China Business: New Zealand products selling well on 11:11 (NZ Herald)

Alibaba’s 2017 11.11 Global Shopping Festival attracted a high demand for New Zealand brands.

The festival comes from Single’s Day in China (the date is 11.11 — four singles) and is also known as Double 11 Day.

Over the 24-hour sale period, Alibaba Group reported RMB168.2 billion (NZ$36.81b) of transactions through Alibaba’s retail marketplaces. As evidence for China’s phenomenal uptake of mobile devices, mobile sales accounted for 90 per cent of the total sales figure.

Alibaba now offers more than 400 New Zealand brands through its B2C platforms Tmall.com and Tmall Global.

Maggie Zhou, Alibaba’s Managing Director of Alibaba Group Australia & New Zealand, says there is a rapidly increasing demand from Chinese consumers to source the highest quality products from all over the world. Brands from Australia and New Zealand have seen excellent sales figures during the shopping festival.

“Australia and New Zealand products are perceived as high quality and continue to outperform in China.

“We are working closely with New Zealand merchants and partners to further encourage this growth.
“When we launched Alibaba Group’s Australia and New Zealand office earlier this year, one of our key goals was to show the outstanding performance of New Zealand brands in previous 11.11 Global Shopping Festivals,” she says.

“We are thrilled New Zealand brands have continued to see success on the world stage, adding further proof of the growing appetite for high-quality New Zealand goods among Chinese consumers.”

Zhou says Alibaba’s Chinese shoppers are drawn to products from Downunder, particularly skincare, health supplements, and high-quality organic goods such as fruit and wine. Rapid improvements in logistics mean that fresh items such as beef, seafood and dairy are also becoming more sought after.

Some of the highest performing brands on the Chinese e-commerce giant during the shopping festival were ecostore and Antipodes.

“The opportunity for ecostore to expand its consumer base is significantly increased through sale days such as 11.11,” says Pablo Kraus, managing director of ecostore.
“Chinese consumers are very sophisticated and their demand for an eco-friendly lifestyle continues to grow, so ecostore is honoured to be a brand that consumers choose for its reliability, authenticity, and being safe for all the family.”

CEO and founder of skincare company Antipodes, Elizabeth Barbalich, says: “11.11 presents and amazing opportunity for us to raise awareness of Antipodes in the China market.

“The Chinese market is key for us, with traditional plant remedies long considered an essential part of Chinese medicinal and beauty practices.”

Offshore companies that participate in the 11.11 Shopping Festival are required to store their products in Alibaba’s warehouses ahead of time, so customers receive their products as soon as possible after purchasing.

After midnight marked the start of Double 11 Day, the first package was in the hands of the buyer 12 minutes later. “This delivery speed makes for a far better shopping experience,” says Zhou.

Project Auckland: A view from the summits (NZ Herald)

The Memorandum of Understanding of Economic Alliance between sister city triplets Auckland, Guangzhou and Los Angeles was signed in 2014 – and if a week is a long time in politics, three years certainly is.

Since then, New Zealand has had three prime ministers. Former Auckland mayor Len Brown “The Singing Mayor” hung up his chains – replaced by Phil Goff, known less for his singing abilities and instead for his prowess in forging New Zealand’s free trade agreement with China.

Guangzhou also changed its mayor in 2016, and although Democratic Party superdelegate Eric Garcetti is still mayor of LA, President Obama was replaced by the entirely different Trump Presidency.

Over that time, three summits were held to recognise the alliance. And just as with geopolitics, the alliance has come a long way.

The first summit, hosted by LA in 2015, was attended by a humble delegation of about 43 Auckland businesses.

In 2016, Auckland outdid the council’s own expectations with over 700 delegates and more than 330 formal business matching meetings.

Guangzhou’s turn to host took place last month, and saw 70 Auckland businesses take 97 delegates, with around 800 others from LA and Guangzhou.

“Auckland companies need to internationalise,” says Pam Ford, General Manager – Business, Innovation and Skills (Acting) at Ateed.

“They have to go global from day one – and it’s hard. “That’s why we ran workshops for attendees ahead of this latest summit. They helped to build the capability of businesses to maximise their time offshore, and gave them the confidence to take part.”

Alongside business matching, networking events and showcase functions, panel discussions and keynote presenters shared insights and ideas from speakers across the alliance.

Los Angeles 2015: New York is a river, Los Angeles is a lake

The first summit saw panellists discuss the cartoonish view of cities that people – including Americans – have about the US, and stressed that the City of Angels should be seen as more than just a gateway to the US, and certainly more than just Hollywood.

Hollywood makes up only a fraction of Los Angeles’ economy. As well as tourism, it is the US’ largest manufacturing centre, a hub for aerospace, logistics, clean technology and innovation, and home to the largest port in the Western hemisphere.

It is the country’s fastest growing tech start-up region – many arguing it has benefits over San Francisco or Silicon Valley for a tech launchpad.

Despite this, there is no denying LA remains the creative capital of the US. One in seven people are employed in a creative field, and it is the top American metro area for art, design and media employment, providing more than US$140b (NZ$203b) of annual economic impact to the city.

“One of the things the LA summit did was open people’s minds that it is more than just film,” says Ford.

“LA is the place for many of Auckland’s companies that create content. Content now fits across so many more mediums – from gaming and television to social media and particularly the influencer economy.”

“But LA is also about cleantech, food and beverage, design and manufacturing. “Because of this three-year relationship, we’ve developed solid partnerships with the organisations for our companies to access – whether that is through the World Trade Center Los Angeles or the Los Angeles Business Council – that we would not otherwise have had.”

One panellist – a resident of LA – described how the city unfolds as you spend more time there. “New York is a river, but Los Angeles is a lake. If you step outside in New York you will naturally go somewhere, the city itself will take you and it is simple to navigate.

“In Los Angeles, to get anywhere you have to actively swim there – or you risk never getting anywhere at all. But that’s what makes it so exciting.”

Auckland 2016: Partnerships, People, and Cross-pollination

The Auckland summit saw global heavyweights take to the stage at the Viaduct Events Centre, speaking about the importance of partnerships and collaboration, and the opportunities that arise when you bring people together and ‘cross-pollinate’ ideas.

Sunny Bates, a serial entrepreneur and a founding board member of Kickstarter who has served as an adviser to companies including GE, TED and P&G, insisted the economic driver of the future won’t come from factories, technology, or software – it will be down to the networks of people.

“Networks are the structural basis for globalisation and for modernisation,” says Bates.

“Networks know no boundaries, and cultural networks are extremely powerful.”

Former Nike innovation expert Erez Morag agreed that networks were critical, but said it wasn’t those networks on their own that lead to innovation, but instead the cross-pollination of ideas through those networks.

“Instead of chasing the competition, chase the insights, listen to everyone, and play bigger than your size,” he says.

Morag used jogging as an example of cross pollination. In 1961, Kiwi runner and athletics coach Arthur Lydiard organised the world’s first jogging club in Auckland, promoting the cardiovascular health benefits of easy distance running.

Lydiard introduced Nike co-founder Bill Bowerman to the concept of jogging on a chance visit to New Zealand.

“[Jogging was] invented in New Zealand and commercialised in the United States,” says Morag – all through the cross-pollination of ideas.

Throughout the Auckland Summit, then-Maori Development Minister Te Ururoa Flavell reinforced the importance of trusted partnerships to the Maori economy. “Maori want to hear your heart, not just slick words.

“If there is no connection to your heart, then there can be no deal – because it will be doomed from the start” – a message that resonated strongly with Chinese delegates, who rely on guanxi – long-term, strong business relationships, based on trust and mutual reciprocity.

Guangzhou 2017: Leverage our Chinese diaspora

Auckland-based Kenneth Leong, co-founder and director at Healthy Breath – an anti-pollution mask using natural New Zealand wool filter media for international markets – spoke about leveraging the Chinese diaspora.

“We sometimes forget Auckland is home to a large, well-connected Chinese business community,” he says.

The summit and surrounding events enabled new connections between the business delegates, and deepened existing relationships.

“Cross-cultural partnerships enrich all parties, by bringing people with great ideas together with people who have connections, capital and channels to market,” says Leong.

“There is a need to accelerate integration between the migrant Chinese and mainstream business communities in Auckland. Everyone is keen to do business together, we just need to create more opportunities for interaction and relationship building.”

New Zealand’s connection to Guangzhou goes back a long way – many of the first Chinese immigrants to New Zealand came from the Pearl River Delta region, including Guangzhou.

Now, Guangzhou is China’s third largest city, contains seemingly endless skyscrapers, and is considered a manufacturing and commercial hub.

It has been consistently ranked by Forbes magazine as the best commercial city in mainland China for ease of doing business, talent, location, and international connectivity, and in many cases, could be a more accessible market for New Zealand businesses than the more recognised larger markets of Shanghai and Beijing.

Project Auckland: Partnerships for growth (NZ Herald)

Tim McCready talks Auckland, infrastructure, and Chinese investment with ICBC NZ chief executive Karen Hou.

You have been living in Auckland for a while now. How do you see its future?

Auckland is a beautiful, attractive city. I have been living here now for three years, and every year it becomes even better. There are signs of growth everywhere.

I have lived and worked in a lot of cities around the world, but Auckland stands out because although the city is relatively expansive and feels big, the actual population is very low.

This, combined with Auckland’s beautiful weather, climate, scenery and multi-cultural population makes it a wonderful place to live.

However, increasingly Auckland’s infrastructure is lacking. As Auckland has grown in population the infrastructure hasn’t kept up.

Auckland Council has tried very hard to meet people’s requirements. They have big plans to make the city more usable.

More apartments, hotels, transportation links and other infrastructure projects are underway.

As one example, the New Zealand International Convention Centre (NZICC) will greatly improve Auckland’s capacity to host world class conferences and exhibitions, which will provide yet another reason to attract people from all over the world.

But the key challenge is making sure the required infrastructure developments happen to ensure the city continues to remain as great as it is now into the future.

The new Finance Minister Grant Robertson is looking to the private sector to finance major transport and housing projects in Auckland.

Do you see an opportunity for Chinese investment?

For Auckland, the government or local government can’t possibly fund everything that is needed. For New Zealand to quickly see results from infrastructure projects, it will be important to use public-private partnerships (PPPs) to bring in significant investment alongside the funds of the government.

ICBC NZ has been shortlisted several times for recent infrastructure syndication loan tenders, and although we are yet to secure a successful deal, our team has become increasingly experienced in the local market.

It takes a lot of time and effort to prepare a bid, but our commitment to this shows our dedication to being involved in successful infrastructure project finance here.

Chinese investment presents a lot of opportunity for Auckland. Over the past few years, China has very quickly developed its infrastructure – in areas like energy, telecommunications and water, but also massive transportation projects that link the country together.

Where local enterprises in New Zealand are struggling to meet the infrastructure shortage, Chinese companies can help them to increase capital, access high quality materials, and reduce cost.

Are Public Private Partnerships popular in China?

Yes, one of the most popular PPP models used in China for delivering major infrastructure projects is called a BOT (build, operate, transfer). With this model, the government uses the private sector to design, build and run an infrastructure project. After a period of time the asset is transferred back to the government.

This structure relies on the private sector, but the government supports the private sector to help with regulatory hurdles and ensuring the repayment of the investment makes the project worthwhile.

As an example, when establishing a subway: the cost is designed from the outset, including how to repay the investment.

If there is not enough money to repay the investment through the subway alone, the government can help by using other developments associated with the subway – such as the related commercial areas – to go towards the repayment of the project.

That way, getting resources for infrastructure projects is easier because the risk of repayment is lowered.

Is ICBC’s client base actively looking to do deals here?

Yes. We have already helped Chinese companies come to New Zealand and understand the bidding process for projects. Although there have not been many successful bids, our Chinese customers are increasingly seeking out opportunities here.

ICBC is the largest bank in the world, and works with the best companies. This means we are able to ensure the highest standard of Chinese companies enter the market to help with infrastructure projects.

We have now been operating in New Zealand for four years. Over this time, we have progressed significantly – we have more than NZ$1.5b of assets in this market – mostly to local customers.

We’ve introduced new technologies and products such as an e-commerce platform to make it easier for New Zealand export companies to do business in China, and we help local companies connect with companies in China.

We also introduced a dual currency credit card, which can be used locally for New Zealand dollar transactions as well as in renminbi while in China, making visiting China more convenient. ICBC hopes that we can continue to increase the links between the two countries.

What can Auckland learn from China in terms of our mounting infrastructure projects?

China’s Government plays an important role in the country’s infrastructure. The government considers the future of the country, makes plans, and ensures projects are delivered quickly.

What people may not realise is that China has become very strong in construction, operating at an interna tional standard. As an example, Chinese companies have played a role in construction projects for the Singapore and Hong Kong subway.

To strengthen the local construction capability here, we need more labour and a lower cost of materials.

The use of Chinese companies can make the cost relatively lower than others due to labour, scale, and the cost of materials. At the same time, Chinese technology, management and safety are world-leading.

Should New Zealand take greater advantage of the skilled labour that China can provide?

Nearly everyone in the world wants to immigrate to New Zealand – for the reasons I outlined earlier.

This provides New Zealand with the rare opportunity to identify the particular skills that are most needed here, and get the right people to match.

For this reason, access to labour should not be a problem in this country. Rather than constricting the volume of people that can come and live here, New Zealand should look towards implementing a policy that will select the people that are needed.

The use of short-term and special visas can bring skilled workers in that can help with construction.

This type of visa is really helpful to fill the labour shortages and rapidly advance infrastructure projects.

China has some great inter-city transportation links, such as the line between Beijing and Tianjin that has cut travel time from three hours to around 30 minutes. Do you think Auckland can learn anything from this?

I think that in the long term, it will be good for New Zealand to be more evenly developed, and not just focused on one or two major cities.

Imagine if there was a high-speed train connecting Auckland and Hamilton – or other satellite cities. A short commute between the two cities would encourage people to spread out further, and reduce the housing, transport, and other infrastructure pressures that Auckland currently faces.

Many cities in China have – or are introducing – high speed rail networks to link them to neighbouring cities. Working with China can give access to not only capital and cost advantages, but also to innovation and experience in projects like these.

Dynamic Business: The value of seizing the moment (NZ Herald)

The forces and trends that shape the world are not always front of mind when running a business.

But in a world where trends are dramatically changing the way value is created, they form an important backdrop that all company strategy and planning should be considerate of.

Some of the most successful businesses over the past decade have prospered because they have managed to successfully navigate the challenges and opportunities these global forces bring with them.

Andrew Grant, Senior Partner (Asia-Pacific) at McKinsey and Company, says New Zealand is a small, nimble nation with an inherent ability to respond quickly to global forces.

“Over the years we have had many global trends working in our favour, but we’ve failed to respond fast enough to seize the moment and capture the opportunity,” he says.

McKinsey uses the metaphor of a crucible for these forces — “a place or situation in which concentrated forces interact to cause or influence change or development,” and segments these “crucibles” into global growth shifts, accelerating industry disruption, and a new societal deal.

Some, like cybersecurity, geopolitics, and the rapid invasion of technology are already front of mind for executives and the boardroom.

Others, though not so obvious, are just as important to consider.

No one can know for sure what the future will look like. But businesses — both old and new — that grapple with these crucibles and question the assumptions of their business model, can expect to compete more effectively in the increasingly disruptive world we have found ourselves in.

1. Beyond Globalisation

Globalisation as we have known it — and as New Zealand has greatly benefited from — is going to change.

Donald Trump, Brexit, Jeremy Corbyn, TPP: the results of recent elections and referendums worldwide can be attributed to a growing sense of disillusionment, anti-globalisation and protectionism.

Traditional measures of globalisation are also slowing. Trade growth over the past decade has been half of that in the late 1990s and early 2000s.

Following the global financial crisis in 2008-2009, global capital flows as a percentage of GDP dropped dramatically — and have not returned to pre-crisis levels.

Despite this, many argue globalisation has accelerated — but it is taking place in different forms: cross-border data flows are increasing at rates approaching 50 times of those in 2005; the McKinsey Global Institute estimates there are now 914 million social networking users with at least one foreign connection.

The world now has 429 million international travellers, 361 million cross-border e-commerce shoppers, and 244 million people that live outside their home country.

Competing with the increasing number of global players means maintaining a local touch is increasingly important for companies. Rising tension between technology firms in China and the rest of the world is creating a gulf that will be an important factor shaping the future of global tech innovation.

The New York Times’ Farhad Manjoo explains: “You can be Alibaba or you can be Amazon. You can be Uber or you can be Didi. But you can’t be both.”

2. ICASA Factor

Brazil, Russia, India and China (or the “BRIC economies”) are four major emerging national economies postulated by Goldman Sachs in 2001 to become among the four most dominant economies by the year 2050 and the biggest drivers for future global growth.

But more than 85 per cent of the growth from the BRIC economies came from China.

McKinsey proposes that ICASA — India, China, Africa and Southeast Asia — will become the dominant force, primarily because the greatest growth engine has been urbanisation.

At the same time, these regions present some of the biggest risks to global growth, as they struggle to deal with internal obstacles including sustainable urbanisation, increasing productivity, mobilising domestic resources and deepening regional integration.

3. Resources (Un)limited?

As the world’s population approaches 9 billion, there is growing urbanisation which brings with it a rapidly increasing demand for resources. This includes a dramatic increase in the demand for protein, consumption of oil and gas, fresh water, and synthetic and natural fibre.

Yet advances in analytics, automation, the Internet of Things and material science are reducing resource consumption in other areas.

McKinsey and Bloomberg have estimated advanced mobility systems — including self-driving cars, ride-sharing, and electric vehicles — could yield US$600 billion (NZ$880b) in societal benefits through to 2030, by cutting the costs of traffic congestion (about 1 per cent of GDP globally), road accidents (1.25 million deaths in 2015), and air pollution (health problems like respiratory ailments).

In other sectors, algorithms are helping optimise and predict energy use, enhanced oil recovery is transforming resource production, and innovative new materials are helping reduce resource use. Demand for resources is growing, but innovation and technology provide the opportunity for the world to be more efficient with what we have.

4. Technology Invasion

Technology change is happening continuously. But Grant believes we are underestimating the scale and the pace at which technology is evolving and will shape business. “People don’t quite understand how profound and how long the journey is going to be.

“The ubiquity of technologies and the ability to roll it out globally is making new advances far more impactful than ever before.”

We’re seeing rapid innovation in areas where families of technologies are coming together.

The smartphone brought the touchscreen, applications, CPU, LCD displays, wireless connectivity, and lithium-ion battery technology together with advances in miniaturisation.

The development of the autonomous car is combining video cameras, presence sensors, Radar, Lidar, GPS and CPU technology. Instead of linear step changes, we can expect to see combinations of technologies make the scale of change much more powerful.

5. Customer-to-Business

B2C (business to consumer) and B2B (business to business) have long been commonplace, but digitalisation and new business models are giving consumers the ability to shape goods and services, often receiving free access to what would once have been paid for.

Alibaba’s founder and executive chairman, Jack Ma, declared the start of C2B, or consumer to business, open several years ago.

Rapidly growing Chinese mobile manufacturer Xiaomi uses crowd-sourcing to engage with consumers for fast, first-hand feedback on its products. Grant says Xiaomi is becoming representative of where the business world will need to position itself for the future.

Customers are increasingly dictating the terms of what they need (and what they want) directly to companies and the Internet is providing the ability for this to occur as never before. Consumers have an ever-increasing choice, and companies must make decisions about their product offering and which business models they should use to continue to create value.

6. Ecosystem Battles

Five of the 10 largest companies in the United States are platform-oriented. Airbnb now has four million listings globally, more than the top five hotel brands combined.

The company says “on any given night, two million people are staying in other people’s homes around the world on Airbnb”. Uber might be the world’s largest taxi firm, but it doesn’t own its cars. Neither of these companies existed 10 years ago.

Alibaba — the world’s largest retailer — moved NZ$37b (US$25.3b) worth of stock during its November 11 extravaganza, but doesn’t own warehouses to store the eye-watering quantity of products sold through its platforms.

These platforms offer business models that can be enormously disruptive in the way they shape the world, and are shaking up industries that were immune from significant competition in the past.

7. Dealing with the Dark Side

Cybersecurity has become a trillion-dollar issue. Grant says boards of Fortune 500 companies are now spending about 15 per cent of their boardroom agenda on cybersecurity.

The Herald’s Mood of the Boardroom in September revealed that New Zealand’s executives are highly concerned about the threat, with 67 per cent of respondents now doing significantly more to combat cybercrime and 30 per cent doing more “in a modest way”.

Previous Mood of the Boardroom reports suggest a clear — and rapid — trend: in the 2015 survey, cyber crime rated 5.9/10 in terms of impact on business confidence. Last year it became the top issue at 7.16/10, and this year it sat head and shoulders above other issues, with an impact rating of 7.64/10.

Alongside cybersecurity, McKinsey estimates that 81 per cent of executives worldwide single out geostrategic factors as the top risk to growth.

Examples of the severity geopolitics can have on business include:

  • A 4.5 million shortfall of Russian tourists as a result of the ban on agency tours to Turkey in retaliation for shooting down a Russian warplane.
  • 120,000 tonnes of Norwegian trout and salmon have been banned from Russian markets in retaliation for EU and US sanctions over the Ukraine crisis.
  • 16 per cent of London properties listed online have had their price cut after the UK referendum to leave the European Union.
  • 500 direct daily flights were halted in the Middle East as a result of the diplomatic stand-off between Saudi Arabia, Iran and Qatar.

8. Growth Formula Experiments

There is no shared narrative on why economic growth is stuck. Is the problem in developed economies a supply problem or is it a demand issue?

Monetary easing, a universal basic income, and debt mutualisation are among the suggestions on how to restart growth. There is extraordinary experimentation going on, but no consensus.

Grant says solutions will not be singularly political. They will require business, civil society, and the political arena to come together.

“Some interesting insights are coming from Denmark, Switzerland, Finland, Israel, Singapore… I think New Zealand has a real opportunity to lead on this,” he says.

9. Middle-class Progress

The benefits of globalisation have not been distributed evenly. Alhough globally the middle-class have done well, those in advanced nations have missed out.

This has created a widening of earnings disparity, and has been blamed for the increasingly negative view towards immigration, the status quo, and trade deals that appear to favour the boardroom over the workers.

Much disillusionment has been blamed on, and exploited by, politicians, but trust has become a critical flashpoint that companies must address and build back to ensure long-term, sustainable businesses.

Sources: Presentation by Andrew Grant — A new narrative of progress? Major Macro Trends Shaping our Region — to the 2017 Infinz conference; McKinsey report — The global forces inspiring a new narrative of progress.

Phil Goff extends alliance with Guangzhou, Los Angeles (NZ Herald)

Auckland Mayor Phil Goff has signed an agreement with Guangzhou Mayor Wen Guohui and Los Angeles Deputy Mayor Jeff Gorell to extend the alliance between their three cities for another three years.

The third and final Tripartite Economic Summit took place in Guangzhou last week.
Los Angeles, Guangzhou, and Auckland are sister city triplets, and the past three years has seen the Summit rotate between the three ‘gateway cities’ – previously in Los Angeles in 2015 and Auckland last year.

The 97 Auckland delegates represented 70 businesses including tourism, urban planning and design, bioscience, creative, digital and education.

Auckland Council says this has been the largest ever trade delegation to come out of the city noting that business delegates all paid their own way to attend.

Goff – who signed the free trade deal between New Zealand and China during his period as Labour’s Trade Minister – said , “If like me you’ve been coming here for 30 years, you can appreciate just how quickly, how dramatically, how strongly this country has grown.”

“When I came to Guangzhou in the 1980s I travelled by steam engine on the rail. Today, we see a nation that has progressed more quickly and further than any nation I can recall in history.”

Now, Guangzhou is China’s third largest city, contains seemingly endless skyscrapers, and is considered a manufacturing and commercial hub. Although it may not always be the first city companies have in mind when they consider entering China, it has been consistently ranked as by Forbes magazine as the best commercial city in mainland China when considering ease of doing business, talent, location, and international connectivity. Many delegates left the Summit noting that Guangzhou may be a more accessible market for their business than the more recognised larger markets of Shanghai and Beijing.

New Zealand can tend to overuse the phrase “punching above its weight,” but in this sibling rivalry we indisputably are. Auckland’s population of 1.5 million is dwarfed by Guangzhou’s 14 million. Auckland’s estimated GDP of NZ$93.5 billion could be considered a mere rounding error when compared with Los Angeles’ over US$1 trillion.

Yet Auckland’s 97 delegates were met with around 500 others from Los Angeles and Guangzhou that saw value in making connections and seeking out opportunities to collaborate.

The biomedicine and health forum was an example of these collaborations, co-organised by Auckland’s Maurice Wilkins Centre – New Zealand’s Centre for Research Excellence targeting major human diseases – and the Guangzhou Institute of Biomedicine and Health (GIBH), part of the prestigious Chinese Academy of Sciences.

The Maurice Wilkins Centre has been working closely with its Chinese counterparts since 2012, establishing a joint centre for biomedicine with the Guangzhou institute in 2015. The two research arms are now expanding their relationship with new projects, joint symposia in both countries, and increased exchange of staff and students.

“GIBH is one of China’s leading biomedical research groups and hosts many world leaders in their fields,” says Professor Rod Dunbar, Director of the Maurice Wilkins Centre.

“We are delighted that our colleagues in GIBH see such value in intensifying our collaboration, and look forward to working with them to deliver new treatments through the clinic.”

Businesses took part in business matching, sector specific sessions and forums, and a visit to tech giant Huawei’s nearby Shenzhen campus.

While New Zealand can be blasé about our mayors and local Councillors, in China they are considered almost like celebrities. It is for that reason that many of the Auckland business delegates considered the high-level representation to have helped connect them to significant players within companies that they would not have otherwise had access to. While the primary aim of the Summit is to build connections for the long-term outcomes that can eventuate, ATEED has said that several companies have made excellent progress at this year’s Summit.

The Council will track and report on the business outcomes of the Tripartite Summit where possible.

– Tim McCready travelled to China as a guest of Alibaba.

11.11: It’s shopping – but not as you know it (NZ Herald)

Step off the plane in China and there is no doubt about what day it is – Singles’ Day.

It’s hard to escape the sale buzz – billboards, the airport arrival hall, malls, hotel elevators – the advertisements are everywhere.

And the numbers are astounding: more than 140,000 brands offering 15 million product listings to hundreds of millions of consumers. The annual sales event dwarfs its Black Friday or Cyber Monday equivalents in the United States.

Last night, e-commerce giant Alibaba lived up to the hype. Oscars producer David Hill was responsible for the gala event that counted down to the start of the shopping extravaganza. Held at Shanghai’s Mercedes-Benz stadium, the event was broadcast on three TV channels and featured American rapper Pharrell Williams, British singer-songwriter Jessie J and former world number one tennis superstar Maria Sharapova – plus 100 or so other celebrities.

“If you analyse why we are doing the show, it’s to turn shopping into sport and to make shopping into entertainment, so the show has got to reflect that philosophy. And the way the show is constructed – with so many segments, so many stars and fun bits – it reflects the overreaching theme of what Singles’ Day has become,” said Hill.

“We can do things in China we can’t do virtually anywhere else in the world. In America, if you stream to any more than one or two million people you get a swirling circle of death, meaning it’s not connecting. In China, we can stream to over 35 million people. It boggles the mind.”

This year’s 11/11 fiesta has been themed around “retail as entertainment”.

The company’s chief marketing officer, Chris Tung, describes the shopping festival as “bringing consumers around the world a step closer to realising the aspirational life where entertainment and retail becomes one”.

The event is also an opportunity for Alibaba to show off its latest shopping technologies, and gives us a glimpse into what the future of shopping might look like.

Alibaba’s “See Now, Buy Now” was an eight-hour marathon of singing, dancing and fashion. Broadcast on seven TV and online channels in China, the show encouraged viewers to shake their phones whenever they saw something they liked to immediately purchase it.

The Tmall platform is running a “Catch the Cat” promotion, designed to drive consumers to bricks and mortar locations including global brands Procter & Gamble, KFC and L’Occitane.

Customers use their mobiles to earn coupons, discounts and prizes by “catching” the e-store’s cat mascot – in much the same way as the game Pokemon Go.

Other online promotions are giving out virtual red envelopes containing a total of more than 250 million yuan ($54.3 million).

Maggie Zhou, managing director of Alibaba Group Australia and New Zealand, is keen to ensure New Zealand is one of the key markets supported in these new initiatives.

“New Zealand products are perceived as high quality and continue to outperform in China, and we are working … to engage more closely with New Zealand merchants and partners to further encourage this growth.”

Tim McCready travelled to Shanghai as a guest of Alibaba.

Infrastructure: Looking at the opportunities for asset recycling (NZ Herald)

Asset recycling enables the Government to boost its available funds by either selling or offering a long-term lease of underutilised, inefficient, or surplus public infrastructure to investors in the private sector.

In exchange for the sale or lease of those assets, the Government can receive a large up-front, lump-sum payment.

Capital received from divestment can be used to revitalise existing assets, or fund new and critical infrastructure needs that might otherwise have been unfunded or funded using more traditional methods such as raising taxes or increasing public debt.

New South Wales
Since 2012, asset recycling has been one of the core principles of Australia’s New South Wales Government property policy.

The NSW Department of Premier and Cabinet says that “real property assets are only held by Government when required, and in the form necessary, to support core government service provision.”

Australia’s asset recycling has extended to the sale or long-term lease of public assets including ports, “poles and wires” electricity assets and its land titles registry, and has reached a combined value of A$53 billion.

Former NSW premier Mike Baird campaigned at the 2015 election on a platform of infrastructure investment, of which the recycling of assets was the method to achieve this.

Baird’s re-election demonstrated that asset recycling and new infrastructure funding mechanisms can be economically effective as well as politically popular – but they take leadership and vision.

A recent report on asset recycling by Property NSW showed overwhelming support for the NSW Government’s policy of recycling property assets to fund infrastructure and better services.

Of those surveyed, 71 per cent said they favoured leasing or selling under-utilised assets over more traditional measures, such as raising taxes or increasing levels of public debt.

Interest from the US
During his visit to Australia earlier this year, United States Vice-President Mike Pence told business leaders that the Trump administration hoped to emulate the Australian model of infrastructure asset recycling as part of the President’s US$1 trillion infrastructure plan.

New York’s LaGuardia Airport was cited by Pence as one example of an asset that had the potential to be redeveloped with the injection of private funds.

LaGuardia is so badly in need of upgrades, expansion and improvements that President Trump has referred to it as “like from a third world country”, contrasting it (and other US airports) to the “incredible airports” in Dubai, Qatar and China.

Upgrading Circular Quay
It is estimated that the number of jobs in the iconic Circular Quay precinct in Sydney will increase by around 4500 in the next 30 years.

The ferry wharves and adjoining promenade were built in the 1940s and are nearing the end of their life. They are also not compliant with the Disability Standards for Accessible Public Transport.

For these reasons, they are considered long overdue for a facelift.

In order to fund the upgrade, Property NSW is divesting commercial assets that are considered not core to service delivery or of long term strategic importance.

This includes the sale of rights to the ground lease rental income at Darling Quarter for 30 years, for an upfront payment of A$192 million ($215m).

The revitalisation of Circular Quay will support new construction jobs, and the upgrades will deliver improved transport services and an enhanced retail offering for workers and visitors, boosting economic growth and tourism to the precinct.

Viewpoint: Michael Barnett, Auckland Chamber of Commerce chief executive
It would easy to be populist and label it privatisation and kill another opportunity for Auckland. The reality is, existing funding models are failing us and we either need to find an innovative response to this or pay the price of a lack of investment in our infrastructure over the last 40 years with low productivity and community frustration.

Old style asset recycling was essentially selling one lot of assets to fund other priorities – this often meant selling an income generating asset to fund another asset that didn’t.

Today it’s about maintaining ownership control and not owning – an example of this could be with Ports of Auckland where the land and the business could be separated or perhaps an environment where an investor of “like values” might take partial ownership of an asset investing say on behalf of a superfund of New Zealanders with only the intention of investment and not for selling on.

Of course, any funds released should then be invested in our infrastructure needs (transport) – the important thing here would be to have a narrative that articulated the benefit to Auckland that may not be in cash but in productivity, employment opportunities and growth.

Viewpoint: Kim Campbell, Employers and Manufacturers chief executive
If we are to have sufficient funds for the development of Auckland’s growing infrastructure needs we will need to find more innovative funding devices.

The community appears allergic to rates, and tolling the roads is consistently blocked by central government. So what’s left?

Recycling of assets is a tried and proven device overseas where city assets are identified as being underused, redundant or inappropriate, and sold. The funds are immediately put to use for items which will increase the city’s overall productivity.

There are many such assets in Auckland. They may have some amenity value, but the benefits may accrue to a small part of the community. This includes shares in airports, golf courses, quarries, forests, transport corridors, water systems and theatres – to name a few.

Their sale is quite legitimate as long as the money is put to more productive use immediately. Often the sold assets become more productive under new owners as we have discovered with the sale of our electrical generation assets. NSW has a long and successful history of this, including Barrangaroo and White Bay.

Viewpoint: Paul Blair, Head of Institutional Banking, BNZ
BNZ is open to talking about ways to solve the big issues facing New Zealand. Countries and governments around the world are facing infrastructure challenges – New Zealand is not alone.

It is important to look at and consider potential ways to solve issues and have those challenging conversations, but any single “tool in the tool box” (like asset recycling) can’t be a silver bullet – multiple approaches and great collaboration is more likely to get a good result.

Governments face ever-rising demands for new and better enabling infrastructure. Asset recycling is one of the tools that have been used successfully in NSW and other overseas jurisdictions. New Zealand has an opportunity to learn from these case studies.

There are many other tools as well (including modern regulation of infrastructure sectors, centralised and specialist procurement, integrated planning, governance and finance, the use of incentives to encourage private sector and local government investment, etc) and a combination of approaches is likely to be needed as these are complex problems.

New Zealand is an extremely open economy. New and modern business models and exponentially expanding technology mean we are highly integrated into global business flows and trends which are changing at an unprecedented rate.

Business and society change is driven by new technology such as artificial intelligence, social media, robotics, data science, 3D printing as well as big macro shifts in demographics, infrastructure pressures and geo-political changes.

All of this change, coupled with government’s relatively limited risk appetite and the complexity of legislating for and regulating this change, means that governments need to look at alternative models to deliver the infrastructure required to meet New Zealand’s social and economic needs.

Infrastructure: Could smart-tracking solve Auckland’s congestion problems? (NZ Herald)

Singapore aims to have the world’s most advanced road pricing system by 2020.

The Global Navigation Satellite System (GNSS) will make Singapore the first city in the world to include a dynamic distance, time, location, and vehicle type road pricing scheme.

The S$556 million (NZ$566m) project was won by NCS and Mitsubishi Heavy Industries Engine System Asia – a price that is less than half the S$1.2 billion submitted by the other qualified bidder, ST Electronics.

The island-wide system will use satellite navigation technology to detect and measure distance travelled, as well as provide real-time traffic for every road user. Drivers will be warned before entering a charged road, giving them the option to divert elsewhere if they prefer.

Parking information obtained from every driver and automatic streetside carparking will mean circling around for a carpark and digging around for cash to buy a parking ticket will be a relic of the past.

In areas where satellite coverage could be weak (including tunnels and beneath viaducts), it is anticipated that signal beacons will be put in place.

Though some say the new system will mean personal cars become less about freedom and more like a “private taxi”, Singapore has long been ahead of the world in road user charging.

In 1998 – when Auckland was suffering from a five-week power outage in the CBD caused by multiple power cables failing – Singapore was rolling out what was then the most sophisticated urban congestion charging system on the planet.

This gantry-based electronic road-pricing system targets roads that are heavily congested, and mostly operate at peak times, applying prices to achieve a minimum “level of service”.

Though some privacy concerns have been raised around the level of surveillance that comes with tracking all road users, there are similar issues with other forms of modern transport.

A push for alternative transport
Despite Singapore moving towards a sophisticated and expensive road pricing system, car ownership is low by global standards. This is largely due to the hefty price of a certificate of entitlement – S$36,000 (NZ$36,790) for cars up to 1600cc – which allows the certificate holder to register, own and use a vehicle in Singapore for a period of 10 years.

When you consider 12 per cent of the small country’s land area is consumed by roads, it is unsurprising that Singapore’s Minister for Infrastructure and Transport, Khaw Boon Wan, has set a target for 75 per cent of trips to take place by public transport by 2030, and 85 per cent by 2050.

Singapore is also significantly boosting its bus fleet, rail network, cycling paths, and the distance of its covered walkways.

Driverless cars are tipped to be a further game-changer. Singapore’s well-maintained roads and contained geography make it an ideal location for autonomous vehicles, expected to offer greater fuel efficiency, reduced road congestion and carbon emissions, and a significant reduction in accidents.

Last year US autonomous vehicle R&D firm nuTonomy ran a limited public trial for the world’s first driverless taxis in Singapore.

Despite one of nuTonomy’s self-driving cars hitting a truck, the trial was considered a success.

The company noted the accident was due to “an extremely rare combination of software anomalies,” and intends to launch a commercial service in Singapore in the next year.

It is therefore not unthinkable that at some point, mass use of driverless cars and public transport could remove the need for congestion charging altogether.

http://bit.ly/TimMcCreadyDonaldTrumpMood

Tim McCready

The “Trump factor” is one of the major issues impacting chief executives’ confidence in the global economy.

In last year’s Mood of the Boardroom survey – held just over a month before the US presidential elections – CEOs rated the election outcome as their third greatest international concern impacting on business confidence.

A year on, they see Donald Trump’s presidency and its resultant political instability as taking the edge off a generally positive outlook. CEOs rated the “Trump factor” their second highest international concern at 6.47/10 with 10 saying they were “extremely concerned” about its effect on political instability.

“The Trump regime has amplified geopolitical instability considerably,” said Rob Cameron, founder of merchant bankers Cameron Partners. “Global political outcomes are more unpredictable.”

“His performance is so poor we can only hope for impeachment,” added a law firm head.

Despite the negativity towards the president, 80 per cent of those surveyed say their view of Trump’s performance won’t affect their own company’s intentions with the United States:

“Operating in the US isn’t easy, regardless of who is in power,” said a tourism boss. “The domestic economy actually feels very strong in the US from a business operating perspective.”

“It remains a key market for us, no matter the presidency. Therefore, we remain committed to the United States,” added Don Braid, Mainfreight’s group managing director.

Others cited the ability for the US Congress to moderate the actions of the President as offering reassurance:

“Fortunately, in the United States, the founding fathers designed a constitution with checks and balances. Despite the concerns about Trump gaining a lot of media attention, his ability to implement action is limited,” explained a major law firm partner.

“He is mercifully restrained by the constitution and the checks and balances in the system,” said Kate McKenzie, Chorus CEO.

Several executives in the real estate industry thought Trump was having a positive impact on their business, as he unintentionally makes New Zealand a more appealing environment:

“As more Americans look to diversify investment and lifestyle outside the US, New Zealand’s clean green image and welcoming economic and political environment makes us a favoured destination,” said one real estate chief executive.

Another commented: “Trump’s irrational behaviour makes New Zealand’s isolation one of our greatest strengths.”

Neil Paviour-Smith, managing director of Forsyth Barr thinks Trump will help New Zealand businesses to bolster its trade in other markets. “While the New Zealand economy is continuing its expansionary phase, we are seeing more synchronised growth globally – including former laggards Japan and the EU – despite a lot of distraction from geopolitical-related activities.”

Much of the comment was pungent. Simplicity’s Sam Stubbs predicts – “as the ultimate apprentice in the ultimate game show, he will be, ultimately, fired.”

Closer to home there was some criticism of New Zealand businessman Chris Liddell – a former chief financial officer at Microsoft and General Motors – who heads Trump’s strategic development group focusing on priority projects and liaison with the private sector.

“Trump is an absolute tosser! What is Chris Liddell doing there?” questioned Local Government Funding Agency chairman Craig Stobo.

Another added: “Though in talking with a prominent Kiwi in the White House, he believes Trump is a very clever person who knows business and will succeed – as long as he gives up the stupid tweeting and mind games over people.”

Though Liddell is still in the White House, the turmoil and unprecedented staff turnover in Washington and delays in filling key jobs in US Government departments, has been noted.

“A disastrous lack of leadership is leaving the United States increasingly rudderless,” said Beca’s Greg Lowe.

“Trump is worse than I thought he was going to be,” added a real estate executive.

The Trump administration has seen a number of high-profile staff leave the White House.

Recent departures include Sebastian Gorka, deputy assistant to Trump; chief strategist Steve Bannon; communications director Anthony Scaramucci – dismissed after only 11 days in the job – and chief of staff Reince Priebus.

But the new chief of staff, former marine general John Kelly, is said to be bringing discipline to the show.

Protectionism rears its head
One of Trump’s first actions as president was to throw out the TPP agreement which New Zealand signed in Auckland in February 2016 along with 11 other nations. During the 2016 presidential campaign, Trump frequently criticised TPP – labelling it “horrible,” a “bad deal,” and a “death blow for American workers”.

His new “America First” strategy has had a wide impact on US involvement in regional and multilateral trade agreements. The president favours individual deals on the proviso they can be quickly terminated in 30 days “if somebody misbehaves.”

He has recently stepped up calls for a more protectionist stance. Dismissing some of his top staffers as globalists, he has demanded a plan be drawn up to impose tariffs to remove China’s “unfair advantage” displayed by its trade surplus with the United States. “There is no dodging it, the world is more fearful and feels (but may not be yet) more protectionist,” says a senior player in the investment community.

“The move towards protectionism causes one to be more cautious and concerned about the outlook,” says Cathy Quinn, partner and former chair at MinterEllisonRuddWatts.

The protectionist stance also brings with it the possibility of border taxes, which some congressional Republicans have put forward to support Trump’s commitment to increase American competitiveness and prevent jobs shifting overseas.

This would mean companies could no longer deduct the cost of imports, creating strong incentives to retain and relocate supply chains and research to the United States. But there are fears this could spark a trade war, as countries move away from the US and source products and materials elsewhere.

Without a detailed proposal for border taxes, it is impossible to comment on the specifics. But chief executive respondents to the Herald survey indicated they are reasonably concerned about potential risks to exporters trading with the United States, rating this at 5.2/10.

“Implementation of the Border Adjustment Tax poses a very serious risk to New Zealand’s wine exports to the United States – our biggest export market – and will undoubtedly be damaging to the industry,” says Erica Crawford, founder and managing principal of Loveblock Wines.

Threat of nuclear war
There is no doubt the threat of nuclear war has escalated considerably since Trump became president.

Earlier this month, Pyongyang said it had successfully trialled a hydrogen bomb that could be loaded onto a long-range missile.

North Korean state television said the trial, which was ordered by leader Kim Jong-un was a “perfect success” and a “very meaningful step in completing the national nuclear weapons programme.” It received international condemnation – including from New Zealand’s Foreign Minister Gerry Brownlee, who called the test “utterly deplorable.”

As is customary, Trump responded by tweet: “North Korea is a rogue nation which has become a great threat and embarrassment to China, which is trying to help but with little success.”

This was followed by: “South Korea is finding, as I have told them, that their talk of appeasement with North Korea will not work, they only understand one thing!”

Trump didn’t expand on what that “one thing” might be, but at an unrelated event last month he promised to inflict “fire and fury like the world has never seen” upon the totalitarian state if it acted in a hostile manner.

It is not surprising then, that the potential for nuclear war in Asia was considered by CEOs to be of reasonable concern, rating at 5.9/10.

“North Korea is a serious issue, which would have come to a head with or without Trump. The problem is Kim Jong-un can’t be fired, only fired upon. This is not reality TV,” said Simplicity’s Stubbs.

The Trump Factor
CEOs rated President Trump’s policy initiatives and actions on a 1 to 5 scale (where 1= not impressive and 5= very impressive).

  • Implementing his campaign agenda including a radical cut to the corporate income tax to 15 per cent: 1.51/5
  • Trump’s call for an “America First” trade policy with a focus on bilateral trade deals: 1.31/5
  • Threats of a nuclear strike on North Korea: 1.30/5
  • United States withdrawal from the Paris Climate Accord: 1.24/5
  • Dealing with Russian security concerns: 1.24/5

Agribusiness: Greener Pastures Under Trump? (NZ Herald)

Tim McCready

Donald Trump says his Administration is “pro-agriculture,” but the rising protectionist sentiment in the United States brings with it a significant amount of uncertainty. This is particularly true for agribusiness – an industry highly dependent on global trade and one which has benefited in the past from freer trade.

Two-way trade between our two countries reached $16.1 billion in 2016, making the United States New Zealand’s third-largest individual trading partner. The US is a major market for agricultural products, and is our largest market for beef and edible offal – worth over $1 billion.

However, with the possibility of border taxes in play, a US-backed Trans-Pacific Partnership (TPP) off the table, and ongoing North American Free Trade Agreement (Nafta) negotiations, the future potential of New Zealand’s trade with the United States is uncertain.

Charles Finny, former official and trade negotiator agrees. “At this stage US policy beyond withdrawal from TPP and a strong preference for bilateral agreements is still unclear, and following the recent visit of Todd McClay to Washington DC a bilateral FTA seems a possibility,” he says.

“But would that be as good a deal as was proposed for TPP? It is too early to tell whether the Trump era trade policy will be good or bad for New Zealand.”

TPP: a leadership vacuum and new opportunities

One thing that was evident throughout the Trump campaign was that America would pull out of TPP. Trump frequently criticised the deal labelling it as “horrible,” a “bad deal,” and a “death blow for American workers.”

While a TPP that includes the US is at this stage off the cards, eleven Asia-Pacific nations – including New Zealand – remain dedicated to ensuring the regional free trade deal goes ahead. The absence of the US has created a vacuum in global trade leadership which China has been more than happy to fill by supporting the Asean-led 16-nation Regional Comprehensive Economic Partnership (RCEP).

For American agriculture, the TPP represented an opportunity for agricultural exporters to trade with what is now a very lucrative Asian economy. The American Farm Bureau Federation estimates that the deal would have boosted annual net farm income by US$4.4 billion.

There is concern in the US that other economies are in a prime position to take advantage of America’s lost opportunity. While in some cases the US is paying significant tariffs in Asia, New Zealand, for instance, is working towards the elimination of tariffs on 99 per cent of exports to key Asean markets by 2020.

The US Meat Export Federation believes its members will see a reduced market share in Japan – their largest export market if the US fails to strike some kind of Pacific trade deal soon. “What we’re worried about is 18 to 24 months from now when [Australia] can offer competitive prices and volumes on cuts that we now are supplying, but at duty rates that are double-digit lower, that really represents a handicap [to US exports],” says the Federation’s Senior Vice President for the Asia-Pacific, Joel Haggard.

The longer this disparity goes on, the bigger the disadvantage could be to the United States, and the greater the advantage to its competitors – including New Zealand.

Recognising this, Darci Vetter – who served as America’s chief agricultural trade negotiator under President Obama said:
“You want to have the best level of access at the time they start forming relationships with buyers and so the timing on this is critical and we’re going to be way behind New Zealand,” he says.

Tim Groser, New Zealand’s ambassador to the US and a former NZ trade minister who worked relentlessly to get the TPP across the line agrees.

“This is a competitive game and of course we aren’t going to sit in a hole and do nothing on these non-TPP fronts because everyone is in this game and if you fall behind you are in a competitive disadvantage.

“At the end of the day we’re all economic nationalists. Our responsibility is to look after our own country’s economic interests.”

Border taxes: sparking a trade war?

Also in play is a border tax on imports into the United States.

In a bid to support Trump’s commitment to increase American competitiveness and prevent jobs moving overseas, some congressional Republicans have put forward a proposal to apply a border adjustment tax (BAT).

The border adjustment tax is considered by some to be a critical part of tax reform, as it will mean that companies can no longer deduct the cost of imports, creating strong incentives to bring supply chains and research back to the United States.

While the introduction of a BAT would impact all sectors, agriculture is expected to be one of the hardest hit due to the amount of materials and inputs farmers rely on that come from outside the US – including fertiliser, fuel and chemicals. Moves to retain the entire value chain within the US could also spark a trade war, with countries like China and Mexico moving away from the US and instead buying their agricultural commodities from other countries.

The levy has divided Congressional Republicans. It is said that Trump is also against its introduction. And there is a question of the legality of the proposed BAT, with critics arguing it would violate United States commitments under World Trade Organisation rules which the US has signed up to.

“Any border tax adjustment runs the risk of breaching commitments made by the US in the WTO or regional/bilateral agreements,” explains Charles Finny.

“Without a detailed proposal it is impossible to comment on the trade law implications of such a policy. But if it appears to be in breach of commitments then the US should expect a challenge from a number of trade partners.

“How the Trump Administration reacts to any challenges will be interesting to observe.”

NZ-US FTA: No major impediments

Trump’s “America First” strategy has had an impact on the US involvement in regional and multilateral trade agreements. But Trump has stressed that he is not opposed to all trade agreements, and is in favour of individual deals on the proviso they can be quickly terminated “if somebody misbehaves.”

Early in his presidency, Trump told Fox News “believe me, we’re going to have a lot of trade deals. But they’ll be one-on-one. There won’t be a whole big mash pot.”

Last month, New Zealand Trade Minister Todd McClay visited Washington for talks with Trump’s Administration.

“I’ve welcomed their interest in an FTA as a demonstration of the good shape our trading relationship is in,” McClay later said.

He saw no major impediments to a trade deal with the US.

Whether Trump sees things the same way is anyone’s guess.