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Remember the ‘four firsts’ and the bigger picture in dealing with the Chinese puzzle


Kiwi companies entering the Middle King should become familiar with New Zealand’s economic and political history with China, especially our track record of initiatives according to David Mahon.

“New Zealanders must endeavour to see the larger picture of poverty and struggle that drive billions of human beings in Asia,” says the ex-pat, Beijing based head of Mahon China Investment Management Ltd. “New Zealanders tend to measure the world against their own rarified and very privileged society. This produces tunnel vision.”

Mahon warns that New Zealand is squandering the chance to convert an historic political partnership into major economic gains. An added danger would be allowing China’s demand for commodities push us to concentrate too heavily on these, instead of diversified value-added technologies, products and services.

Most kiwis aren’t aware of the position of favour enjoyed by New Zealand in the Chinese government’s eyes. In political meetings, the Chinese government makes constant references to what is calls New Zealand’s ‘four firsts’. Ours is an unusually intimate relationship for a big developing and small developed nation, though Mahon says there has actually been five firsts.

• July 1997. NZ broke the boycott by most OECD countries of the swearing in of the new Hong Kong government. America and Britain put considerable pressure on NZ, but from a simple matter of principle, NZ politicians/bureaucracy concluded China, not Britain, had honoured the handover agreement.
• 2001. NZ was the first developed country to conclude bilateral negotiations on China’s entry into the World Trade Organisation.
• April 2004. NZ’s recognition of China as a free-market economy, for which it was widely derided by other OECD countries.
• December 2004. NZ the first developed nation to enter into bilateral negotiations with China for a free trade-agreement.
• (April 2008). First OECD country to sign a free-trade agreement.

While no doubt New Zealand has been test crash dummy in a sense for China’s negotiations for larger prey, the country’s far from ingratiating itself Mahon says.

“While it has supported China on a range of issues, it has also aroused China’s pique when it has stood up to it on others, such as allowing persons whom China considers dissidents, like the Dalai Lama and Xinjiang human rights advocate Rebiya Kadeer, to visit New Zealand,” he says. “If smaller nations conduct smooth relationships with larger nations out of weakness, the smaller nations will quickly lose the respect of the larger ones.”

Mahon contention of an unlikely partnership between China and New Zealand is a living example of a verse from the Dao De Jing by 5th century BC poet Laozi.

If a great country can lower itself to greet a small country,
It will win the friendship of a small country.
If a small country can lower itself to greet a great country,
It will win the friendship and support of a great country.

From a business perspective, Mahon says kiwi CEOs and their boards too often underestimate the need to form comprehensive strategies for China and do not consider their presentations carefully enough.

“It is not enough to simply ‘sell’ one’s company to an audience in China,” he says. “Meetings are opportunities to learn the needs of Chinese companies in their business methods. It is too easy to come away from meetings where mutual goodwill and hospitality are mistaken for commercial substance.”

Often delegations of companies, such as a recent green-lipped mussel co-operative, waste their trips to China Mahon says.

“They need to see such trips as the beginning of deeper relationships and not ends in themselves,” he says. “Much of the value of the opportunities that these delegations offer companies will be wasted unless the companies follow up with subsequent trips, bringing their senior managers and board members.”

Mahon says that New Zealand companies should also look to their intangible assets and residual goodwill in China, and maximise returns from these.

A full version of Mahon’s paper is here.

Remember the ‘four firsts’ and the bigger picture in dealing with the Chinese puzzle

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