It’s glorious to be rich

Chinese Premier Wen Jiabao’s dream is not about a future in which every Chinese will own his own car or be able to live in a posh apartment in downtown Beijing or Shanghai.

It is a future in which every Chinese child will be able to drink two glasses of milk a day.

It’s a vision that Wen confided in Prime Minister Helen Clark at a time when the China free trade negotiations were going through a tetchy period.

Young Chinese have developed a taste for milk in its many forms -particularly yoghurts – marketed with anything ranging from a Chinese astronaut to a football star.

China’s demand for dairy products has proved a bonanza for New Zealand’s own dairy farmers. It’s not to put too fine a point on it that this is one of the key factors ensuring the New Zealand economy remains relatively stable at a time when other economies are under pressure.

Milk consumption in China has virtually tripled within a mere decade as China’s new middle class avails itself of high-quality foods and eats at top-notch restaurants.

But rising prices, just as they have here, have taken the edge off appetites.

China has been a good economic friend to New Zealand. In October that friendship will move to a deeper level when the China Free Trade Agreement will come into effect. Already New Zealand companies and entrepreneurs are readying themselves to capture a first mover advantage.

Leading businessmen like Air New Zealand chief executive Rob Fyfe say that the relationship with China has already become much closer since the FTA was signed in Beijing’s Great Hall of the People last month.

Fyfe, like other senior businesspeople who accompanied Prime Minister Helen Clark to Beijing for the signing ceremony, is optimistic that the FTA will lead to benefits in excess of the raw numbers talked about in the deal.

In coming weeks the free trade legislation will be attacked by some people in submissions to Parliament, but it’s a done deal.

From the business perspective there is only an upside.


“The China Price” is a phrase that sums up why companies from Fisher & Paykel to the world’s biggest manufacturers have shifted production to China will still exist. But China will be manufacturing aircraft and building new generation nuclear power stations.

The first major power to get old before it gets rich, more than 20 per cent of its population will be over 60 by 2030. The growth in the number of Chinese will slow down but there will still be approximately 1.49 billion in 2035 compared with 1.31 billion (in 2005). China’s strict one child per family policy will be gradually abandoned.

Backward plants will gradually be closed down. Beijing is spending $US13 billion ($17 billion) on a cleanup before the Olympic Games but 70 per cent of the country’s rivers and lakes are polluted and 90 per cent of ground water in Chinese cities is tainted. This provides an opportunity for NZ firms to capitalise on our Pure New Zealand image (if we can live up to it).

China’s rapidly growing middle class will demand top-class proteins as pollution and water shortages impact on food quality. New Zealand’s FTA positions food exporters like Fonterra and meat exporters well to capitalise on the market potential.

China will more than double its oil imports from 160 million tonnes annually to about 350 million tonnes to fuel its voracious energy appetite. New Zealand will sell more coal, aluminium iron ore sands and gas.

The Chinese Communist Party will still dominate Chinese politics. But there will gradually be more democracy at grass-roots level as China’s new roadmap for political reform rolls out – and occasional turmoil.

Young Chinese (Chuppies) will use mobile phones and the internet. More of them will speak English up to one-fifth of the population is learning the language. In 2006 there were 7.3 million cars in China, by 2035 there will be 542 million.

Shanghai is where workers staged some of China’s first strikes. Now residents are concerned that the extension of the maglev train through prime neighbourhoods will cause property values to plummet. If Nimbyism takes hold, it won’t just be the peasants who revolt.

China will have another 30-40 companies in the Fortune 500 list on a revenue basis; it will have enhanced military power but will still be dependent on imports for the most advanced systems. The power of its president will rival that of the US. BusinessWeek/Institute of Quantitative & Technical Economics of the Chinese Academy of Social Sciences/China Access.

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