Capital Markets: Time for Prospectus NZ? (NZ Herald)

Fran O’Sullivan and Tim McCready

New Zealand is in a sweet spot.

Surely it’s time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets?

“I just think the genie is out of the bottle with New Zealand,” says Nicholas Ross, country head for UBS New Zealand. “People are just going to keep coming and coming and coming.”

“If there was ever a time to be bold and to borrow a bit more this is it,” he adds. “Markets are in very good shape, they are very receptive to good proposals and interest rates are very low.”

It is a stance shared by a growing number of senior NZ capital markets players and business leaders.

New Zealand arguably remains behind the pace when it comes to applying financial leverage to fully fund the growing infrastructure gap sparked by rocketing net migration.

A Government spooked by a series of major earthquakes is wary of accruing too much debt in case it needs to use its balance sheet in the event of another costly natural disaster or recession. But this appears short-sighted when Trump’s America and Brexit have affected international perceptions and this country is increasingly viewed as a safe haven for people and capital.

Auckland Chamber of Commerce CEO Michael Barnett points out there are many options for funding the city’s growth.

But they all require capital.

Commonwealth Bank’s Andrew Woodward says the NZ debt market has shown it has the capacity to complete larger project finance transactions.

Woodward – who is general manager of CBA’s NZ operations – points to Transmission Gully and the Puhoi-to-Warkworth projects, which attracted support from domestic and offshore banks and investors and competitive outcomes for the NZ Government.

He says the continued success of this style of transaction – as well as funding of significant investment by the likes of Auckland Council and Auckland Airport – will continue to rely on domestic and increasingly international debt markets supporting growth projects, with both having targeted international debt markets to meet their growing funding requirements this year.

Says Woodward: “To aid the further development of the NZ debt market there continues to be a strong role for Government in outlining a clear pipeline of projects (across a range of asset classes including toll roads, prisons, hospitals, and rail projects), so foreign capital keeps New Zealand on the radar, as well as ensuring legislation around areas such as interest withholding tax are competitive versus other jurisdictions, and encourage investment in New Zealand.

“While the domestic debt market can meet requirements up to a certain capacity, foreign capital is expected to play an increasing role to meet the planned infrastructure spend.”
Kiwis who have collectively saved more than $40 billion in KiwiSaver – an average of just under $15,000 per person – might also question whether investment allocations are structured to deliver sufficient funding for NZ growth (and the needs of savers).

Australian research firm Strategic Insight has released figures showing total KiwiSaver balances hit $40.651 billion at the end of March; up from $38.416b at the end of December.

With KiwiSaver poised to turn 10 this year, it is worth asking whether more avenues for investment should be provided onshore.

In its report, World awash with Money, Bain & Company looked at capital trends through to 2020.

The consultancy firm predicted that for the balance of the decade, markets will generally continue to grapple with an environment of “super-abundance”.

It says there has been a power shift from the owners of capital to the growers of good ideas. “In this environment, investors’ success will be determined less by how much money they command than by their ability to spot an investment’s true creation potential and act on it nimbly.

Those that can react with speed and adaptability will be best able to identify the winners, steer clear of bubbles and generate superior returns.”

There is an abundance of innovation in New Zealand. Time for that Kiwi prospectus to fund our growth and our ideas.

Capital Markets: Venturing closer to maturity (NZ Herald)

Tim McCready

Richard Dellabarca, chief executive of the NZ Venture Investment Fund, has completed a strategic review of the industry and provided growth options to Government, reports Tim McCready
Last year, then Economic Development Minister Steven Joyce announced a review of New Zealand Venture Investment Fund’s structure, reiterating the Government’s ambition for the fund to become self-sustaining.

Soon after the announcement, Richard Dellabarca was appointed chief executive of NZVIF in mid-2016 — a move that indicated the industry was maturing.

Dellabarca, an investment banker, had spent 14 years offshore in a variety of leadership roles in venture-backed companies, capital markets, financial services and technology-related opportunities.

He brings a private sector investment perspective, but given his experience as an entrepreneur he understands what is required to build globally scalable companies.

“Really good Venture Capital funds (VCs) are looking to build businesses. Investment is an important skill to have, but their greatest skill is in building companies,” he says.

“It helps to have gone through the journey of building a global company, or a company with global aspirations, in order to understand what is needed.”

When Dellabarca joined NZVIF, he was given a blank piece of paper and the mandate to go away and undertake an independent strategic review. He has spent the last year speaking with stakeholders — around 140 organisations and 230 individuals.

Dellabarca says he is encouraged with the significant amount of investable opportunities in New Zealand, noting that founders and teams tend to be aspirational and motivated, and companies aim to be global from day one.

The review noted a growing amount of angel investment — $69 million in the last year, and more than $400 million since figures have been tracked — in addition to the significant investment into universities and Crown Research Institutes.

There is money available in New Zealand to fund proof-of-concept in early stage companies.

But a shortage of funds was identified for opportunities requiring $5-20 million in early stage growth capital.

In addition, Dellabarca noted that in the Silicon Valley or the UK, “you generally see funds syndicating with two or three investors when raising Series A & B investment.

“Yet over here, we have only Movac and Global from Day One (GD1) investing locally in growth capital, severely limiting the opportunity to syndicate investments or fully fund early stage growth companies through to maturity — and ultimately a successful realisation of the investment.”

Although eight Venture Capital funds were originally established in New Zealand, the average fund size was only NZ$45 million compared with a global average of approximately US$300 million.

Dellabarca explains there is a good reason for global fund sizes given the amount of money a company generally requires through to an investment realisation.

“They will tend to invest in, say, 15-18 companies at $5-10 million each, and then keep money aside for further follow-on investment in companies that are succeeding.

“This allows for better funds management practice, managing downside while optimising on upside opportunities,” he says.

“These historic sub-scale New Zealand funds tended to invest in a range of companies, but then either didn’t have capacity to fund them through to success and, therefore under-capitalised them, or had later stage investors dilute them down when they couldn’t follow on with the investment.

“The consequence was that many of these funds didn’t generate appropriate returns for their investors,” Dellabarca says.

While offshore corporates and financial institutions have had an interest in allocating money into New Zealand technology innovation, they have not been able to find a platform to put the money in.

As many of these institutions manage multibillion-dollar funds, the smallest investment they are willing to make is $50-$100 million.

“With an average fund size of $45 million, their mandate will often preclude them from being more than 10-20 per cent of a fund,” says Dellabarca.

“By definition you need a $300 million to $400 million fund to take these cheques.

“We just haven’t set up a fund of scale to allow foreign investors to come in and access innovation.”

NZVIF have presented a number of options to Economic Development Minister Simon Bridges that aim to make the fund self-sustainable.

Although Dellabarca is unable to divulge the details on those options, he says the fund-of-funds model with its hefty fees on fees structure is no longer viable.

The results of the strategic review provide a clue that early stage expansion capital for growth companies is New Zealand’s choke point, and is a gap NZVIF would like to address if a model that works can be established.

“There is an unmet need. You could argue about the specific number but the current deal flow suggests an annual demand of $200-$300 million,” says Dellabarca.

“If you assume our current VCs invest over five years, holding back 30 per cent for follow-on investment (the traditional venture capital investing model), then you have approximately $20-$25 million invested per year, versus a demand of up to $300 million per year.

“But whatever the number is, it is substantially larger than available capital. The aspirational goal is to have that need met in some way or another.”

Considering the future, Dellabarca says that he would like to see more money in the angel space. NZVIF is currently the second largest angel investor in New Zealand, and he hopes that in time it won’t be needed.

He has the same goal for the venture capital space.

“Hopefully in 15 years we won’t need a NZVIF in any guise, and instead there will be several self-sustaining funds of scale,” he says.

“We don’t have government intervention in private equity.

“You would hope that ultimately the same will happen in the venture capital space.”

Power of NZVIF?
The NZ Venture Investment Fund (NZVIF) was established by the Labour Government in 2002 to build a vibrant early stage investment market in New Zealand by investing alongside private venture capital funds into high-growth companies.

NZVIF currently has $245 million of funds under management which it invests through two vehicles:

  1. a $195 million venture capital fund of funds, partnering with private New Zealand venture capital funds to support the development of innovative companies from start-up through to growth (investing on a two-to-one basis).
  2. a $50 million Seed Co-Investment Fund (SCIF) established in 2005 to encourage angel investment and fill the investment gap for entrepreneurs needing capital to get their business underway (investing on a one-to-one basis).

Since its inception, NZVIF has formed 27 investment partners (16 angel and 11 venture capital partners) and invested in a portfolio of 236 companies.

NZVIF has helped stimulate $2.2 billion in leveraged capital, $1.2 billion in attracted overseas capital, employment of 6076 FTEs and $174 million in taxes.

China Business: Alibaba offers sweet deals (NZ Herald)

Tim McCready chats with Alibaba’s Australia and New Zealand director of business development John O’Loghlen about the new regional office, the work being done with New Zealand businesses, and the future of online shopping.

Moving on from the rules of the WTO and global trade will allow small businesses and developing nations to tell their stories and trade together effectively using e-commerce.

Alibaba last month opened an Australian and New Zealand office in Melbourne, demonstrating the Chinese e-commerce giant’s ambition to expand its global footprint.

“Although it is headquartered in Melbourne, New Zealand is equally important,” said John O’Loghlen, Director of Business Development – Australia and New Zealand at Alibaba Group. “The leadership team in Hangzhou look at both markets together.”

Alibaba also recently appointed Pier Smulders as Director of Business Development in New Zealand, a dedicated in-market resource and experienced client service professional for Alibaba’s key accounts and opportunities in the SME space.

At the Melbourne opening, Alibaba founder Jack Ma acknowledged Australia and New Zealand’s clean environment provides a unique selling point for its businesses and will be a “goldmine” for the region’s economy over the next 15 years.

“In the past 30 years through a lack of experience in China we have a terrible polluted environment. There’s a lot we should have learned from Australia and New Zealand,” he said. With a local office and expert team, Alibaba will help Australian and New Zealand businesses share their world-famous products with billions of customers around the world.

“Whether a large company with existing links to China, or a mum-and-dad run exporter operating out of a garage, Alibaba is here to make it easy to do business,” he said.

The opening of the Australasian office comes after a strategic alliance was established between Alibaba and the New Zealand Government last year. The memorandum of understanding (MOU) signed by New Zealand Trade and Enterprise (NZTE) formalised discussions for strengthening trade between China and New Zealand, with an aim to foster greater trade opportunities for businesses seeking to enter the Chinese consumer market.

At the time of signing, NZTE chief executive Peter Chrisp said: “New Zealand businesses are already using Alibaba’s channels to sell a wide range of products including dairy, meat, seafood, fruit, wine, beverage, cereal, skincare and health supplements. By providing dedicated services for New Zealand products, this new arrangement offers significant opportunities for New Zealand businesses to reach more consumers as well as advocating New Zealand’s reputation as a place of open spaces, open hearts and open minds.”

Since the MOU was signed, Alibaba and NZTE have run workshops across New Zealand, helping exporters to gain insights into doing business with China and Chinese consumers, evaluate their business models and provide education about Alibaba’s various platforms.

Last September, NZTE and New Zealand Winegrowers established a Wine Pavilion on Tmall, dedicated to the sale of about 100 different New Zealand wines, representing all key wine regions and wine varietals.

NZTE’s Trade Commissioner in Shanghai, Damon Paling, says that wine traffic has been growing through organic and paid advertising, with the conversion rate consistent with market expectations at around two per cent, and an average basket value around NZ$120.

In addition to wine, Paling says that Alibaba platforms Tmall and Taobao are “seeing good sales of various consumer dairy products, fruits, and small categories such as manuka honey, wine, breakfast cereals, and snack bars.”

Although New Zealand and Australia is perceived as a regional “sweet spot,” O’Loghlen said it is important for businesses to appreciate that companies in Switzerland, Japan, America, South America and Britain are all looking towards China too.

“There are a lot of great brands around the world. Many countries make good milk, honey, and merino sweaters.

“In order to be successful, you not only need the best-in-class product in New Zealand and Australia, but it has to stand on its own two feet globally.”

Alibaba is spending a lot of time helping clients understand that it is important to tell their own brand story effectively, while at the same time leverage the unique advantage and narrative that comes from being a New Zealand business.

While there are a huge number of opportunities in the region, O’Loghlen said one of the most significant areas of focus over the next three-to-five years would be produce and protein.

“Seafood, beef, lamb, dairy, and really exotic produce like avocados offer an exciting opportunity.

“The fresh food space is going to be fascinating. We are really excited about fresh milk on top of what has been the first round of extended shelf-life milk into China,” he said.

Alibaba’s platforms will allow businesses to sell direct to consumers, avoiding the layers of distributors that have been a hurdle for New Zealand companies in the past.

O’Loghlen said it is really important to recognise the power of the daigou community – especially in Australia and New Zealand.

Daigou is the Chinese term given to buying items overseas on behalf of others. Products are purchased and brought into China by professional personal shoppers – or bought through online channels – with international students often acting as the intermediary.

This grey market is a multibillion-dollar business, and it can be argued that daigou can help put innovative new products on the radar.

Many New Zealand products already have an unofficial presence in-market because an enterprising Chinese New Zealander found it, liked it, and introduced it to their networks in China, said O’Loghlen.

“Chinese in New Zealand are using their mobile phones to tell the story of the region, disseminating that information back to China in real time.

“My colleagues in Europe and North America do not have an equivalent demographic that we do here [in Australia and New Zealand], in terms of percentage of the Chinese population in the large urban centres,” he said.

Chinese consumers looking to buy something from this region are receiving an accelerated experience of the New Zealand and Australian culture, because – more often than not – they know someone here.

“As Chinese authorities tighten up on the grey channels, companies will need to take hold of their own story from that of the daigou community, moving beyond a commodity phase to a more branded presence,” said O’Loghlen.

“This shift will lead to strong brands telling wonderful stories, and that is where Alibaba can help.”

O’Loghlen has spent considerable time living and working in China, and has noticed the pace of change recently has been more rapid than ever.

“Opportunities are emerging that didn’t exist previously. A lot of new platforms are geared towards small businesses and newer brands.”

Alibaba’s Australasian presence will help to ensure Australian and New Zealand businesses have the information and support necessary to succeed in China and the rest of the world.

“The office here will help businesses in the region understand that the pace of change in China is very different to that of New Zealand – or even Hong Kong or Singapore,” O’Loghlen said.

“I think if you had spoken to people in e-commerce in China several years to premium Kiwi producers

“Now we have a number of bonded warehouse opportunities. For example, Alibaba’s Taobao Global taps into a network of daigou, who ship their products through a bonded warehouse, and are as far away from a grey channel as you can imagine.”

With people in-market, Alibaba can not only help companies in Australia and New Zealand stay on top of the emerging sales channels, but also bridge the cultural chasms and language barriers that come with doing business in China.

Alibaba has made a number of investments in offline department stores over the past 18 months, in a push to merge its online platforms Tmall and Taobao with bricks-and-mortar (offline) shopping.

A surge in mobile internet usage and the growth of big data capabilities is driving this new “omnichannel” shopping experience as a way to better meet consumer demand.

The most recent move by Alibaba was a strategic partnership with Bailian Group, one of China’s largest retail conglomerates with 4700 stores across 200 cities and autonomous regions.

The two companies plan to leverage their respective consumer data to “explore new forms of retail opportunities across each other’s ecosystem,” integrating offline stores, merchandise, logistics, and payment tools to deliver a better overall shopping experience.

By combining membership data, they will be able to introduce technologies including geo-location, facial recognition, and big-data driven sales and customer management systems.

“When we talk with people here, a lot of people ask us if this is like Amazon, or what the analogy is,” said O’Loghlen. “But it is actually something very unique to China.

“These investments in offline allow consumers to experience brands. There will be a blurring of the lines in promotion online and offline.

“People [in China] are used to scanning QR codes or buying things offline and then receiving a promotion online, or vice versa,” he said.

“We have to be able to educate people very quickly about these things, because by the time it gets reported, your competitors may be up and running on the platform.

“It doesn’t require huge marketing dollars. A huge number of these promotions rely on livestreaming, which is the communication channel of choice at the moment in China.”

Marketing via livestreaming maintains a degree of exclusivity for the consumer — if they don’t tune in, they will miss out. Companies can tell their story in a more authentic way, better connecting with buyers and consumers.

“For Singles’ Day (November 11) there were 60,000 live streams between October 21 and November 11 featuring celebrities from China and overseas.”

O’Loghlen explained that if he and I were to have this same conversation in another 12 months, China will likely have moved on from livestreaming – perhaps to augmented reality or virtual reality goggles. That is not as a far-fetched as it seems. Last year the augmented reality game Pokemon Go took the world by storm.

Alibaba’s Buy+ virtual store also made its public debut in July last year at the Taobao Maker Festival in Shanghai. Buy+ – although still in beta – allows consumers to shop and browse products in a virtual environment using a headset with 360-degree views and two hand controllers. Shoppers can even have virtual models showcase apparel and accessories on a catwalk.

Ma has spoken about his aspirations for a frictionless, borderless future for e-commerce. Central to that is the establishment of an “electronic world trade platform” (eWTP), that will use the internet to remove trade barriers and allow all manufacturers and brands – regardless of their size – to have the same opportunity to enter a consumer market.

“Australia and New Zealand are both in the driving seat to take a leadership role in the eWTP rollout,” said O’Loghlen. “Moving on from the rules of the WTO and the rules of global trade will allow small businesses and developing nations to tell their stories and trade together effectively using e-commerce.

“We want to democratise the playing field for trade. A lot of people are really excited by that vision.”

A long lasting connection
Alibaba founder Jack Ma was one of the first foreign business heavyweights to meet with Donald Trump following his election victory.

In contrast to President Trump, Ma is an advocate for global trade, and says the best advertisement for globalisation is the success of one company trading with another, and hiring more people in the process.

By expanding into Australasia, Ma said Alibaba was making it easy for our businesses “to do business anywhere”.

At the opening of Alibaba’s Australasian office, Ma described the region as one he holds a long connection with.

“Australia will always have a special place in my heart and that’s why I’m so pleased to come back to contribute to supporting Australian businesses and create opportunities and jobs in a country that has meant so much for me.”

China’s richest man electrified a luncheon for former Prime Minister John Key in Beijing last April when he thanked New Zealand “for your benefit to the whole planet”.

He revealed then that 20 of Ma’s former colleagues at China’s e-commerce giant loved New Zealand so much they have retired here.

In the 1980s when Ma was 12 years old, he introduced himself to Australian Ken Morley — who was visiting China on a family holiday — in an effort to improve his English.

Ma befriended Morley’s son, who subsequently brought him to Newcastle in Australia on his first international trip.

Ma has said the time spent in Australia when he was young changed his view of China and its relationship with the world. “I am very thankful for Australia and the time I spent there in my youth. The culture, the landscape and most importantly its people had a profound positive impact on my view of the world at that time,” he said.

Last month Ma, who according to Forbes is worth US$28.2 billion and is the second wealthiest man in China, gave A$26.4 million to establish a scholarship at the University of Newcastle.

The Ma & Morley Scholarship Programme will help establish networks between the two countries, as well as provide practical training to equip beneficiaries for leadership in the global environment.

China Business: Chinese brands make their mark (NZ Herald)

Tim McCready

A decade ago, the most respected domestic brands in China were those attached to clothing, shoes and other small items.

Nowadays, Chinese appliance brand Haier, e-commerce platform Alibaba, and personal computer manufacturer Lenovo are well recognised, and showcase China’s rapid growth and aspiration for dominance in innovation and technology.

Perhaps nothing better demonstrates this change than low-cost Chinese smartphone manufacturers. Recent surveys have shown the good quality and low prices of domestic high-tech smartphones have dramatically increased in reputation to become among the most trusted brands in China.

China is the world’s largest market for smartphones, and one that is growing rapidly. Global technology analyst firm Canalys recently reported that for the full year 2016, China reached 476.5 million unit shipments of smartphones, growing year-on-year at 11.4 per cent — vastly up on 2015’s growth rate of 1.9 per cent.

The last quarter of 2016 saw smartphone shipments in China reach 131.6 million units — the highest single quarter total in history and accounting for nearly a third of worldwide shipments.

Leading the charge in the Chinese smartphone market are Huawei, Oppo and Vivo. Their rankings jump around depending on how the data you use is captured (shipments to resellers, reported sales, phone activations), but all have experienced strong growth in sales numbers over the past year.

Traditionally, Huawei has focused on China’s larger tier-1 and tier-2 cities, with Oppo and Vivo targeting rural areas and medium cities — although that is changing as all three look to aggressively expand their market share.

The Chinese smartphone market is not without its challenges. Xiaomi was once considered by many to be the “Apple of China”. Xiaomi’s CEO, Lei Jun, has been on a mission to “change the world’s view of Chinese products”.

Yet Xiaomi has slipped to fourth place in the Chinese smartphone war, and is the only one of the top brands to decrease its shipments in smartphones over the last year.

The company sold enough to keep comparatively expensive Apple at fifth place, but has struggled with poor reviews and hasn’t been able to keep pace with the innovation, marketing, and investment into distribution channels of its domestic competitors.

Globally, Chinese brands are making big strides into international markets. Earlier this year at the Consumer Electronics Show (CES), an annual tradeshow for consumer electronics held in Las Vegas, many analysts reported that China’s presence marked a big change. Chinese companies were present in record numbers — 1575 exhibitors compared with 1755 from the United States, showcasing strong innovation and technologies including smartphones with high specifications and advanced cameras.

Huawei was one of the early smartphone entrants into Western markets, and has become the first Chinese company to chip away at what has been South Korea’s and the United States’ stronghold on the industry, claiming third place in the fiercely competitive global smartphone market just behind Samsung and Apple.

Richard Yu, CEO of Huawei Consumer Business Group, said at CES that Samsung’s woes over the past year with the Note 7 catching on fire provided more fuel to the company to push ahead as a serious player in the market.

Yu believes China deserved its previous reputation for being an imitator.

“Chinese vendors are getting strong and stronger at innovation,” he said, expecting Huawei to spend US$10 billion on research and development this year — about the same figure as Apple spends.

Huawei continues to push its brand in New Zealand — it is a regular on television adverts and billboards around the country. Last year Huawei and the Wellington Phoenix signed the largest sponsorship deal in New Zealand football history, extending their initial three-year partnership for at least another three seasons.

At the time, Huawei global rotating CEO Guo Ping said connecting with football fans through the Phoenix had been a huge part of growing the brand in New Zealand.

“This partnership has been outstanding for Huawei, building our profile in Australasia, and providing amazing experiences for our customers and friends in New Zealand.”

It seems to be working. Huawei has grown to third position in terms of share of total shipments to New Zealand, growing to 21 per cent in the fourth quarter of 2016. That compared with 31 per cent of the market for Apple and 26 per cent for Samsung.

Other Chinese brands are yet to crack the New Zealand market to the same degree. Oppo is one would-be player, having signed exclusive agreements with 2Degrees and JB Hi-Fi to sell their handsets. This represents a natural next step for the Chinese producer, having enjoyed 700 per cent year-on-year growth in its Australian market share in the fourth quarter of 2016 (reaching 2.9 per cent of the market).

Global producers of smartphones have struggled to expand into China, and yet Chinese producers are rapidly accelerating into other parts of the world.

In the 2000s, Finland was the epicentre of phone manufacturing, with Nokia a ubiquitous staple in everyone’s hands. Whether or not Nokia’s recent relaunch will shake the industry up remains to be seen, but in the first quarter of 2016 Huawei sold 10 times as many phones as Apple did in Finland. Last October Huawei passed Samsung to claim the top spot of the smartphone market there.

High specifications and low prices might just be a winning formula for Huawei and others to take on Apple and Samsung — the top players in the industry since 2011 — and expand their dominance in China and Finland to the world.

China Business: UniServices goes global from Hangzhou (NZ Herald)

Tim McCready

Auckland UniServices, the commercial arm of the University of Auckland dedicated to connecting its capabilities to business, investors and the community, has recently established an innovation institute in Hangzhou, the “Silicon Valley of China”.

Hangzhou, capital of Zhejiang province and fourth-largest metropolitan area in China, is just an hour by bullet train from Shanghai and showcases China’s rapid transition from a low-cost manufacturer to technology-focused innovation centre.

E-commerce giant Alibaba was founded in Hangzhou, and companies such as Siemens, Motorola, Nokia and an increasing number of start-ups have set up there.

Dr Lisbeth Jacobs, General Manager International at UniServices, says “Chinese officials in Hangzhou are well aware of the University of Auckland’s success in commercialisation.”

She is responsible for all contract research and services activity outside New Zealand, Australia, and the Pacific.

In 2014, the MIT Skoltech Initiative identified UniServices and Auckland University as one of the top five “emerging leaders in entrepreneurship”, one expected to become a major international powerhouse in the coming decades.

Last year, the university was ranked 27 in a Reuters report on the 75 most innovative universities in Asia, a list that identifies the educational institutions doing the most to advance science, invent new technologies, and help drive the global economy.

“While China is very entrepreneurial and pours a lot of money into innovation, it can still be a struggle to bring new ideas to market,” says Jacobs. “China is a large market that offers a ton of opportunities but at the same time is extremely competitive.

“In order to be successful it is important to have a strong local base,” she says.

“Successful innovation depends on many different factors, but it must be process driven.

“New ventures are typically more likely to succeed when we put experienced people next to young entrepreneurs.”

Jacobs sees Hangzhou as the perfect location for UniServices, matching the type of technology being undertaken at the University.

“Hangzhou has a lot of biotech, e-commerce, logistics, precision manufacturing, pharmaceuticals and nutrition companies, and is attracting top-tier science and technology companies and researchers.”

The Government of the Hangzhou Economic and Technological Development Area (HEDA) helped UniServices find a suitable location for the innovation institute, and assisted with administrative processes and other local requirements.

UniServices will initially use the institute to gain traction in China in several areas where the university’s internationally-recognised expertise is relevant for the Chinese market, including robotics, high value nutrition, light metals research, water, clinical trials and drug development, particularly in oncology.

The University will also look to offer executive education in specific areas, including tailoring their post-graduate qualification in commercialisation and entrepreneurship, for which it is well known internationally.

While UniServices has already had several contracts with Chinese companies, Jacobs says managing them from New Zealand is not always easy.

“On previous projects we have wanted to hire staff close to the project.

“Without a Chinese entity, it is very difficult to do that. Enforcing contract terms and payment has also been challenging at times.”

The institute has been set up as a wholly foreign owned limited liability company under Chinese law.

A local entity and a base in China will make it a lot easier to hire staff, enforce existing contracts and be closer to Chinese customers.

Jacobs explains it is not possible for UniServices to hire generic staff — an engineer might be suitable for a programme in light metals but is not interchangeable to work on a drug development project.

Teams will be built around projects and research entities as is done at UniServices in Auckland.

“Our people will travel more, and as projects and research centres grow we will build teams up locally to expand beyond ad hoc projects,” says Jacobs.

“We will be able to access more work, and ensure any contracting is more effective, efficient, and enforced.

“If UniServices can contract from their own entity in China to another in China — and backed by local government — it is a lot harder to be ignored.”

UniServices has previously had an offshore presence, including a large multi-year programme to introduce an English language foundation programme at Princess Nourah Bint Abdulrahman University in Riyadh, and it has staff in Oman to deliver a schooling improvement project alongside the government.

But establishing an office that will do everything UniServices does from New Zealand, rather than project-based work, is a first for Auckland University.

Jacobs’ vision for the institute is to be actively engaged in contract research, deliver consulting services, spin out companies from the university and incubate start-ups.

“One of UniServices’ criteria for investing in spin-outs is that they have the potential to become global players. It is easier to become global on day one from China than from New Zealand.

“We will be able to offer our start-ups the ability to go global and really test their ideas in an international market.”

Jacobs says the institute aims to bring together people from all facets of the innovation ecosystem to use the facilities and share their experience and expertise with each other.

“It is my hope that the institute will ultimately provide a link between the innovation and commercialisation in New Zealand and China.

“We want to create impact, a vibe, and a hub for innovation,” the UniServices manager says.

Dynamic Business: No ordinary disruption (NZ Herald)

Tim McCready

A handful of forces are shaping the future of what global business will look like

Four global forces are breaking all the trends and shaping the future of what global business will look like: greater global interconnections, industrialisation and urbanisation in emerging economies, an ageing world and disruptive technologies.

These disruptive forces will clearly have an impact on the business environment and will have an impact on investing for the future.

Consulting firm McKinsey & Company outlines the four global forces in its presentation: ‘No Ordinary Disruption’.

Greater global interconnections
The world is becoming increasingly connected through trade and cross-border flows of capital, people and information. Since 1990, cross-border flows have increased five-fold. Data flows are surging and connecting more countries — in 2005, 4.7 terabits per second were transferred globally, growing 45 times larger by 2014 to 211.3 terabits per second.

Australia and New Zealand are noted as two particularly well-connected economies in all five types of cross-border flow (goods, services, finance, people and data).

Relative to the size of the economies, Australia and New Zealand have more exchanges than most pairs of countries — people and data are rated particularly high, with 27 and 25 per cent share of total flows between the countries, respectively.

However, Australia and New Zealand rank lower in global connectedness — Australia is ranked 27th (down 10 places from last year) and New Zealand is ranked 48th (down five). This is in contrast to Singapore, the Netherlands and the United States who take out the top spots.

McKinsey & Company notes that the current slowdown masks digital transformation, but creates opportunities for smaller firms to participate. While Australia and New Zealand are strong together, it is important to acknowledge there is much more that can be done.

Industrialisation and urbanisation emerging
The rise of China, India and other emerging economies over the past 10 years has seen the global economic “centre of gravity” shift at an unprecedented pace. Emerging markets are going through simultaneous industrial and urban revolutions. The acceleration of output per person is occurring at roughly 10 times the pace of that following Britain’s Industrial Revolution and 300 times the scale — creating an economic force 3000 times as large.

McKinsey projects that by 2025, 46 of the global top 200 cities will be Chinese (in terms of 2025 GDP) and emerging regions of the world will be home to almost half of all Fortune Global 500 companies.

This massive scale and momentum means big shifts in economic power, but it is the mid-tier cities that are driving growth — not the megacities. Nearly three billion people will join the consuming class by 2025, bringing new consumers and competitors for businesses to consider.

An ageing world
The population of advanced economies is ageing rapidly. There are currently three countries where one-fifth of the population has passed the age of 65 — Germany, Italy and Japan. By 2020, 13 countries will fit this profile. By 2040, about one in four people in advanced economies and China will be 65 years old, or older.

Productivity, which is needed to meet the demands of an ageing population — and therefore becoming increasingly critical — is going the wrong way. This has implications for skill gaps and successions, and without an increase, a smaller workforce will constrain consumption and slow the overall rate of economic growth by up to 40 per cent over the next 50 years.

Disruptive technologies
Mobile internet and advanced robotics have seen massive increases in development pace. It took 115 years to advance from the first phone call to the launch of the first website — and then 16 years until the first iPhone was launched in 2007.

We have all seen the statistics demonstrating how quickly the adoption of new technologies is accelerating. The amount of time taken to reach 50 million users has decreased from 38 years for the radio, 13 years for television, three years for the internet, nine months for Twitter, to an incredible 19 days for the 2016 mobile game phenomenon of Pokemon Go.

Despite these advances, McKinsey reports that digitisation is still in its early days, with advanced economies capturing only a fraction of their true digital potential.

Smaller firms and large sectors (such as agriculture, construction, hospitality, government and healthcare) remain laggards in technology adoption, and are still a long way away from achieving potential benefits.

Both New Zealand and Australia are currently lagging behind the OECD average in terms of STEM qualifications.

Of all graduates, 18 per cent in Australia graduate from across science, technology, engineering and mathematics. New Zealand is slightly higher at 21 per cent (up five per cent from last year), yet talent across these subjects will be critical in shaping the future of our economies.

Tripartite Summit: Infrastructure, housing, and transport – We can learn a lot from each other

  • Auckland, Guangzhou, and Los Angeles have strong and long-standing sister city relationships.
  • Auckland Los Angeles share similar challenges, particularly in transportation, the economy, international trade and innovation. Eric Garcetti believes these challenges come from our cities being “victims of our own success”.
  • Over the next decade, autonomous vehicles are expected to revolutionise transport. People won’t need to own their own cars, and cities won’t need the carparking infrastructure they have today.

“We have a lot to learn from each other, and we decided to formalise that relationship to improve the economy and the quality of life in each of the three cities.” – Eric Garcetti

While in Auckland, Los Angeles Mayor Eric Garcetti spoke of the strong and long standing relationship between the cities in the Tripartite Economic Alliance, the similar challenges Auckland and Los Angeles are facing, and the opportunities that can come from our longstanding relationship as sister-cities.

Los Angeles has been a sister city with Auckland for 45 years, and with Guangzhou for 35 years. “Two years ago in Guangzhou we realised there was so much we could share with each other, especially in transportation, the economy, international trade and innovation,” Garcetti said.

He believes that local governments are where the rubber hits the road and innovation takes place. “We have a lot to learn from each other, and we decided to formalise that relationship to improve the economy and the quality of life in each of the three cities.”

 

Although Garcetti acknowledged Auckland and Los Angeles share similar challenges, he believes they come from our cities being victims of our own success. “Both cities are learning from mistakes of the past, and undergoing massive transformation in infrastructure, housing, and transportation,” he said.

“Rents are going up, traffic is increasing. But on the other hand, we have a booming economy. People love Los Angeles – it is the northern capital of Latin America, western capital of the United States, eastern capital of the Pacific. In so many ways, people want to be there because it is such a creative place. We just have to solve what that does to people, so they can have a decent place to live, and not be stuck in traffic.”

Both Los Angeles and Auckland’s current housing affordability problem is driven by a lack of supply. Garcetti has been heavily criticised for removing historic buildings in order to build apartments, however he believes that city planning requires a careful balance of urbanisation and preservation.

Neighbourhoods can be preserved, as long as we put intensification around areas we have put public transportation in place. “It’s a supply and demand issue. You have to put buildings where you’re investing in transit, and in your downtowns,” Garcetti said.

Even more so than Auckland, Los Angeles is defined – and criticised – by its roads, and its transportation problems. Both cities removed their tram and streetcar networks in the 1950s and invested heavily in roading infrastructure.

“We want to have cars and we love cars, and we need to improve our roads, but there’s no space to build new freeways. What we have to do is lay down rail that allows people to get around,” said Garcetti.

Los Angeles residents are strongly supportive of increasing public transport. The city requires two-thirds of the population to vote in favour of tax increase, and yet eight years ago the city agreed to tax themselves a quarter-cent on every dollar of sales to initiate a US$35 billion construction programme.

“We literally have five lines underway, connecting the airport, and you will now be able to go from the skyline to the shoreline – Downtown to Santa Monica, for the first time in sixty years, just like our grandparents used to do,” said Garcetti.

Over the next decade, Garcetti believes that autonomous vehicles will revolutionise transport. Although Los Angeles has excellent roads, in Downtown Los Angeles, 81 per cent of space is taken up by car parking spaces. With autonomous vehicles, people won’t need to own their own cars, and won’t need carparking infrastructure.

“96 per cent of the time, cars are not driven – we own too many of them,” Garcetti said.  “Even at peak traffic – which is only 5 per cent of the day – 10 per cent of the roads have cars on them, 90 per cent don’t. It’s a spacing problem, and we’re right on that brink.

Infrastructure, housing, and transportation are challenges that Garcetti believes our cities can work with each other to share ideas and learn. The formal relationship that our sister city relationship and the Tripartite Economic Alliance provides means Los Angeles, Auckland – and Guangzhou – can innovate, grow, and solve these challenges, together.

Tripartite Summit: E-commerce – a world of opportunity

  •  The e-commerce industry is rapidly evolving and transforming the retail sector faster than ever before.
  • Although the customers might differ in their buying decisions, e-commerce is becoming an important player in all markets around the world.
  • China saw the opportunity New Zealand can provide to their e-commerce industry – many of the country’s largest e-retailers were present at the Tripartite Economic Summit in Auckland, seeking out products that would be in high demand.

“E-commerce is a very simple topic.” -Rob Freelen

“E-commerce is a very simple topic,” said Rob Freelen, Los Angeles Market Manager of Silicon Valley Bank at the Tripartite Economic Summit. “It boils down to connecting a product with the customer, including how you market and sell to the customer, and how you transact with the customer.”

While the customers might differ somewhat between Los Angeles, Auckland, and Guangzhou, the e-commerce industry is rapidly evolving and transforming the retail sector faster than ever before.

Freelen noted that the United States is seeing a large number of e-commerce companies operate in very specific niche sectors.

Thrive Market sells ‘the best healthy, natural, non-GMO, organic, vegan, raw, Paleo, gluten-free, and non-toxic items from the top-selling brands at wholesale prices’ – effectively a hybrid between Whole Foods and Amazon. They deliver specifically to those demographics that don’t have an easily accessible Whole Foods, and it’s a market that is growing very quickly.

Club W is a wine discovery platform targeted to 21-31 year olds. It has been designed to introduce younger consumers to new tastes they might like. The Dollar Shave Club sells very cheap disposable razors. Both of these business spurred a multimillion dollar business based on a couple of YouTube videos that went viral.

The US economy often leads the world in industries like e-commerce. Freelen has seen the industry rapidly shift from an information economy to an experience economy. “These companies are expected to not only go internationally, but to go after customers in a unique, innovative way, that will drive much faster sales increases,” he said.

Recognition of the transformation to an experience economy was even echoed at the Tripartite Summit in a panel discussion on virtual and augmented reality. “The importance is not discounting; it’s about upselling experience,” said Dr Roy Davies, Founder of Imersia.

“The importance is not discounting; it’s about upselling experience.” -Dr Roy Davies

The Guangdong Cross-border E-Commerce Industry Association (GCEIA), an industry body that was formed by many of the leading Chinese e-commerce industry players reiterated China’s e-commerce interest in New Zealand.

GCEIA actively promotes New Zealand as a region and a source of products among its membership. When asked what they aimed to get from their attendance at the summit, GCEIA said “the Summit is a great opportunity to explore potential local suppliers. Many of our association members are interested in the opportunity for New Zealand products in China. We are here to seek out those goods that will be in high demand through our platforms.”

China’s E-mall platform provided by ICBC now has 680 million subscribers, which at more than the population of the European Union, ranks it as the largest e-commerce platform in the world. The internet industry has contributed to seven per cent of China’s total GDP, and this is expected to continue to grow.

China has seen such rapid development of the e-commerce industry because it corresponds to the growth of the middle class. China is being further and further urbanised, customers demand for better quality products is growing, and disposable income continues to increase. By working with top quality businesses, ICBC have established a solid brand in the marketplace, and are achieving a very good word of mouth reputation among customers and businesses.

ICBC’s New Zealand E-mall was launched in November 2015, and allows ICBC’s small and medium sized businesses to sell directly into the Chinese market through a secure sales channel. In the three months since the New Zealand E-mall went live, ICBC facilitated 4000 transactions on the platform. Leveraging the increasing demand from Chinese consumers for high quality, safe products, the majority of items on the New Zealand E-mall are personal health care and cosmetic products, and New Zealand made snacks.

“The next step for ICBC will be to expand their product lines into new products, including tourism and studying in New Zealand.” -Xiaoyan Chen

“The next step for ICBC will be to expand their product lines into new products, including tourism and studying in New Zealand,” said Xiaoyan Chen, ICBC Director. “We plan to provide information and solutions for people looking to visit and study in New Zealand. ICBC wants to become a strong bond. One that can link trade between our countries together, and provide a one stop cross-border solution.”

Vipshop, a Chinese ecommerce giant, is another Chinese company capitalising on the ecommerce shift. Working with around 18,000 brands, many of them at the premium end of the market, the company now has 180m registered members, including 13 million daily active users, with an 80% repeat purchase rate.

“You can really see how ecommerce is shaping the whole China retail market.” -Hillary Wang

To put the shift into ecommerce into perspective, 46% of all pairs of shoes sold in the Chinese market in 2015 were sold online. “You can really see how ecommerce is shaping the whole China retail market,” says Hillary Wang, Senior International Director at Vipshop.

E-commerce platforms like Vipshop are able to provide the suppliers whose products they feature with access to an increasingly large pool of data about buyers. For example, Vipshop can provide suppliers with information about where merchandise has been delivered to and who has been buying. New Zealand companies can then use this information to make strategic decisions when entering the Chinese market in a physical, offline sense.

These innovations open New Zealand retailers up to a potentially enormous customer demand, especially now that China has overtaken the US to become the world’s largest e-commerce market, and this is only anticipated to continue, with China’s strong domestic consumption and rapid urbanisation.

Tripartite Summit: The Economic Power of Arts and Culture

  •  The creation of networks of people is an important driver for economic development and can help to fully unlock creativity.
  • It can be argued that China is millennia ahead of the rest of the world in terms of understanding the role of networks, and cultivating them.

“The economic driver of the future isn’t a factory or a piece of technology or software. It’s actually networks.” – Sunny Bates

 Sunny Bates is CEO of Sunny Bates Associates and a director of Kickstarter and Creative Capital, an advisory board member of MIT Media Lab, and a Brain Trust member of TED Conferences. She advises big corporations including GE and Proctor & Gamble.

Bates is also an expert in human networks, and although she spoke at the Tripartite Economic Summit about how she spends her life with a fear of missing out, it seems she does everything but. Bates joked – though only half-heartedly – that her keynote address was organised thanks to a chance meeting in a hot tub on a boat with a New Zealand executive. Opportunities like these don’t seem all that uncommon in Bates’ life.

 

Networks redefined

Bates insisted the economic driver of the future won’t come from factories, technology, or even software. But it will instead come from networks – networks of people.

“The most important thing anyone can do to drive economic development and fully unlock creativity is to create networks of people,” she said.

Bates pointed out that art and culture are critical economic drivers. The cities and regions that understand this are consciously creating conditions to attract and retain people and support their networks. They will be the winners this century.

The Tripartite Alliance was highlighted throughout the Summit as an example of where cultural cross-pollination is occurring, with tangible benefits resulting. “There is a beautiful cultural exchange going on,” said Melanie Higgins, US Consul-General in Auckland. “Culture transcends the boundaries and the Pacific connects us.”

 

What are networks?

Guanxi is a Chinese word originating from the Chinese social philosophy of Confucianism, stressing the importance of mutual obligations, reciprocity, and trust with others in order to maintain social and economic order. It describes the importance of connections and networks that are formed between individuals – and the way that people find each other, and the way in which capital and ideas move.

Bates argues that China is millennia ahead of the rest of the world in understanding the role of networks, and cultivating them.

Most people think of a network as being something physical. But instead, Bates’ thinks of Rome.

In contrast to other big cities – particularly London’s Thames and the Seine in Paris – Rome has been strangely disconnected from the Tiber river. The river, although running through the heart of the city, has been neglected over the years, and people don’t use it.

For the revitalisation of the river, Rome didn’t build a stadium or a factory. Instead, they commissioned a massive art project. William Kentridge created a 550 metre frieze – Triumphs and Laments – running along one side of the embankment between Ponte Sisto and Ponte Mazzini. Rome’s largest piece of public art since Michelangelo’s Sistine Chapel wasn’t painted on the walls. Instead, large, figurative stencils were placed on the river’s embankment and the wall then power-washed around them – a process referred to in the industry as ‘reverse graffiti’.

This revitalisation of the heart of the city, although only opening last month, has already made the waterfront a place that people want to visit. Rome has become the go-to European destination this summer.

How did this happen?

We often talk about things ‘taking a village.’ But the modern day equivalent is that it takes a network – and often a global one.  Allowing arts and culture to flourish and become an economic driver requires funding, public policy, and infrastructure. You need support not only from government, but from the public.

The project in Rome was created by a South African artist, commissioned by a Roman arts organisation, with funding through the US crowdsourcing website Kickstarter. The project raised over US$95,000 – easily surpassing the goal of US$80,000. Most backers for the project were based in America and will likely never see the artwork. But it doesn’t matter – because as Bates points out, networks know no borders. That is their power.

What is culture in an economic context?

Today, networks are immaterial. Moving beyond goods and services, networks still produce values and products – they just look different. Experiences, intangibles – a conference – these are all cultural products. They have intellectual property, a location where these experiences happen, and a process that leads up to them.

The recent hoverboard craze is another example of a network in action, Bates explained. They were born out of social network magnification and are now a global phenomenon. China’s Shenzhen has become the world capital of meme manufacturing – 600 manufacturers started producing hoverboards in the first six months of 2015. This idea of meme manufacturing typically starts in the west – an idea spreads through an elaborate social network. Tweets, likes on Facebook, and photographs posted onto Instagram have the power to shape the lives and economies of people and places on the other side of the world.

The economic power of culture and networks was also evident in a panel discussion on the ‘influencer economy’. “A lot of people underestimate the power of culture and how that actually impacts people’s buying decisions,” says Angelo Pullen, founder of 3BlackDot. Increasingly, YouTubers are “driving forces in culture for young men and women around the world.”

3BlackDot is essentially a network itself; the company has a number of YouTube stars under its umbrella, which Pullen describes as “a network of YouTube influencers.” Between them, these 22 influencers have some 70 million followers and receive around 700 million views each month.

Other examples of culture impacting economics that Bates spoke of included:

  • The Gates in New York were a group of gates comprising a site-specific work of art by Bulgarian artist Christo Yavacheff and French artist Jeanne-Claude. They installed over 7,500 vinyl gates along pathways in Central Park. Although this was initially rejected in the 1980s, it ultimately attracted many people, and helped to boost the arts scene in New York.
  • After a struggle spanning the seventies, eighties and nineties in Berlin, the wrapped Reichstag was completed in June 1995. For two weeks the building, the former centre of the German Empire, was shrouded in silvery polypropylene – highlighting the features and proportions of the imposing building. It helped shift Berlin into a celebratory mood with crowds gathering day and night and marking the beginning of the city’s twenty-year ascent to become the cultural mecca of Europe.
  • The 798 Art zone – or the Dashanzi Art District in Beijing – is a 50-year-old decommissioned military factory with a unique architectural style. It has been transformed into a thriving community for artists. The building brings together an eclectic mix of people that would otherwise not have an outlet.
  • The Lord of the Rings is a great New Zealand example of culture driving economics. The films helped to grow tourism by 40 per cent from 2000 to 2006. Six per cent of international visitors cited the films as their primary reason to visit New Zealand. The films continue to boost the New Zealand economy, estimated to be worth NZD$33 million a year.
  • The film and television industry in Los Angeles accounts for a significant amount of the US GDP, and is a critical mass for cultural migration. Furthermore, business in Hollywood tends to be done over drinks and a meal – which was fuelled a great culinary scene in the city.

Bates concluded her talk with an inspirational message that set the scene for day two of the Tripartite Summit.

“Networks are the structural basis for globalisation and for modernisation,” she said. “Networks know no boundaries, and cultural networks are powerful. They should be consciously created for the benefit of everyone. They can’t be violated, abandoned or ignored. Networks have power that can’t be explored without consequences.”

Tripartite Summit: Guangzhou – a hub for innovation

  • Guangzhou is China’s third-largest city. It has a GDP of similar size to Singapore and Hong Kong, and is undergoing massive transformation.
  • The city is moving away from low-cost manufacturing and exports and towards innovation, science and technology, and services for domestic consumption.
  • There are various opportunities for Los Angeles and Auckland to be involved in China’s new economic blueprint, and to access Chinese government funding where there is an alignment with the development priorities of each city.

“It is lucky that China has managed to tie all these things together. Seemingly by sheer luck, China has got the mix of timing, location, and people right.” – Derrick Xiong

Delegates to the Tripartite Summit will not have left uncertain of the scale of the opportunity offered by Auckland’s sister city status with Guangzhou.

China’s third-largest city economy is transforming. Even if it wasn’t, the size alone would be opportunity enough: at US$275bn, Guangzhou’s economy is almost the size of Singapore’s and Hong Kong’s in terms of GDP.

 

Importantly, in the face of growing fears of a slowdown in the Chinese economy, it’s a city which grew 8.3 percent in 2015. That made it the fastest growing of China’s three largest cities, outpacing Shanghai and Beijing by 1.5 and 1.6 percentage points respectively.

As outlined by Rebecca Needham, New Zealand Consul-General to Guangzhou, the Chinese economy as a whole is undergoing a transformation, but Guangzhou is “structurally one of the most advanced cities” on this path.

“What I mean by that is moving away from growth dependent on low-cost manufacturing and exports and moving very much towards growth based on innovation, science and technology, and services for domestic consumption,” explains Needham.

A Chinese government plan in 2008 confirmed plans to make Guangzhou an international hub for science and innovation. That goal is also prominent within the Guangzhou city government’s own five-year plan. Now, eight years into the original plan, and with four years left, Guangzhou has arguably already achieved that goal.

A hallmark of that process has been the development of the Guangzhou National Supercomputer Centre which holds Tianhe-2, the world’s fastest supercomputer. The result of USD$400m of investment by the Guangzhou, provincial, and central governments – and built in an impressively quick 18 months – the Centre offers a huge amount to the city.

“Now, we talk about a new industrial revolution,” said Professor Yuan Xue-Feng, the Centre’s Director. “Characterised by digitalisation, information, networks, intelligent prioritisation.”

Tianhe-2 has fast become the centre of the city’s innovation, with more than 1000 user groups. Applications include material engineering, computational biology and personalized medicine, digital manufacturing, energy-related activities, astronomy geoscience and environmental engineering, and smart-city activities.

The ultimate goal is to “create an ecosystem for research and innovation.”

There are various opportunities for NZ involvement in what Needham refers to as “China’s new economic blueprint”. These have included biomedicine, information technology (with scope for collaboration with the Supercomputer Centre), or even creating a virtual landing pad in Guangzhou through the Innohub connections Auckland has forged of late.

Rapid prototyping is another high-level sector where Guangzhou’s capabilities represent an opportunity for Auckland’s businesses. The Callaghan Institute is currently exploring this, along with scaling-up possibilities around manufacturing, as an option for young New Zealand companies.

“There are also possibilities for Auckland and Los Angeles to access Chinese government funding where there is an alignment with the city’s development priorities,” says Needham.

“There are also possibilities for Auckland and Los Angeles to access Chinese government funding where there is an alignment with the city’s development priorities.” -Rebecca Needham

This new wave of economy for China was reiterated in the Advanced Manufacturing and Automation panel at the Tripartite Summit. Derrick Xiong, of Ehang Inc. referred to the Chinese saying throughout his presentation – “timing, location, and people”.

“It is lucky,” said Xiong, “that China has managed to tie all these things together.” Seemingly by sheer luck, China has got the mix of timing, location, and people right, which has allowed companies like Ehang Inc. to be part of the new era of made in China”.

For New Zealand businesses to be a part of this emerging opportunity will require looking beyond Guangzhou as simply a market for exports, but instead seeing it as an area to form innovative partnerships that add value.