PCNZ NEW YEAR REPORT – 2025
David Boyle, CEO of Primary Collaboration New Zealand
Greetings and Happy Chinese New Year !
Firstly, wishing all our New Zealand businesses “Gong Xi Fa Cai” and all the best for a prosperous 2025. The CNY festival has finished without the skyrockets and fireworks of previous years, (now they are banned in Shanghai), but there have been ample fireworks fired across the Pacific to compensate! The staff are arriving back in the office after trips home to see distant families, and trips away to warmer climes, (it’s cold here!) but we are generally in a buoyant mood about the challenges of 2025. There are some steep challenges too, with China’s economy still sluggish, consumer confidence cautious, and ambitious targets for our brands this year.
So, how did the new calendar year begin? January’s macro-economic data were slightly disappointing but not bad, due partially to the relatively early Lunar New Year holiday in late January compared to mid-February last year. The large migration of people to homes in central and western China began a week before the holiday started on January 28th. China’s tourism spending and box office sales prospered however, showing some signs of a rebound in domestic consumption.
There is a proven and direct correlation between more holidays and increased domestic consumption, and the eight-day CNY holiday was one day longer than 2024. Tourism spending was up 7% to 677 billion yuan (US$93 billion), according to data from the Ministry of Culture and Tourism. And another critical pillar of the Chinese economy, home sales, grew 26% YoY in January, suggesting purchasing intentions remained strong before the holiday lull set in. This growth continued the end-of-2024 home-sales market rally, driven by government policy announcements and incentives in Q4 last year, including mortgage relief and tax breaks for homebuyers.
Export activity in January reduced slightly, which was somewhat concerning considering exports are likely to deteriorate further following the US tariffs implemented last month. (+10% on all China imports into USA, so far). Directly related to the exports, and the pre-Christmas inventory builds for USA and Europe, manufacturing conditions deteriorated slightly in January, with a PMI decline from 50.5 in December, to 50.1. (The headline Producer Manufacturing Index (PMI) readings above 50 signal improvement and below 50 indicate deterioration).
The full year 2024 trade data between China and New Zealand warrants a brief summation; China is still;
- NZ’s largest trading partner (2-way trade was NZ$37.7 billion),
- Our largest export destination (NZ$20.25 billion),
- Our largest source of foreign students. (19,070)
- Our 3rd largest source of visitor arrivals (240,870).
- New Zealand’s Number One Food and Beverage export partner, buying 28% of our total F&B exports, despite the fact that our total F&B exports shrank -2.2% vs 2023.
Across the sectors;
Dairy, after three soft quarters until September, grew +5.2% YoY, (+NZ$400million)
- Meat sales fell NZ$1 billion (from NZ$3.4b to $2.4b),
- Fruit grew by NZ$ 300 million (+34%),
- Seafood exports held their head above water growing NZ$ 11.2 million (+1.2%).
- And a nod to a favourite sector; Wine exports grew by 14.4% to reach $44 million; with quantity growing (+18.8%), but values dipping (-3.7%), in a saturated market.
So, a mixed bag of results across our key sectors in what was a turbulent year economically.
Other Recent News…..
Tariffs. On Saturday, US President Donald Trump issued an executive order imposing 10% tariffs on Chinese imports, mentioning Beijing’s alleged role in enabling the flow of fentanyl into the US. The Executive Order also eliminated the ‘de minimus’ exemption which previously exempted imports worth less than USD 800 from customs duties, undermining Chinese retailers like Shein and Temu. In response Beijing immediately hit back: the Ministry of Commerce (MofCom) announced a 15% tariff on U.S. coal and liquefied natural gas, and a 10% tariff on crude oil, farm equipment, and some vehicles.
Consumer Incentives; Government employees received pay increases near the end of 2024, and also the government announced an expansion of the “Cash-for-clunkers” trade-in program. Both moves are clear signs that the central government will continue to incentivise spending in 2025.
Real Estate Sector. Pundits are still concerned about the lack of any new policy support for the real-estate sector. Sales are losing some steam, and after the failings of real-estate behemoths Evergrande, Country Garden, and Huarong Securities, the fate of the part-state-owned developer China Vanke once again appears uncertain.
DeepSeek. Aarguably the biggest China news of the year so far revolves around something that few people had heard of until late January: the release of DeepSeek's R1 app. This groundbreaking AI app has the potential to reshape geopolitics and global economies. “China Skinny’s” Mark Tanner has written a balanced piece about DeepSeek’s capabilities versus Chat GBT and other AI tools, which is well worth a read..
China’s Tech Rally. China’s technology stocks continue to roar ahead, after news was released of a meeting between 15 private sector tech executives and President Xi Jinping, last week. The main beneficiaries are likely to be the larger, well established companies, given the pipeline of early stage tech sector companies has declined to a trickle. Broadly speaking, there’s some cause for optimism about China’s economy when looking at credit growth in January which showed that some of China’s much-promised stimulus is working. The major downside risk to the economy is still the real-estate sector, with the huge (and hugely troubled) developer China Vanke’s poor fortunes having a negative impact on homebuying sentiment.
Best wishes for 2025, and the Chinese New Year of the Snake!
David
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