(Yicai) July 23 -- New Zealand companies are optimistic about the Chinese market despite ongoing geopolitical tensions, economic headwinds, and increasing competition, according to a report by the pre-eminent industry association for the country's businesses in China.

Fifty-two percent of the 60 companies polled by the the New Zealand Business Roundtable in China expressed high or very high confidence in the Chinese market, with 95 percent reporting at least moderate optimism, according to its 2025 Business Outlook Report.

New Zealand businesses are optimistic about the market for several reasons, including growing opportunities in second- and third-tier cities as local consumer demand for aspirational products increases and the fact that China has become “quite a profitable market” for them, NZBRiC Chairman Mark Anderton said in an interview with Yicai yesterday.

More than half of the respondents to NZBRiC’s survey reported higher revenue, and as many saw their profits increase in the last financial year, showing considerable resilience during an economically challenging year, both in New Zealand and China.

Looking ahead, 66 percent of New Zealand businesses in China expect their revenue to grow in the coming year, with 55 percent also projecting higher profits, despite economic headwinds at home.

More than 80 percent plan to maintain or increase their investments in China over the next three years, showing its continued appeal to New Zealand exporters as a growth market. However, China is the top investment destination of 78 percent of them this year, down from 84 percent last year.

Localization Beyond Exports

The shift towards localized production was one of the main trends to emerge from the NZBRiC survey. The proportion of New Zealand businesses producing or sourcing goods within China for the Chinese market surged to 20 percent this year from just 7 percent last year.

"New Zealand businesses have to really think about the trend of localization," Anderton noted, adding that this will transpire into using more local talent and moving out of first-tier cities.

Sixty-two percent of the companies are optimistic about opportunities in second-tier cities, and 48 percent about third-tier urban areas.

“New Zealand has traditionally exported into the major centers -- Beijing, Shanghai, Shenzhen, and Guangzhou -- tier-one cities,” David Boyle, chief executive officer of Primary Collaboration New Zealand, which supports small and medium-sized enterprises in entering China, told Yicai.

“There is no question that in the last two to three years, particularly since Covid, as we have developed our distribution systems, we have been able to into tier-two, tier-three, and tier-four cities provided we have the right logistics setup and we have good customers,” Boyle said.

“In the last six to eight months, we have visited Hefei, which is one of the fastest-growing cities in China, Zhengzhou, Hangzhou, Chengdu, and Qingdao,” Boyle noted. “In all of these cities, we have customers now to whom we sell directly.”

There seems to be more disposable income in second- and third-tier cities, as the cost of living is lower and where young people seek more opportunities in terms of their lives, their families, and interesting companies to work for, Boyle added. “So a really good consumer base in those tier-two and tier-three cities who can afford our products.” he said.

When asked about the trend of selling products directly to customers through online channels, Boyle noted that his team examines data from platforms such as Xiaohongshu (RedNote), Kuaishou, and Douyin (TikTok) to gather market insights.

“More than 70 or 80 percent of people buying our fresh produce are women aged between 28 and 48, and they get their information from three or four key social media platforms," he explained. For example, Xiaohongshu redirects them to buy New Zealand apples at Sam's Club or Freshippo sites.

In recent years, China's marketing has grown very fast through social media, especially Douyin and live auction platforms, according to Brett Raymond O'Riley, CEO of New Zealand's Employers and Manufacturers Association. "This is a fast-moving market with a lot of new ways to engage with consumers."

Navigating Growing Competition, Market Evolution

Competition within China remains the main challenge for New Zealand companies in the country, with 57 percent of the survey’s respondents citing this as their biggest concern. The other top two were a challenging retail environment and shifting consumer preferences at 43 percent, and geopolitical tensions at 29 percent.

“Chinese competitors are continuing to improve,” Anderton said. New Zealand businesses already have a presence in China and understand the market well, he said, adding that “we really believe having a presence here in China and having local talent will help combat that domestic competition.”

However, New Zealand businesses in China not only have to compete with local firms but also with other importers.

“New Zealand's competitors, like those from Denmark, Switzerland, and Ireland, are all selling and marketing products based on a clean, green strategy," Boyle said. "There's not only domestic competition, which is warming up, and quality standards are rising, but there's also a lot of other international competitors as well."

Preparation is crucial for success before entering a market, especially intellectual property protection and partner selection, Rocky Meng, founder of law firm Sparks Partners, told Yicai.

“You need to line up everything right before you come into the market and do your thing,” noted Meng, a lawyer who has been helping New Zealand companies navigate China's legal landscape for over a decade.

New Zealand business should promote themselves and their products through broader cultural values to differentiate themselves. “We've leveraged a clean, green image, and we’ve leveraged trust and safe,” Anderton noted, “New Zealand businesses should move a little beyond that and also think about the values that New Zealand has in community, our ingenuity, and out Te Ao Māori identity.”

While only 28 percent of the New Zealand firms surveyed by the NZBRiC incorporated Māori elements in their businesses last year, this year some 35 percent of them believe such elements resonate with Chinese customers.

This gap points to untapped potential in leveraging Māori cultural identity as a distinctive branding asset in China, if appropriate to do so, the NZBRiC noted.

'Strong But Sensitive' Bilateral Relationship

While corporate optimism remains high, the NZBRiC's Business Outlook Report shows eroding perceptions of the New Zealand-China relationship. In fact, the percentage of respondents perceiving the relationship as strong dropped to 70 percent from 84 percent last year.

Nevertheless, the share of firms that still consider the relationship to be important for their success in the Chinese market remains relatively high compared with similar surveys of businesses from other countries, the report noted.

New Zealand-China trade relations have deepened significantly since the pair signed a free trade agreement in 2008, the first-ever FTA China signed with a developed Western country.

Bilateral trade between the two now totals about NZD38.3 billion (USD23 billion), with China taking more than a quarter of New Zealand's exports.

There is potential for deeper collaboration between the countries beyond traditional trade, said O'Riley, who also represents New Zealand on the Asia-Pacific Economic Cooperation Business Advisory Council.

“I've witnessed over the last 10 years China's commitment to decarbonizing and the green economy," O'Riley noted. "For New Zealand, China is the perfect partner to help us decarbonize our economy.

"If we look across the 21 APEC economies, China is the only economy that has had a material reduction in its carbon footprint over the last few years," he added.

For New Zealand businesses already in China or considering entry, the message is clear: success requires deep local engagement, strategic patience, and willingness to evolve beyond traditional export models. Those willing to make these commitments are finding that China's vast market still offers compelling opportunities for growth and profitability, even as the competitive landscape continues to evolve.

Editor: Futura Costaglione