New Zealand firms in China are shifting strategy, localising their operations and pushing into regional markets. Photo / Duncan Bridgeman
New Zealand businesses are doubling down on China despite a more challenging operating environment, with a new survey finding the market is "harder to win in, but worth winning in".
The New Zealand Business Roundtable in China (NZBRIC) Business Outlook report says firms are shifting strategy, localising their operations and pushing into regional markets amid intensifying competition and margin pressure.
"As China continues to grow domestically, New Zealand businesses are moving to capture new markets outside the traditional tier one cities, optimise their supply chains and utilise local talent to move faster in the ever-changing Chinese market," NZBRIC chairman Daniel Young said.
Despite slowing economic growth, New Zealand firms are maintaining a strong outlook on the opportunities within the China market, he said.
This year 64% of New Zealand businesses now report high or very high optimism about operating in China, up from 51% in 2025, with total confidence climbing to 97% from 94% last year.
"New Zealand businesses continue to see enduring value in commitment to this market," Young said.
China's economy is experiencing increasing unevenness, with retail sales recently falling for the first time in more than three years and investment also slumping. At the same time, industrial output has picked up pace.
Economic growth in the second quarter is expected to slow to 4.5% from 5% in the first. Last year real consumption expenditure rose by 4.4%, meeting the Government's GDP growth target of "about 5%".
The NZBRIC report notes China's 15th Five-Year Plan places a strong emphasis on prioritising production quality over sheer quantity.
"As Chinese companies advance this transition, the unmatched scale of domestic manufacturing allows them to achieve economies of scale that few other countries can match," Young said.
"This dynamic is creating clear opportunities for New Zealand businesses. According to our latest findings, 34% of surveyed firms expect to further optimise their supply chains moving forward, a significant leap from just 20% in 2025.
"This shift is also reflected in investment intentions, and when asked about drivers for future capital deployment, supply chain optimisation saw the largest year-on-year increase.
"Ultimately, as China focuses on elevating its total factor productivity, New Zealand firms are well-positioned to leverage these advancements to enhance the quality and efficiency of their products as they enter the market."
How would you describe your general optimism towards operating in China?
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2026 NZBRiC Business Outlook Survey Report
Another core theme emerging from the survey was a clear shift towards localisation.
Some 51% of NZ firms in China now employ no nationals or permanent residents on the ground, up 15% in a year - a shift in how Kiwi companies operate in-market.
"While this shift can create cross-cultural and communication challenges between New Zealand headquarters and China teams, it highlights the rising quality of the local talent pool, and the soft labour market which has meant lower costs of employment," Young said.
"The workforce has reached a level where a majority of firms now confidently entrust their entire on-the-ground operations to locally engaged staff."
While tier one cities and 1.5 hubs, including Shanghai, Beijing, Guangzhou, Shenzhen, and Hangzhou, remain primary growth engines for premium brands, New Zealand firms are increasingly optimistic about lower-tier market growth.
Tier three cities and below are cited by 19% of respondents as a current opportunity, up from 0% in 2025 - and supply chain optimisation has become a fast-rising driver of future investment.
How does China rank in your organisation's global investment plans?
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2026 NZBRiC Business Outlook Survey Report
"While the mid-market territory of [tier two] provincial capitals like Wuhan and Nanjing remains challenging to penetrate, New Zealand companies are structurally well positioned to capitalise on the eventual consolidation of distributors across these mid-tier regions," Young said.
He said the trends showed New Zealand businesses are adapting to a key market reality.
"To keep up with how fast Chinese consumer preferences change, companies need deep local roots. Without local presence through partnerships and/or staff, international businesses may find it challenging to match the market's rapid speed of change."
Overall, the 2026 survey paints a picture of cautious optimism.
Respondents continue to back the China market as a long-term proposition, but they are "clear-eyed" about a tougher, more competitive operating environment than a year ago.
How many New Zealland nationals (citizens and permanent residents) are currently employed in China?
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2026 NZBRiC Business Outlook Survey Report
"Headline optimism has firmed compared to 2025, yet a closer reading of the data shows that beneath this confident surface, expectations on profitability, regulation and competitive pressure have softened. The market is viewed as harder to win in, but worth winning in."
The report also noted that moving into the second half of 2026, the geopolitical landscape remains unstable, characterised by escalating trade tensions, economic security concerns, and ongoing global conflicts.
"Despite these global headwinds, the New Zealand–China trade relationship has demonstrated remarkable stability under our long-standing Free Trade Agreement."
Bilateral trade climbed 10% compared to 2024 to top $40 billion, surpassing the previous record high set in 2022.
Trade Minister Todd McClay said he was cautiously optimistic about global trade tensions easing, describing recent high-level talks involving the US, China and Russia as a "positive sign" of more constructive engagement, although "a lot more work" is needed.
Speaking to the Herald in Shanghai last month, McClay said New Zealand remained concerned about United States tariffs, calling them "unwanted, unwarranted" and warning they push up costs for American consumers, though he expects further trade action, including a potential investigation into lamb imports.
He signalled tariffs could rise again, stressing "they don't fix problems" and fail to address underlying supply constraints.
Despite global uncertainty, McClay said the China relationship remained critical, describing it as "one of our most important" economic partnerships and noting it "continues to go from strength to strength".
His focus is maintaining a stable, rules-based relationship under the free trade agreement, arguing that both sides largely honour commitments, giving businesses confidence to invest and grow.
Duncan Bridgeman is the managing editor of NZME Business News, overseeing the Business Herald and BusinessDesk . His travel to Shanghai, China, was funded by the Asia New Zealand Foundation.
