If New Zealand companies are to succeed in China, the government’s going to have to take a much greater hands-on role in supporting ventures making their first foray into the Middle Kingdom.
“One of the best ways for the government to engage with China would be to act as a catalyst to bring the smaller and medium-sized companies together by making funds available around core strategies,” says David Mahon, managing director of Mahon China Investment Management Ltd. based in Beijing.
“New Zealand is one of the few developed OECD nations that does not assist its companies financially to expand into key international markets,” Mahon, who is also chairman of the China advisory board for NZ Trade & Enterprise’s Beachheads programme, says.
The NZ government’s trade and investment related initiatives aren’t closely enough aligned, and companies tend to remain aloof regarding strategic advice that is available.
“A disciplined programme of loan guarantees for New Zealand companies that are looking to expand their business in China or are already there and looking to consolidate their business would make a difference,” he says.
Mahon worries that a greentech company such as LanzaTech, (using proprietary bacteria to convert smoke stack gas streams to ethanol and other useful products), which is rapidly partnering and growing in China, needs early-stage capital but would not qualify for normal loan guarantees.
“Historically, such companies have had to find investors offshore, and some become only nominally New Zealand-owned,” he says. “New Zealand is disproportionately innovative in science and technology, but loses the value to more farsighted and less risk-adverse investors in other countries.”
Mahon suggests that NZ could establish an early-stage joint venture funds with a group of Australian and Chinese institutions. At intermediate stages of each investment’s development, shares could be placed privately in a wider domestic New Zealand investor market.
“Ongoing failure on the part of the government to build investment capability in New Zealand will only result in ownership of good assets becoming increasingly foreign and leave companies without the means to establish themselves in Asian markets,” he says.
More than at any time in its modern history, the NZ economy needs a dynamic public-private partnership, and the country only has a short period of time left to revolutionise the manner in which it develops international trade and establishes commercial platforms in Asian economies he says.