Report on China Today Breakfast
Laetitia Peterson, Managing Director
Vanja Pivac, Operations and Compliance
We leapt at the opportunity to attend a timely seminar which examined China's impact on business in New Zealand and on New Zealand's future. The China Today business breakfast seminar, held at Auckland's Ellerslie Convention Centre on 4 May and at Wellington's Duxton Hotel on 6 May, coincided with the launch of Liontamer's TIGER Series 1 fund on 29 April 2005.
As you will be aware, TIGER Series 1 tracks indices in six Asian countries and is over weight in two countries, China and India. We consider these countries to be the growth engines of the Asian region.
The Liontamer delegation at China Today was Laetitia Peterson, Managing Director, and Vanja Pivac, who is seconded to Liontamer for six months from Bell Gully, where she is a senior financial services lawyer.
We were particularly interested to listen to the wisdom of the keynote speaker, Jean-Christophe Iseux, who is recognised as one of the world's foremost China experts.
Professor Iseux has received many accolades for his knowledge and understanding of China and its emerging market economy. As well as being a China business consultant to a dozen Fortune 500 multinational corporations, he is a Director of China Studies at Oxford University and special adviser to the People's Government of China.
China Today was well supported by New Zealand's business community who trade actively with China, due in part to the government's decision to recognise China as a market economy and to enter into a Free Trade Agreement.
The opening remarks of the China Today seminar were made by:
- Nevil Gibson, Editor in Chief, NBR
- Lex Henry, Trustee, Asia New Zealand Foundation
- Murray Gregg, Manager Cargo Sales, Air New Zealand Cargo
- Reinhold Goeschl, Bax Global Transportation and Logistics Worldwide
- Peter Darroch, CEO, Grey Global Group Advertising
The recurring theme from these opening remarks was that it is very difficult to gain a through understanding of, and access to, China.
Lex Henry talked about New Zealand's lack of media coverage of issues in China and the fact that it is necessary to try to look 20 to 30 years ahead as China's development is in its infancy.
Murray Gregg described the extraordinary red tape involved in getting the operating permits and business licenses required to operate a freighter service in and out of Shanghai.
Reinhold Goeschl described the practicalities of trading with China as "challenging" and said that communication is key.
Peter Darroch used a quote from Hannibal, the famous General of Carthage, to describe Grey's guiding philosophy in terms of China's uncharted creative relationship territory. The quote that was translated into Mandarin was, "Find a way or make one".
Some of the sentiments expressed were that you need a good Chinese partner to work with, in particular, someone with knowledge of important Chinese dialects, and you need to have one eye on an ever-changing regulatory environment. This parallels Liontamer's view that gaining access to China's investment sector has previously been the stomping ground of the more seasoned investor.
Keynote Speaker
Jean-Christophe Iseux, who is an investment adviser to 14 Chinese local governments and the world's first non-Chinese member of the Chinese parliament, began by remarking that New Zealand is leading the world in recognising market opportunities in China. Iseux expounded the benefits of China for New Zealand's service industry, particularly in relation to tourism and urged New Zealand to tap into China's one million millionaires.
Professor Iseux described major new developments, such as recognising private property, as breakthroughs in promoting confidence in China's private economy. This is especially important in terms of property rights for farmers, who make up 60 to 65% of China's population.
Iseux stated that China has recently exceeded the threshold of $US1000 GDP per capita and is in a critical stage of development. Several imbalances exist, between, for example, city and countryside, poor and rich, east and west. Professor Iseux pointed out that China will be a developing country for the next 50 years and the government and the ruling party are attempting to find ways to address these imbalances so that China can achieve sustainable economic and social development.
China's "Go Global" strategy was also discussed by Iseux. He described China's push to make Chinese companies multinational. There are presently 12 or 13 Chinese companies in the Fortune 500 and it is anticipated that there will be about 30 by the end of the decade.
Professor Iseux stated that "Last century was the American dream, this century is the Asian dream".
Following the keynote speech an interview was conducted by Nevil Gibson, Editor in Chief of the NBR. Gibson asked Professor Iseux about China's banking system and a possible appreciation or float of China's currency. Iseux responded that the currency would most likely be pegged against the US dollar and that a revaluation would be between 3% and 5%.
In response to a question about the price of China's exports, Iseux responded that the price of raw commodities in China is lower than other countries and as a result there will be a readjustment of costs over two years and the cost of goods made in China will increase.
Iseux also commented on China's improved measures to secure its energy supply, tackle pollution and wastage and compete on the world stage in terms of technology and the service industry.
Iseux refuted claims that the economy of China is slowing down. He remarked that an estimated 8% annual increase in GDP is understated and is closer to 11% in real terms.
Liontamer is considering a possible second Asia fund in the future and will be seeking your feedback when we are researching investor appetite for our next fund launch.
