New Zealand’s Gallagher Group is pulling out of Chinese manufacturing to bring investment back to New Zealand and is actively building new relationships with Five Eyes members. New Zealand academics have staged a mass protest, urging companies to strengthen rather than withdraw from their partnership with China, warning that the move is akin to a dictatorship.
In light of concerns about national security threats, the Gallagher Group has decided to stand its ground against Chinese human rights abuses in Xinjiang, and has brought manufacturing back to New Zealand from China in response to accusations that well-known brands such as Nike have rejected Xinjiang cotton. Anna Earl, a management lecturer at the University of Canterbury, condemned the move. She said companies should work together to improve the environment in emerging economies, rather than opt for a hard exit.
“New Zealand, being a first world country, can’t simply say it’s going to cease operations, which would jeopardize all of our production in the Chinese market,” Earle explained. There are problems of international relations, geopolitical relations and international trade among them. If we stop doing everything, that will be a coercive mechanism to respond to the problem, but it doesn’t mean that it will be a positive change for the market.”
She went on to criticize the Gallagher Group’s new move, saying that if it chose to stop operating in China altogether, it would set an example for other smaller companies. She stresses that this is a very autocratic model of trying to show other markets or partners that you want to stop, and nothing more. “I strongly disagree that New Zealand companies should stop doing business in China,” she said.
Kahl Betham, the chief executive of the Gallagher Group, said at the Technology Forum in Hamilton that the company’s decision not to base its manufacturing in China would help it sign new contracts with members of the Five Eyes alliance that share intelligence data. He also singled out the company’s deliberate investment in unmanned automation as a way to bring back uncompetitive manufacturing from China.
Siah Hwee Ang, professor of international business and strategy at the University of Victoria, said: “For many New Zealand companies, moving manufacturing back to New Zealand will force them to raise the price of their goods, thus limiting the market as we also lack manufacturing skills and scale in China.”
As to whether the Gallagher Group would have an impact, he also responded: “By moving away from China to appease the Five Eyes Alliance, there is a risk that New Zealand companies will be shut out. If you want to come back to the Chinese market in the future, I wish you the best of luck, because this will never come back to China.”
Alexander Gillespie, a law professor at the University of Waikato, has suggested that technology companies that choose to manufacture in China are likely to retreat out of fear that “backdoors” could be installed in their software or hardware to allow remote access by Chinese officials. “Companies must weigh the risks of manufacturing in China and bear in mind their social responsibilities, especially on issues like human rights, which may cause a backlash among Western consumers,” he continued.
While security threats are something New Zealand companies need to be aware of and consider, halting and disrupting production in the Chinese market should not be an option, said Canterbury University management lecturer John Earle. She suggests that New Zealand should start thinking comfortably about sharing data, but not all data can be shared depending on the company and the data it produces.
Mr. Earle says companies should first do their homework on the markets they are focusing on and understand what the problems are. They should be rooted in the local market, deeply aware of how the market operates, fully integrated into the market environment, and set clear standards for the company. She concluded: “If we want to change the status quo, if we want equality in the world, and try to change human rights in China or Russia or Africa, it certainly requires collective global action. You can actually lead change, but you can also choose to set an example for other New Zealand businesses.”