Beijing-based David Mahon counsels NZ decisionmakers not to decouple from China because opportunities will emerge in ways they would never have done in steadier geopolitical times

By David Mahon*

The following is a Note to Clients by Mahon China Investment Management Ltd, Beijing, and is here with permission.

1.
Over the past year New Zealand companies in China have been watching Wellington grapple with its relationship with Beijing with disquiet and increasing alarm. A few influential politicians and bureaucrats appear to want to take the country back to a time of greater social and cultural certainty – one existing only in their selective imaginations. The prime minister and his key international interlocutors have been asking New Zealanders to accept the country needs to be closer to Washington and Canberra, implying New Zealand’s sovereignty is under threat from China. But the increased threat to peace in the region and New Zealand’s economic stability comes from Washington, not Beijing.

2.
As US economic and political influence wane in Asia and the Pacific, Washington is resorting increasingly to its military might to maintain its power. But might alone is no substitute for diplomacy, and despite the very slim chance of a confrontation over Taiwan, there are no immediate means by which the US may confront China militarily. And so it will invariably continue escalating its threat against China through tariffs, sanctions and media disinformation.

3.
New Zealand companies are right to worry that their country’s favoured and respected status is at risk and therefore their commercial endeavours may become even harder in China. The Chinese Government has made every effort to reinforce its relationship with Wellington, sending Premier Li Qiang and other ministers and senior officials to meet their counterparts in New Zealand this year. Perhaps fearful of upsetting Washington and Canberra, the New Zealand Government has not reciprocated with a foreign minister visit, despite the minister having visited dozens of other countries and some more than once. This is a diplomatic slight at best and has likely been taken as a direct political message by Beijing.

4.
Wellington has muted its hawkish pro-Washington, anti-Chinese rhetoric over the last month, and Sir John Key’s recent comprehensive reaffirmation of China’s commercial importance and New Zealand’s need to remain independent in its foreign policy may be having some limited traction in Wellington. His voice joins those of political elders Dame Helen Clark and Sir Don Brash, although the New Zealand media seems largely indifferent to the debate.

5.
Australia has learned that it may trade freely with China even while engaging in US military manoeuvres that are tacit rehearsals for war with China, so long as it does not condemn and threaten China publicly. New Zealand’s coalition government may believe it is similarly licenced as Canberra to collaborate in containing China while enjoying full trade privileges and diplomatic trust. But New Zealand does not have the economic or political agency of Australia, and the government would be mistaken to believe China would not consider taking punitive trade measures against it.

6.
It is in New Zealand’s interests to reassert its sovereign independence, or it will risk damaging its trade with China and losing the respect it enjoys regionally and internationally as an audacious, principled small nation. A country, like an individual, does not need to be powerful to cultivate mana (Māori: strength and integrity); it needs though to be principled, courageous and true to its own rational interests.

7.
Beijing seems keen to encourage New Zealand companies that they are welcome in the China market and will not be censured, despite their government’s rhetoric and actions, and the apparent xenophobia of New Zealand’s immigration policies that are frustrating Chinese business travel and tourism. These policies carry the distant echoes of the 1881 poll tax imposed on Chinese wishing to travel to New Zealand. Any move on the part of the New Zealand Government to increase the isolation of New Zealand’s society and economy risks impoverishing the nation, economically and culturally.

8.
It is positive that the Shanghai-based New Zealand Business Round Table, ostensibly New Zealand’s chamber of commerce in China, continues to speak out for common sense and balance in the relationship, and this may help forestall or even limit retaliation against New Zealand goods at the border. It does not take an order from Beijing against a nation’s goods for local customs and quarantine bureaucracy to erect non-tariff barriers. There are many zealous officials at Chinese ports who may take matters into their own hands and slow the passage of products by applying existing regulations more strictly. As a nation exporting many perishable or limited shelf-life products to China, New Zealand is particularly vulnerable.

9.
New Zealand companies based in China and trading with it are speaking up, but they need to speak louder and in greater unison to penetrate the echo-chambers of Wellington. The National Party prides itself on its affinity with the business sector, and the Labour Party strives to prove to a sceptical electorate that it understands business. Collective pressure on Wellington by companies that do business in or with China may catch enough attention from Members of Parliament to avert economic disaster.

10.
While New Zealand still enjoys a trade surplus with China, fewer New Zealand companies are exploring opportunities in the market, managing distributors actively or seeking domestic partnerships. This is not yet a crisis and reflects companies’ natural reticence when facing mixed consumer demand and lower confidence post the pandemic and deep geopolitical anxiety. But it is still a lost opportunity. As business leaders and their boards turn to once-respected economic commentary from the US and the UK on China’s economy, society and politics, they find a chorus of scepticism and condemnation. Bits of it are fair but most is misleading and much of it deliberately false. New Zealand and New Zealand companies should strive to stand outside the present east-west culture wars and deal with China objectively.

11.
The US is telling countries in Asia that it is acting in the region’s interests by opposing and containing China, to prevent Chinese domination. In reality, Washington is coercing Asian countries to align with its interests, which is to preserve its regional hegemony. Yet China’s Asian trading partners are not constraining exports to and investments in China, because they understand that it is in their interests to maintain a positive relationship with China. On the contrary, the more the US and the West isolate China, the more they will drive deeper relationships to form between China and nations in Asia and the Global South.

12.
According to Bloomberg, China will account for 21% of global economic growth over the next five years, larger than the share of all G-7 countries combined. Some in New Zealand assert that Wellington need not take sides in the US - China struggle. This is true, but New Zealand can and should decide where its current and future commercial interests lie and acknowledge it is already largely an Asia Pacific economy.

13.
Throughout this year the Western commentariat has pushed views that the Chinese era of growth and stability is over, that some degree of collapse is imminent, or that China is at least in for a long recession. China is indeed a patchwork of stagnation and recovery, but both the macro numbers and grassroots evidence show a largely positive trend. Beijing triggered many of the country’s immediate problems, such as the steep downturn in real estate. This was an attempt to avert greater instability and possibly a destructive collapse of the property bubble over the next few years. Stimulus packages initiated by Beijing in recent months will create positive momentum in the economy and be catalysts for the recovery of corporate and consumer confidence by the second quarter of 2025.

14.
Demand will recover for New Zealand protein and fibre exports, and Chinese manufacturing sectors are keen for investments of technological innovation and knowhow. Recovery will not be swift, but as some Western nations try to decouple their economies from China’s, opportunities for New Zealand companies will increase in ways they would never have done under steadier geopolitical times.

*David Mahon was also a guest on an episode of our Of Interest podcast. You can listen here.

*David Mahon is the Executive Chairman of Beijing-based Mahon China Investment Management Limited, which was founded in 1985. This Note is here with permission.