I work in a School of Business at a university in the south of China (www.gdufs.biz). My city, Guangzhou (once called Canton, third largest city in China), has strong ties to New Zealand.

Canton
The Chinese who ran fruit shops in Manaia and Stratford in the 1890s came from Canton. Seventy five years ago we accepted refugees from the Japanese occupation of Canton. My students are proud of the part their families played in Japan’s defeat. NZ and China together fought the Japanese.

Dairy history
The Chinese have saved the South Taranaki dairy industry three times!  

(1) A Chinese entrepreneur in the 1870s sold a fungus known as Taranaki Wool. The fungus was collected by farmers. In some years their income from this source was five times that from the sale of butter. Thus, impoverished farmers survived because of a market in China.  (2) Our early dairy sales to Australia and the UK were often found to be putrid on arrival. The Chinese built NZ’s first refrigeration unit for butter and established the cool storage industry. In the 1880s, Chew Chong developed innovative cream and butter factories, mainly around Eltham but also at Ngaere, Cardiff, Stratford, and Mangatoki. (3) Chinese leadership introduced into Taranaki a system of share-milking to ensure a steady supply of milk.

Our economy
Taranaki faces economic disaster. There is radical change and our politicians refuse to face the facts. John Key avoids the reality for Taranaki when he said last week, dairy farming “makes up only about 5 per cent of our economy and other key industries are all performing well”.

China & milk
If you think the Chinese dairy boom is going to come again, you do not understand China. China needs food, but China is a command economy and it has the ability to adapt. China does not believe in free markets, except to the extent that they work for the country (not for individuals or companies). The price of basic milk products will stay down. Why? Let me give you two examples of China’s approach to economic matters, soccer and personal relationships:

Soccer
Embarrassed by poor World Cup results last year the government made soccer compulsory in schools. Good news children, you will all enjoy soccer. Money pours in. Soon China will win the World Cup. This extreme nationalism is also behind their manipulation of the stock exchange.  Conclusion: China will make dramatic changes to achieve long-term goals and maintain China’s prestige.

Personal relationships
A few weeks ago money suddenly appeared in my Bank of China account. The money was a gift (on top of my salary) because my university gained an international accreditation for their MBA degree. Conclusion: contracts are not important and the Chinese are generous with their friends.

China’s Food Policy
China’s demand for food will continue to grow. The Chinese approach to food security is like their approach to other things. They will not let prices get out of control again and they will ensure a diversity of suppliers. Possible food contamination anywhere in the supply chain will result in gross bans. New Zealand simply says “Oh we have more competitors in the market” – but it is not as simple as that. That conclusion sees things from the free market (western/American) perspective. How is New Zealand to prosper in China? Understand that markets will be manipulated and build personal relationships. Do not expect China to operate like a western country.

Market Risk
Taranaki dairy risks market failure because it allows drilling waste to be spread over the land. Try to tell the Chinese this is safe. The Chinese believe in food purity in a way we do not. They believe in their inner-feelings and we believe in the Regional Council. If they discover we spread waste products on our land, all of Taranaki’s land-based production could suffer a ban. Silly Taranaki risks its reputation and farm income to help overseas investors make money.

Dairying’s problem
A hydrocarbon industry is incompatible with farming. The only way we can have the both is to insist that the hydrocarbon industry is ocean based and does not impact on the land. That means no drilling on land and no dumping of waste on the land.  Our regional council (those responsible for environmental standards) and the STDC (responsible for land use via the District Plan) seem unable to protect dairy farm markets.

Compare
The hydrocarbon industry uses our resources to make money for their shareholders. That is their goal. They give us just enough to make us docile. They will be gone when the resource is gone. In contrast, dairy farms are the lifeblood of Taranaki. They buy and sell at home. They are a sustainable industry. But one day they will have to pay to clean up our land and our image in China.

Robert Shaw
robert@porirua.net