Finance Minister Bill English has welcomed the move by Chinese authorities to allow their currency, the yuan, to trade in a wider band, saying any extra flexibility would likely help New Zealand exporters.
Meanwhile, English also said Chinese authorities understood concerns in New Zealand about foreign ownership of land, were sensitive to those concerns, and wanted to see them resolved.
He was speaking to media in Parliament Buildings after hosting the fourth-ranked Chinese leader, Jia Qinglin, and a delegation for discussions on trade and investment between New Zealand and China, marking 40 years of diplomatic relations betwen the two countries.
'Yuan move good for us'
The Peoples' Bank of China last night (NZ time) doubled the yuan's trading band against the US dollar, saying it would be allowed to trade 1% above and below a daily-set reference exchange rate, up from 0.5% previously. The move would allow the yuan to be traded more, and indicates Chinese authorities may be more inclined to letting their currency appreciate.
The New Zealand dollar is thought by many to be overvalued as major economies take moves to manipulate their currencies downward.
Actions by the US Federal Reserve to engage in quantitative easing - effectively printing money - have seen the US dollar devalue, with the New Zealand dollar hitting a record high over 88 US cents last August. Chinese authorities intervene in markets to keep the yuan artificially low.
Any extra flexibility for the Chinese exchange rate was positive from New Zealand's point of view.
New Zealand was caught between the US taking actions to keep their currency low, which made New Zealand exports to the US less profitable, and the Chinese government also not allowing their currency to rise, which meant New Zealand could not be as competitive in China as it could be, English said.
"So if either of them change their policies to give more flexibility and allow their currencies to move in the way that we expect they will move, that will benefit New Zealand," he said.
Investment deal
English this afternoon met with Jia to discuss the trade and investment relationships between New Zealand and China.
The visit included the signing of an agreement between the two countries' trade organisations, New Zealand Trade and Enterprise and China's Investment Promotion Agency, for the two to share information about investment regulations and cooperate on targeted investment promotion.
English told media in Parliament buildings the talks between him and Jia did not include discussion about the controversial Crafar Farms sale.
A Chinese company, Shanghai Pengxin, is seeking to buy the 16 farms which were tipped into receivership in 2009. Initial approval from the Overseas Investment Office for Pengxin's purchase was overturned earlier this year by the High Court, after a rival bidder challenged the OIO's decisions when processing Pengxin's application.
A revised decision from the OIO has been handed to the government ministers responsible for approving sensitive land sales. They are expected to announce their decision by the end of the month, and have sought their own legal advice on whether the OIO this time interpreted the Overseas Investment Act correctly in making their recommendation.
The Green Party has suggested that Jia's visit was putting pressure on the Government to approve the sale, after he wrote an op-ed in the New Zealand Herald on the investment relationship between New Zealand and China, after 40 years of diplomatic relations.
In the op-ed, Qinglin said China welcomed New Zealand companies to invest in China and would continue to provide them with a sound investment environment.
"China also encourages capable and credible Chinese companies to invest in New Zealand," he said.
"We hope New Zealand will provide them with an enabling policy environment and facilitate Chinese investment so as to scale up two-way investment and achieve all-round and balanced growth in our business ties."
'Broad discussions'
Asked whether the Crafar Farms sale was raised during talks with Jia, English replied, “not directly.”
“There was a discussion about how much the trade has increased, and how that is backed up by China welcoming New Zealand investment in China, and New Zealand welcoming Chinese investment in New Zealand,” he said.
The Greens’ call that Jia might be looking to influence the government’s decision on the sale was a “conspiracy.”
“I think the Chinese government, in our experience, know that any country where the Chinese are going to invest usually has some debate about it, and we have an objectively neutral system for assessing those investments. We’re accountable to the people of New Zealand for applying the law of the New Zealand Parliament. There’s really no question of stand-over tactics,” English said.
Discussions covered the strength of the relationship between China and New Zealand, went over the different agreements currently in place and focussed on achieving the goal of hitting NZ$20 billion of bilateral trade between the two countries by 2015.
The Chinese government focussed on ongoing benefits of greater tourism, growth in international education, trade growth and cooperation internationally.
“We’re looking to work with the Chinese in the Pacific where we spend a considerable amount of aid money. They’re spending quite a bit of money [there], and it would be a good idea if we worked together on it,” English said.
'They understand'
The Chinese delegation did not raise issues relating to New Zealand attitudes towards foreign investment.
“And nor would we expect them to. In the discussions that we do have around investment, we find that the Chinese government understands those concerns, not just in New Zealand but when they go to Australia or Africa or any other country," English said.
“They want to be perceived as sensitive to those concerns and want to see them resolved. So we’ve found them in the past amid these discussions sensitive to public opinion in New Zealand, and cooperative about how those might be resolved," he said.
“We have to always state our obligation to deal with any investment propositions according to the legislation that Parliament’s laid out, and according to the courts and the decisions they’ve made, including the recent one around the Crafar Farms [sale].”
'We're not concerned'
On the High Court’s Crafar decision, English said the government was not overly concerned by the case.
“New Zealand is increasingly seen, including in Australia, as in pretty good shape and a good place to invest, partly because of our stability, partly because of our economic prospects, partly because we’re becoming steadily more competitive," he said.
“Those sort of factors in the long-run are much more important than a court decision, or even an individual investment decision.”
4 Comments
It is infuriating that we apparently make ourselves totally dependent on what the US, China, and no doubt others do; when our own destiny in terms of our exchange rate is entirely within our own control. If we need our exchange rate to reduce- and I argue we desperately do, even Bill English seems to acknowledge it by saying the Yuan appreciation is a good thing, then the solutions are simple. Bill, your job title is Minister of Finance, your job description includes fixing this, and it is both easy and within your grasp to do it. Fix the charter of the Reserve Bank and we are away. You can do it. Be a little brave or imaginative. All the other major countries have shown the way. (Mostly by printing money, and not by having foreigners finance their deficits- which only guarantees more deficits in our case) Don't pretend we have to wait for the Chinese. Or Australia. Or the US. Or Europe. It can be hard to keep a currency up if the world wants it to go down. But it's incredibly simple to get it to go down, and it would fix the need for asset sales; your deficit, and many other issues.
SL,
You put a lot of faith in the ability of BE. His title does not mean a lot when tunnel vision predominates.
QE or its equivalent in major economies has only resulted in the NZD not falling in line with them. When he had the chance to print $300m a week he decided to mortgage all of us to the Chinese instead.
NO vision. NO ideas. NO hope.
Dying to get money and people out ..
From above "In the op-ed, Qinglin said China welcomed New Zealand companies to invest in China and would continue to provide them with a sound investment environment". - while the locals head for the exits ......
BEIJING — Neil Heywood, the British businessman at the center of a scandal involving the former Chinese Politburo member Bo Xilai, allegedly transferred large sums of money overseas illicitly for Mr. Bo’s family before his death in November
http://www.nytimes.com/2012/04/17/world/asia/fund-transfer-cited-in-inq…
Hong Kong plans to ban the women of mainland China from giving birth in the territory, its chief executive said Monday, the latest sign of tension between the metropolis and the rest of the Asian nation.
http://latimesblogs.latimes.com/world_now/2012/04/chinese-mainland-moms…
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