Dealing with foreign property buyers, steel dumping allegations and disputes in the South China Sea - without upsetting the Chinese dragon

Dealing with foreign property buyers, steel dumping allegations and disputes in the South China Sea - without upsetting the Chinese dragon
Image sourced from Flickr

One of the world’s most regarded experts on Asia-Pacific relations has issued a stark warning New Zealand can’t put all its eggs in the China basket.

A professor of Asia-Pacific Strategic Studies at Australia National University, Bates Gill, says: “China’s increasingly in a position to inflict economic punishment on its trade partners if it wants.”

New Zealand isn’t immune from this, so we need to diversify our trade strategy, while being smarter about the way we engage with China.

Zespri trade war speculation highlights risks of dependency on China

Gill’s comments follow speculation of China waging a trade war on New Zealand through Zespri.

Zespri on August 5 halted its trade to China for two weeks, due to Chinese concerns over a fungus on its kiwifruit. The fungus had been present for years and doesn’t pose any health risks.  

The move raised eyebrows as it followed a Chinese trade association warning Zespri there could be consequences if New Zealand investigated allegations of Chinese steel dumping.

Yet the Government swatted away speculation China was waging a trade war, saying we shouldn’t join the dots between the trade halt and warning over steel dumping allegations.

Whether these events are related or not, Gill says the “larger takeaway” is that “China is in a position to take action like this if it wants to”.

“What this obviously has done then, I hope, is reinforce in the minds of New Zealand citizens that we all are in a risky situation.

“Maybe we weigh up the risk, weigh up the opportunity, and decide to go forward anyway.

“Maybe the silver lining coming out of this episode is that it could refocus strategic thinking a bit in New Zealand and elsewhere about the risks that are involved in becoming overly dependent [on China].”

China puts emphasis on hard power over soft power

More broadly speaking, Gill says: “We can certainly expect Beijing to continue to increasingly exercise its hard and soft power. Why wouldn’t it? It’s becoming a larger, more powerful, wealthier, more capable, great power.

“I would expect Beijing to put greatest emphasis on economic hard power. That’s really where it has a lot of advantages.

“And at the same time, work to develop a more effective range of soft power assets - get smarter at how to portray China, how to seek and gain influence. I suspect we’ll see more in the way of trying to do this through the Chinese diaspora communities outside of China.”

Targeting Chinese in property debate could be damaging   

Asked how damaging the seemingly growing discontent over the flow of Chinese money into New Zealand - largely through the property market - is, when China is putting such an emphasis on economic hard power, Gill says it’s important we don’t single out the Chinese among other factors inflaming the property market.

“The problem is that you may end up in a place where they [the Chinese] become the target… That would be a bad thing, because obviously it’s unfair and ultimately it could undermine the confidence China would have about its relationship with New Zealand.

“It would not be a difficult matter for the Chinese leadership - if they believe they need to take some sort of punitive action or if they are offended by the choices New Zealanders are taking about how they deal with Chinese money - to discourage for example tourism or to discourage Chinese students by painting New Zealand as an unfriendly place.

“It wouldn’t be hard for them to flip some switches in ways that could be quite damaging.”

Gill maintains measures like a tax on foreign property buyers, won’t affect New Zealand’s relationship with China, provided any policy change isn’t perceived to be directed at China.

China ditches ‘Hide your strength, bide your time’ approach

Speaking at a New Zealand Institute of International Affairs event at Auckland University on Monday, Gill provided a bit of context around China’s position on the world stage.

As China was rising to power at the end of the 20th century, he says it took its leader, Deng Xiaoping’s approach of "Hide your strength, bide your time".

Between 1997 and 2007 it largely focussed on maintaining peaceful international relations to stay focussed on its development internally.

Since then it’s changed tack.

“With bursting economic and military assets, China seems to be increasingly willing and able to exercise hard power in support of its national interests, even if there’s a risk of potentially disrupting what’s been a largely stable external environment,” Gill says.

Conflict in the South China Sea is a good example of this.

Australia under pressure

An international tribunal at The Hague in July overwhelming backed the Philippines in its dispute with China over territorial claim in the South China Sea.  

Chinese President Xi Jinping said his country’s “territorial sovereignty and marine rights” would not be affected by the ruling, before Australia, Japan and the US released a statement reiterating the “importance of upholding the rules-based maritime order”.

The state-owned Chinese newspaper, Global Times, then went on to publish a scathing editorial targeting Australia. It said: “China must take revenge and let it know it's wrong. Australia's power means nothing compared to the security of China. If Australia steps into the South China Sea waters, it will be an ideal target for China to warn and strike.

“Australia is not even a "paper tiger," it's only a "paper cat" at best.”

In another expression of Chinese economic hard power, President Xi on Sunday told G20 world leaders the global economy is being threatened by rising protectionism.

He told Australian Prime Minister Malcolm Turnbull he hoped Australia would continue to provide a fair, transparent and predictable policy environment for foreign investors.

This followed Australia blocking the A$10 billion sale of the country's biggest energy grid, Ausgrid, to Chinese bidders last month.

Risk China will overplay its hard and soft power hand

Gill concludes: “I think there is a risk China will overplay its hard and soft power hand. This is especially true as a more nationalist and even xenophobic messaging seems to be coming out of Chinese media and other propaganda organs of the Chinese Communist Party.

“This pushes both official and public attitudes into more strident directions that could result in inadvertent military confrontations and clashes in disputed waters between China and other claimants.

“Or it could lead to a more precipitate decision in Beijing… to impose economic costs on countries, in retaliation to perceived offences.”

Gill says: “We need to recognise our generally limited ability on our own to shape China’s use of hard and soft power.”

He suggests New Zealand diversifies its “economic, diplomatic and security engagement, not only with the US, but with a whole range of global and regional partners”.

“This does not mean shunning or containing China, which is not possible in any event. New Zealand and all of us must be smarter with engaging China.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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27 Comments

13
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You might have thought that New Zealand had learned a lesson about "putting all your eggs in one basket" from the UK joining the EEC, way back when.

Diversification mightn't make you rich, but it can stop you getting poor. Perhaps.

18
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Courtsey John Key we are on the way to become China Colony.

15
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John Key will deny and will come up with manipulative data to Lie.

By now everyone knows this is John Key response for everything - Legacy.

19
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Yesterday on news heard they mentioning that one million mark is a black spot on John Key Government and today morning on Paul Henry, housing minister Nick Smith says that one million dollar mark is positive and sign of prosperity.

How opposite and far away national government is from reality can be judged from this.

Would like to hear from the experts in interest.co.nz , is touching a million dollar mark a black spot or positive and a sign of proaperity.

15
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Reena one doees not need to be an expert. It is a crisis and black spot for Kiwi AND positive prosperity for Chinese and if positive for masters than definitely positive for Chon Kee and his gang.

Seriously it is a concern of chinese dominancy over national government. Shame.

15
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Lots of Chinese immigrants came to New Zealand to get away from corrupt government and institutions. They must be gutted now.

lol classic!

Surely depends which side are you at

What's lil ol Nz got to fear?
The hard roaring dragons head or the soft centipede body spreading its feet wide and far?

Hot off the press from the BBC: New Zealand tops global list for house price rises
http://www.bbc.com/news/business-37293588

Quote from article: Price rises in these cities have been driven not just by domestic demand but overseas interest from Asia, especially China!

Question is: Will John Key still try to pretend that only 3% of Auckland's property investors are overseas?

Yes. Last time he was in the media he was calling it 1%.

Whats 1% or 3% when you have the type of character that thinks its OK to pull children & adult pony tails ?
Key should have remained in NYC with Weiner, that world would be more appropriate for his type of weird behaviour.
YET he remains PM of NZ so what does that tell you about the NZ public ?
Where are the people with the guts to demand Key is removed as Prime Minister ?

unfortunately theyre too busy collecting their pensions, buying more rentals and making hard calls about soft furnishings

CJ099 leave it to our PM to deny manipulate and lie the BBC.

Interesting how someone can repeat supply supply like a broken record and no medià in NZ grills him for that ànd it is this failure on the part of nz media that allows him to lie and manipulate.

When Chinese property is only purchased on a 70 year leasehold it makes property investment in NZ and other Anglo-Saxon property ownership structured countries a no brainer investment.
I doubt many of the overseas investors(Chinese or not) have any medium term plans to sell as it is a safe haven asset for when the world blows up. More questionable is the student Visa racket.

Incidentally quite a few wealthy Europeans still seem keen on moving out here despite cost of living etc.

Why would they move, don't see any good reason for doing so. Cost of leaving in EU is lower than in NZ, services and goods are generally better, let alone the number of places to live and visit. Job market is huge, apart from a few countries.

Yes it's more likely that Europeans will want to leave NZ rather than face the prospect of being owned by China in the future, which is becoming more of a reality whilst National remain in power.

12
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He is right we have been very foolish allowing ourselves to become so dependant on a single country. Even more so when it is such a large totalitarian state that treats even it's own citizens so poorly and has a culture that is totally devoid of any moral scruples. President Xi Jinping is now revealing their true nature and we have much to fear. Without giving too much offence, we should be tip toeing away from them and doing everything we can to find alternative markets for our products even if they are not quite so lucrative.
Incidentally has anyone heard what is happening to the complaints of steel dumping by our NZ companies, or have these been buried by the government in favour of the threats from China that "aren't retaliation."
Having said all that we cannot single out any one country for restrictions on property ownership. They would be fully justified in taking offence, besides which other countries are also very large owners of our property.

Could not agree more and have always seen the whole thing with China as being nothing to do with its people and all to do with its regime.

I prefer Chinese foreign policy to the USA.

Faux communism appeal does it?

Where would you rather live, China or the USA?

USA
Any day.
It is called freedom.

The extent to which Chong Kee and Co are willing to go to throw Kiwi industry and Kiwi workers under a bus is alarming. Beijing must be well pleased with their efforts, effectively they have removed our anti dumping legislation. It's open slather, wild west stuff but, you know, doesn't even surprise me anymore. In this mornings Herald:

Exacerbating matters, as part of an effort to stimulate cheaper prices for the Christchurch rebuild, the NZ Government opened the floodgates by suspending dumping penalties for three years, ordinarily one of the key remedies available to combat dumping.
The current bill goes even further by making it potentially much harder for New Zealand businesses to gain remedies by the inclusion of a uniquely defined Public Interest test (so that in the cases where it is deemed to be of "Public Interest" dumped goods may be allowed) which is unlike any other adopted by our comparable neighbours such as Canada, US or the EU. Importantly, Australia, our closest trading partner, has twice rejected the need for a Public Interest test.

It seems absurd now, that the anti-dumping bill would make it harder for NZ industry to secure trade remedies at a time when a glut of cheap products is being dumped on world markets.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1170...

Hmmmm sounds like NZ Steel is being lined up for something.......
Also heard something in passing yesterday about legislation coming up for when land is taken under the Public Works Act. If said land is subsequently not required, the previous owners would not be offered first refusal to repurchase.
In light of our fresh ranking in the scale of corruption this is adding the finishing touches to a larger picture in my mind.....

Isn't the NZ steel works at Glenbrook owned by China?

Bluescope- Australian company.