Siah Hwee Ang says a change in mindset will be required to manage NZ-China ties beyond the celebration of the 45-year relationship so far, and into the next five years

By Siah Hwee Ang*

New Zealand scored many firsts with its free trade agreement with China in 2008.

The country was also a founding member of the Asian Infrastructure Investment Bank (AIIB), a funding mechanism proposed by China back in 2015.

Earlier this year, it also become the first Western country to sign a memorandum of understanding with China on collaboration around the One Belt One Road (OBOR) Initiative.

From both political and economic standpoints, these are good indicators that the New Zealand-China relationship is growing from strength to strength.

And with the rising presence of China in the global economy, this healthy picture bodes well for New Zealand.

But it will require a change in mindset to manage ties beyond the celebration of the 45-year relationship so far, and into the next five years after China’s 19th CPC National Congress.

When New Zealand signed its free trade agreement with China in 2008, China was a US$4.6 trillion economy.

China’s economy is likely to hit US$11.8 trillion this year.

That growth in 9 years - US$7.2 trillion - is equivalent to the sum of the economic sizes of Japan and the UK or the sum of those of Germany, France and Australia in current dollar value.

New Zealand has not grown at the equivalent rate in the same period.

New Zealand product exports to China in 2016 stood at US$6.59 billion, a more than three-fold rise from 2008 figures of US$1.81 billion. Service exports to China ran at US$1.90 billion in 2015, again three times the 2008 value. So, there’s a strong and steady rise in exports to China.

China’s importance for New Zealand’s exports has also stabilized at just below 20 per cent of its total exports, both in product and services.

None of these figures reflects the reality that with China’s rise in the global economy, there is always a risk that New Zealand may become a less important (economic) player to the second largest economy in the world.

The fact of the matter is that New Zealand’s product exports constituted only 0.42 per cent of China’s product imports in 2016. And its service exports weighed in at 0.44 per cent of China’s service imports in 2015.

While these figures are unlikely to get much lower, it is less of a reflection of New Zealand’s sustained trade with China, but rather of China’s movement into more investment-type relationships across the globe.

Unlike when the AIIB and the OBOR were first introduced a few years ago, China is becoming more assertive in its role in the global economy.

Fair enough, considering it contributed to one-third of annual world economic growth in recent years.

It has become a leader of the emerging economies group of nations, and plays a more significant role in world finance.

Managing ties with China beyond 2017 will involve recognizing this major contextual change in the last few years.

It also means understanding China’s wants and needs and aligning them with what New Zealand needs and can provide.

While we are still hearing bits and pieces of news relating to China’s 19th CPC National Congress which occurred in October this year, major changes are on the horizon in the next five years.

China’s stand on being recognised as a market economy continues to take centre stage in its trade strategies.

Can and should New Zealand be a part of that conversation?

More government intervention in its business environment is an overlapping element.

That can create some uncertainties for foreign businesses in China. But unfortunately compliance may be the only ticket to the market.

Is this something New Zealand businesses are able to live with?

More alertness around what the CPC does can be useful for dealing with this market uncertainty.

With focuses on reforms, and also on poverty reduction and sustainability issues, our understanding of the Chinese market will continue to remain in flux.

But who can claim to have really understood the Chinese market in the last 45 years anyway?

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*Siah Hwee Ang is the BNZ chair in business in Asia and also chairs the enabling our Asia-Pacific trading nation distinctiveness theme at Victoria University. You can contact him here.

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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18 Comments

Perhaps a way of gaining closer ties would be to do away with the Warriors and adopt this traditional spectator sport:

https://www.theguardian.com/world/2017/dec/18/thousands-china-watch-exec...

Or we could skin our livestock the traditional way:
https://www.google.co.nz/search?q=china+dragging+dogs&source=lnms&tbm=isch

The global environmental impact of the One Belt One Road initiative:
https://theconversation.com/chinas-growing-footprint-on-the-globe-threat...

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It's no secret what China wants; the entire supply chain under it's belt. Kiwis will just be some dumb second class citizens. No nice fruit, tender meat or straight timber for kiwis, they get the scraps. This isn't much of a negotiation. The Chinese media here are under the thumb of the CCP. They even had have a spy in the National Party. The only way NZ can cope with our rubbish productivity is to ship off property titles.

Setup business in China? Forget about it. Any business with IP setting up in China should be worried. Look at what happened to the car manufacturers. China drove them out of business and took over the factories.

'had'? Has he resigned? Or even been reported saying something negative about the Communist Party of China? Or even suggested public executions in sports grounds (as reported above) may be unsavoury?

He has been busy lobbying to get Chinese personnel into the SIS.
The naivety of NZ.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11962652

Is this guy still in parliament?

Why celebrate? Do we celebrate the date we started trading with Australia or USA or Japan?

What to celebrate - very debateably NZ has contributed to making China massively more wealthy but China has had no effect on NZ where productivity and GPD per capita remain flat. But with 20% of NZ trade China can whenever it wants crash the NZ economy using the tactics it recently has with South Korea. Whereas with less than 0.5% of Chinese trade even if a dictator took over NZ and froze all trade with China I doubt they would even notice.

China economy has been massively improved but from a very low base. However it is still only half as wealthy per capita as NZ or Hong Kong, Japan, Taiwan. So Chinese flood into NZ as immigrants whereas there is no demand to go the other way (even if it was permitted).
If China maintains its growth rates then in a decade the average Chinese would be as well off as the average Kiwi - maybe even with a welfare state and pensions. The question is a big if - Russia after the Tzars created an industrial country with a mighty army but after 45 years of success they then found they just could not catch up with the west because their centralised non-democratic rule with heavy censorship was too much of a burden to build a world-class economy. Maybe it will be the same with China?

"If China maintains its growth rates then in a decade the average Chinese would be as well off as the average Kiwi.."

Cant possibly happen. There simply isn't the (energy) resources available anywhere to realise this growth in consumption. At the moment pitiful world growth is based on unsustainable leverage growth, not real growth.

The question is a big if - Russia after the Tzars created an industrial country with a mighty army but after 45 years of success they then found they just could not catch up with the west because their centralised non-democratic rule with heavy censorship was too much of a burden to build a world-class economy.

Hmmmm....

Russia has a full-service space industry which has the only other operating global satellite navigation system, the only taxi service to the ISS, much of which it built, and, apparently, the only rocket motors good enough for US military satellites. Neither Canada nor Germany, let alone Spain, does. It has an across the board sophisticated military industry which may be the world leader in electronic warfare, air defence systems, silent submarines and armoured vehicles. Canada, Germany, Spain do not. It builds and maintains a fleet of SSBNs – some of the most complicated machinery that exists. Ditto. It has a developed nuclear power industry with a wide range of products. Ditto. Its aviation industry makes everything from competitive fighter planes through innovative helicopters to passenger aircraft. Ditto. It has a full automotive industry ranging from some of the world’s most powerful heavy trucks to ordinary passenger cars. It has all the engineering and technical capacity necessary to build complex bridges, dams, roads, railways, subway stations, power stations, hospitals and everything else. It is a major and growing food producer and is probably self-sufficient in food today.... Read more

The Chinese track record of building dams and bridges at home isn't exactly what i would call healthy.

Your point is? Much of the technology you list was developed under communist rule. Since then they have had interesting times in Russia but I agree they certainly have the potential to be a major food exporter (with global warming actually in their favour).
Not sure why you are comparing Russia with Canada which has a tenth of the population.
I'd sum up your and my posts with "big countries can do great things that small countries can't but small countries are better to live in".

If you do not know China's history and do not understand China's culture, you will never be able to understand China.

Ppl seeing China through a pair of Western-centrism lens and reading China with cold-war mentality in mind, will fail to predict China over and over again.

We can't even predict our own elections . Knowing everything about any place is impossible; you seem to be reserving the privilege of criticising China to those who agree with you.

Sometimes you need distance to see the big picture (can't see the wood for the trees as they say). For example the politicians couldn't see women voting as of any importance (in the UK they were too busy arguing about the rights of Catholics and Irish home rule) but a few observers not active in politics were discussing the issue decades earlier.

Admittedly in general the more you know the better.

Wild Swans, or Ppl seeing China through a pair of Chinese lens and being left with disgust. China is never one body, it's history has never been one direction. In the mires of death they may have come upon an economic gem but to be honest if even the government cannot let the people speak because of fear of what they might say it is not a government built on strength. No wonder so many are pulling their money out of the country. It's future is as clear as the Yangtze and about as clean.

I am all in favour of as much trade with China as is beneficial to both parties but not at any price.

China is not a market economy, it is a command economy without the rule of law as we understand it, run by communist despots who are very manipulative.

China is certainly not a market economy. It is no longer ‘open’ to the world now under President Xi’s new shift.
NZ does not share its general values, NZ does not agree with its human rights values or record, and NZ companies and universities and Govt depts should open their eyes to the fact that all the IP and supply chain will be dominated by China in any deal. Collaboration between NZ & Chinese companies can be overridden at anytime by their Govt.
Meanwhile NZ is giving it all away - have a walk around the plane next time you fly to Shanghai - dozens of NZ local body politicians, NZ Govt politicians, University marketers, corporate reps about to give/sell IP away, etc.
Does NZ really know how the ethics of this trading partner will affect NZ in future?