Damon Paling revisits some core principles Kiwi exporters can follow when building commercial endeavours in China.
New Zealand and China retain a strong trade relationship built on mutual respect. In December 2022 political and business leaders from both nations marked 50 years of diplomatic relations. The relationship is complex spanning political, economic, cultural, and security dimensions.
However, the two countries have developed a robust bilateral relationship over the years.
The April 2022 upgrade of the original 2008 bilateral Free Trade Agreement underscored the commitment of both parties. Whilst there have been some tensions and challenges, the two countries will hopefully continue to navigate the relationship in a way that advances their respective interests.
At an enterprise level, there are approximately 300 New Zealand companies targeting China and at various stages of their growth journey. Around 70 percent of these companies are in the food and fibre sector.
Chinese talent is typically recruited and retained by the New Zealand head office as the market becomes financially material to global revenues. This talent often supports in activities such as:
- Conducting ongoing market research.
- Expanding distribution and retail reach.
- Delivering offline events with retailers and consumers.
- Co-marketing with other non-competing like-minded brands.
- Accelerating new product development.
Since China’s dynamic Covid-zero policy was relaxed in late December 2022, Chinese talent has been returning to New Zealand for a well-earned rest and to reconnect with head office. New Zealand business leaders have been revisiting plans and lining up their well overdue business trips to China.
Back to basics
Some skills on cross-cultural leadership may have softened during the pandemic. Getting the basics right ensures a strong understanding of the fundamentals before moving on to more advanced or complex concepts. Managing and leading teams in China can be challenging, due to cultural and linguistic differences, as well as the unique political and economic environment. Here are a few refresher points for leading teams in China:
- Understand Chinese culture: It is essential to have a deep understanding of Chinese culture and how it affects communication, decision-making, and relationships. This includes understanding the importance of face, hierarchy, and the concept of Guanxi (networking and building relationships).
- Respect hierarchy: In Chinese culture, there is a strong emphasis on hierarchy, and it is important to show respect to those in positions of authority. This includes showing respect to your Chinese colleagues and managers, as well as to government officials and other leaders.
- Build relationships: Building relationships is considered an essential part of doing business in China. Take the time to get to know your Chinese colleagues and be patient when building relationships.
- Communicate effectively: Be mindful of the differences in communication styles. Chinese people may not express disagreement openly, or may use indirect language to convey a message. Be aware of these differences, be patient, and use simple, clear language when communicating with Chinese colleagues.
- Empower your team: Chinese employees may be used to a more hierarchical management style. They may be less likely to take initiative or speak up at meetings. As a leader, it is important to empower your team and encourage them to express their ideas and opinions. A practical example would be empowering your Chinese team to create limited edition offerings around cultural festivals, such as the Lunar New Year or QiXi Festival.
- Lead by example: Chinese employees tend to follow the leader’s example, so lead by example and demonstrate the behaviour and work ethic you expect from your team.
- Be aware of the legal and regulatory environment: China continues to have a unique legal and regulatory environment, so familiarize yourself with the laws and regulations that apply to your business and seek professional advice when necessary.
Some normal training and development opportunities were absent during the pandemic. Chinese employees tend to value these for personal and professional development, so it is beneficial to reignite them post-COVID.
Developing China knowledge from New Zealand
New Zealand organisations such as NZTE and the New Zealand China Trade Association offer a wide range of resources and opportunities to build networks and knowledge. Certain digestible podcasts are also worth tuning into, such as:
- The Prince: A 12-episode feature produced by The Economist on Xi Jinping which delves into how he rose to the top, and what it may mean for China and the rest of the world.
- The Drum Tower: Produced weekly by The Economist’s China correspondents spanning everything from party politics to business, technology and culture.
- Caixin China Biz Roundup: Produced each weekday by The China Project with 15-minute reporting on the biggest developments spanning the economy, finance and tech sector.
Putting in the mahi at home in New Zealand results in endearing yourself towards colleagues in China.
Finding your way
The outlook for the Chinese economy is positive, but with some uncertainty due to various factors such as trade tensions, demographic changes, and the lingering impact of the pandemic. In the short term China’s economy is expected to grow five percent in 2023 and Beijing has implemented several measures to support economic growth, including monetary policy, fiscal stimulus and infrastructure spending.
In the long term, China’s economy is expected to continue to grow at a moderate pace, driven by factors such as urbanization, an expanding middle class, and an increase in domestic consumption.
However, there are also some potential headwinds impacting China’s outlook. For example, for the first time since the 1960s, China’s population is shrinking. The state pension system may struggle to handle the unbalanced ratio of older adults to a shrinking working population. The decline may well harm China’s overall productivity.
Whilst Beijing is managing State-led investment and cleaning up the bloated real estate sector, with a falling working population and the number of families declining, China needs fewer new factories, new office buildings and new housing.
Either way, engagement of Chinese talent is going to be at the heart of export success in China. So make the bridge between head office and in-market talent stronger than ever. The division of labour and the division of decision-making therein can be well balanced.
By following the above tips, you can successfully work cross-culturally in China and build strong and productive relationships with your Chinese colleagues.
Remember, 2023 is the Year of the Rabbit – a symbol of longevity, peace and prosperity in Chinese culture.
Damon Paling is a former NZTE trade commissioner to China, and now an NZTE Beachheads Advisor based in Auckland. Email [email protected]
This article has also been published in the May quarterly edition of NZBusiness magazine.
