a "trade agreement". That's what it is called
It's Title is .... "This Free Trade Agreement between NZ and China"
Iinvestment has to be associated with Trade Investment in businesses and land and buildings allied to production and or product and or trading services or developments
The parties to the agreement basically agree to remove "trade barriers" in the form of tariffs and duties

This expert says “When you have one of them here, 10 of them will come; when you have 10 of them here, 100 will come, and then the price [of property] will keep going up, and it’ll almost never come down. They come in bunches… and it’s almost impossible to argue they’ll stop coming unless there’s some restriction in terms of how many Chinese can buy in this country, otherwise there’s no stopping them.”

Looks like we should pull the plug on Chinese buying property here ASAP

Ang says "we need to stop having a race debate, and realise every property sale is simply a business transaction. Any property purchased is considered a business transaction, and if you think of it that way, it’s very normal for Chinese to buy land or property here, because a lot of them are very rich and they can afford that”.

OK Ang let's not have a race debate - let's have an economic debate - Auckland is full so we need to shut the gate on migrants for 2 or 3 years.

"He notes the more we single out the Chinese, the more racially-fuelled the business issue becomes."

Who is "we"? The media and associated politicians who consciously turn an issue of legitimate protection of national interests into a race hate matter only to suppress discussion.

This is devious and anti-democratic. That China is a vile dictatorship with no respect for human and civil right is btw not a race issue.

China is a dead Dragon walking, by now I think that should be obvious to a blind man person. Idiots thought Chinese demand for, iron, coal, dairy, copper, oil et al was insatiable, turns out it has been sated, to the point where it is puking up on all involved.

The party is over.

Maybe people like this professor should being all sensitive and feeling racially victimized, when all people in NZ don't really care where from overseas the houses are being, bought, but just want to the proof they are being bought from overseas, because all they want is the chance to buy a house in a market that is not ridiculously over inflated by overseas buyers from exponentially larger countries.
For a professor he needs to have a good hard look at himself.

While people like Key have tried their hardest to keep it a dirty little secret, and trying to label anyone that wants to find out racist or xenophobic, keeping the smokescreens and mirrors going.

I find quite a few comments on this discussion to be very racist to say the least. The fact is money flowing into this country is a good thing. The problem is HOW it is invested. Where is the govt initiative to rebuild a manufacturing base which has been gutted over the last 30 years? Its not the chinese you need to be afraid of, its the NZ politicians that you vote in!

Apologies to all chinese reading this article for NZ biggotory. Every chinese person I have met has been nothing but polite, sincere, law abiding and a tax payer!

It is true more chinese are moving here and good on them. Let them move here and get out of there over populated communist state where they can have more than one child in a safe clean country to bring up their children. 60 years ago, it was the english and the irish who were flocking here.

The main thing is we have a country which we can be proud to say we live in it.

Admittedly there is smart business transactions being taken by the chinese but, if the boot was on the other foot, wouldn't you take advantage of an economy on the downtrend as we currently are?

Economics is economics and if house prices collapse, chinese and kiwi who bought at the highs will LOSE money.

We white caucasians can learn a few things from the chinese.... 1) how to work hard 2) how to invest smart 3) how to live on practically nothing and still be happy becuase my friends this economy is turning very very nasty and we will need every single dollar of chinese and other foreign investment just to stay afloat.

China is not looking good either. Just ask any chinese person what they know about the "shadow" banking system and who do they know that lost money?

The world as a whole is in debt up to their eyeballs and our creditors will reach the point where they will stop lending up money and you can guess what you interest payments on your $800,000 Auckland house will be then!

NZ debt govt and private >200% GDP right NOW

The money is good for whom quality guy? Privileged middle class people like yourself who already have assets to sell and thereby gain a windfall from Chinese buyers who are prepared to pay any price?

Why do we need a government initiative to rebuild an industrial base which they themselves gutted in the 1980s and 1990s?

Did it occur to you that not everyone has such a mercenary world view as you appear to have? The respected professor himself acknowledge that these people have millions in savings, so they certainly found it a rewarding place to do business. Btw. Property investment is not just a "business transaction" at all. It comes with what economic liberal types call "property rights", which confer the owner a package of legal entitlements, which preclude the use of that land by any other prospective user. Why should we accept our own government employing its sovereign powers to enforce the property claims of people who aren't even New Zealand citizens, which by necessity excludes our fellow citizens access to that land and its resources?

"We white caucasians can learn a few things from the chinese.... 1) how to work hard 2) how to invest smart 3) how to live on ..."

This is a text book racist comment. Disgusting really. If you think that the Chinese are a master race and the "white caucasians" the new subhumans then you truly live in the wrong century.

Never thought I would read racist bile like this on this site.

I sort of agree, in a small way but yes mostly its rubbish. he obviously knows nothing about china and clearly has done no business with mainland chinese.

Mostly Rubbish. I can say this as half my family is chinese. Right now my wife is laughing at what you have written as its absolute bollocks, you obviously know nothing of chinese and how they think. Simple chinese hold us in contempt as we are a nation of peasant farmers who they look down on and will take advantage of (or enough of them) without a second thought.

except for, "this economy is turning very very nasty" not just ours, China's is also looking pretty bad, no where is in good shape. That is due to oil, or the expense of it.

Apologies to all chinese reading this article for NZ biggotory. Every chinese person I have met has been nothing but polite, sincere, law abiding and a tax payer!
...
So how come henry van der hayden said "Don't trust them! Never!:" Of course they aren't all bad or good (just like people here) but:

"It is true more chinese are moving here and good on them. Let them move here and get out of there over populated communist state where they can have more than one child in a safe clean country to bring up their children. 60 years ago, it was the english and the irish who were flocking here."

Pekings population is heading to 130 MILLION.
Also when people from the U.K were coming it was in response to increasing productivity. Now it is the result of a population ponzi

"The fact is money flowing into this country is a good thing" perhaps Quality Guy could explain how money flowing into NZ into BUYING RESIDENTIAL PROPERTY not building an export business or creating employment is a good thing irrespective of it's source, Chinese, Australian, American or European? The fact is if this is a business transaction as professor Ang states, then it is a part of the process of creating a river of money LEAVING the country. This must stop or at the very least be slowed significantly. because there is no benefit to NZ'rs

Invest in China the man says. You have to be joking; the investment we have had has been an unmitigated disaster just ask Lion Breweries or Fonterra. The situation now is far far worse with the biggest credit bubble and consequent over investment the world has ever seen:

"In a country where the banks, even the largest, are not known for openness, Charlene Chu has warned since 2009 about a rapid expansion in lending that has seen something close to $15 trillion (£9.1 trillion) of credit created, fuelling a property and infrastructure boom that has no equal in history.

To say her warnings have been unusual is to underestimate quite how important her contributions have been. Chu has explained the creation – from a standing start just five years ago – of a shadow banking industry in China that today is responsible for as many loans in terms of volume as the country’s entire mainstream financial system. Speaking for the first time since her departure from Fitch last year, Chu, who has taken a new job at Autonomous, the respected independent research firm, says she remains adamant that a Chinese banking collapse of some description remains not just an outside chance, but a certainty. “The banking sector has extended $14 trillion to $15 trillion in the span of five years. There’s no way that we are not going to have massive problems in China,” she says.
http://www.theautomaticearth.com/2015/08/china-and-the-new-world-disorder/