Geopolitics is a tricky business.
In early May, the Global Times, the Chinese Communist Party’s English-language mouthpiece, spoke of “warming ties” between New Zealand and China. It said that New Zealand was “charting a very positive and clear path" with China “which could result in major gains for New Zealand products and services in the Chinese market”. The health, dairy, meat, and horticulture sectors were specifically identified as potential winners.
Kiwi exporters must have been excited at the prospect.
However, before the month was over New Zealand went down a different path when it issued a joint statement with Australia expressing “grave concerns” about human rights in Xin Jiang and Hong Kong. Beijing responded that these were “irresponsible remarks” that “grossly interfered in China’s internal affairs and seriously violated the international law and basic norms governing international relations”.
There was more trouble last week when New Zealand government officials were summoned to the Chinese embassy in Wellington for a dressing down. New Zealand, along with many of its allies, had accused China of carrying out “malicious cyber activity”.
Some exporters will have watched the latest developments with a growing sense of dread.
As NZ China Council chairman Sir Don McKinnon put it “Once you reach a stage where you feel you have to criticize China publicly … well that escalates it to a new level and you’ve got to be prepared for the consequences of that”.
In case there was any doubt about those consequences, McKinnon pointed out that “trade with China means money in people’s pockets in New Zealand from one end of the country to the other”.
A lot of money. China is New Zealand’s largest export market - $19.4 billion in the year to 30 June 2020. It is also the second largest foreign investor in New Zealand.
The obvious fear is that China will use its trading and investment power to punish New Zealand for causing offence. Is that fear justified?
Well of course we have seen this movie before. In fact, it is playing right now across the Tasman. Australia, more than any other Western country, is currently on the receiving end of China’s wrath. The Middle Kingdom seems determined to make an example of the land down under.
Tensions between the two countries have soured over several years. The Australian actions that have riled China include banning the Chinese company Huawei participating in Australia’s 5G market, raiding Chinese journalists, blocking Chinese investments, and criticising China for its treatment of the Uighurs and the people of Hong Kong and for its military expansion in the South China Sea. Added to that is what China sees as Australia’s constant toadying to the US.
The relationship went from bad to worse last year when the Australian Prime Minister, Scott Morrison, led the world in calling for an international investigation of the source of Covid-19.
China’s response was swift. Within a matter of weeks, it imposed an 80% tariff on imports of Australian barley. Various restrictions quickly followed on a wide range of Australian exports to China including wine, beef, lobster, cotton, coal, copper, sugar, and timber.
Initially Beijing justified some of its actions on the grounds that Australia was engaging in dumping or that the relevant products were substandard. More recently the true motivation, namely to punish Australia for its perceived anti-China behaviour, has become unmistakable.
In July a spokesman for China’s Ministry of Foreign Affairs was asked about the drop in Australia’s share of Chinese agricultural imports. His reply could not have been clearer -
“We will not allow any country to reap benefits from doing business with China while groundlessly accusing and smearing China and undermining China’s core interests based on ideology”.
The result has been devastating for some Australian exporters. For example, wine exports in the March quarter collapsed from $325 million in 2020 to just $12 million in 2021. Exports of beef in the year to 31 March 2021 were down by 36% on the previous year.
The Lowy Institute, an Australian think tank, has done an analysis of the Chinese sanctions. It calculates that the goods targeted by China generated approximately $25 billion for Australian exporters in 2019. In the three months to January 2021 exports of those same goods were running at an annual equivalent of just $5 billion.
However, it’s not all bad news. The Lowy Institute estimates that trade diversion has seen most of the losses from the China trade recovered in other markets.
Even with the sanctions in place, Australian exports of other goods to China are robust as illustrated in the following graph of monthly exports in 2021.
This is primarily a story of iron ore, the one Australian product China can’t afford to boycott. China currently accounts for 75% of the world’s iron ore imports and Australia supplies more than half the world’s iron ore exports. China is trying to develop new sources of iron ore in Cameroon and the Republic of Congo. Until it either does that or reduces its demand for iron ore, it has no choice but to deal with Australia.
The lucky country is lucky that, for the moment at least, China’s economic needs trump its foreign policy objectives.
One unknown factor at this point is the future of Australia’s substantial service exports to China. The Covid-19 pandemic makes it impossible to assess the impact of Australia’s ‘China problem’ on its tourism and education sectors.
What about Chinese investment into Australia? A recent report from KPMG and the University of Sydney reveals that annual direct investment has been in decline since 2016. In 2020 it was at its lowest level since 2007.
Australia is still a preferred investment destination compared to many other countries. However, a majority of Chinese investors surveyed for the report indicated that “the political environment in 2020 has made Chinese companies more cautious to invest in Australia”, “the Chinese government was less supportive of investment in Australia than previously”, and “the Australian Federal Government was less supportive of Chinese investment in Australia than previously”.
This does not augur well for Chinese investment in Australia. However, that does not appear to be a major concern in Canberra. In fact, the Australian government has expressed concerns about the strategic risks of Chinese investors buying certain Australian assets.
In any event, Chinese investment in Australia is dwarfed by that of other countries.
What can New Zealand take from Australia’s experience?
While Beijing is very sensitive to criticism, it takes quite a catalogue of offences to trigger the kind of retribution meted out to Australia. New Zealand is probably still a long way from achieving Australia’s pariah status in Chinese eyes. And even the wolf warriors of Beijing would probably be reluctant to be seen to be bullying the internationally fêted Jacinda Ardern.
The position might change if New Zealand abandoned the ‘Belt and Road’ initiative.
In the event that New Zealand did have a major falling out with China and attracted economic retribution, the consequences would likely be more serious than those suffered by Australia. New Zealand has no export equivalent to iron ore. Dairy, meat, and timber are much less strategically significant to China’s economy.
New Zealand is also more reliant on Chinese investment than Australia.
The lessons are clear. China is crucial to New Zealand’s economic prosperity. The challenge for Wellington is balancing that reliance against New Zealand’s values and its relationships with its key allies. The only certainty is that meeting that challenge is going to become a lot more difficult.
Ross Stitt is a freelance writer and tax lawyer with a PhD in political science. He is a New Zealander based in Sydney. His articles are part of a new 'Understanding Australia' series.
51 Comments
Russia had a lucrative deal going with Germany in the 1930s & early WW2 supplying abundant raw material, especially for their war machine. Then came Barbarossa & Germany happily fired it all back at them. Moral of the story play with the bellicose neighbour if you like, but at your peril.
I think what some political factions want is not for us to lose our soul but to sell it to the Chinese -
Key accepted China had serious human rights issues but didn't think that should hinder strong economic relations between the countries.
Key's definition of strong ties probably includes the powerful 'ally' committing state-sponsored acts of cyber terrorism on the weaker one.
The satellite photos of prison camps are forgeries? The Chinese local govt accounts showing massive increase in purchases of barbwire and security equipment are forgeries? The Chinese accounts showing dramatic increases in employment of police and security officials but no extra expenditure on teachers for their re-education camps? As you have pointed out I've never been to China so I don't have any personal knowledge but while China censors media and social media and while it prevents free access for journalists to Xinjiang province I'll stay very suspicious.
My Chinese friend from Hong Kong is far more vehemently anti Chinese govt than I am. Most troubling is how many Chinese Kiwis are nervous of expressing any opinion.
the US destroyed Iraq based on one tube of washing powder claimed to be the WMD.
the invasion of Iraq was because Saddam would not trade oil in the US dollar.
stiring up forged human rights is one of many dirty tricks played by the US to interfere and destroy which ever countries that do not line up with its selfish interests.
for NZ 's benefits, do not be one of the US's collateral damages against China.
You have got to look at the big picture not the media fed spin. Americans have shot each other at a rate that a decade total would be more than all the Uighurs in prison. I don't think that you could even begin to add up the numbers killed by the USA in foreign wars. Just because they speak the same language don't automatically think they are the "Good Guys". The USA are now engaging in a deliberate campaign to discredit China in every possible way they can. I'm not saying China is perfect but perhaps look in your own backyard first. Far to much interference from the USA, look at Afganistan another waste of 20 years trying to "Control" other countries. Better to let countries sort out their own domestic issues instead of invading them.
The numbers killed by the USA in foreign wars could be nothing compared to the lives perished under the People's Republic till they started working with the West. Xi is taking the second-biggest economy back to the Authoritarian path rapidly. It is alarming, and people should not underestimate the consequences. Most of the famous 20th-century dictators started as good people. By the way, CCP complained about America's withdrawal from Afganistan because they had benefited from ISAF's effort to stabilise Afganistan for so long.
You mean the Wuhan lab run by Americans ? You never going to get to the bottom of the actual origin of Covid-19, to many skeletons in everyone's closet for that to happen. The blame game is a pointless exercise unless this was enhanced in a lab and then deliberately released. You have to consider all the possibilities.
Not really mate, we have random Ebola outbreaks and thats a killer that we have been very lucky to contain so far but I don't hear anyone getting the blame for that. The viruses exist in nature, my only question is was it enhanced in a lab and that will answer all the rest of the questions.
We wont mention Peter Daszak, or the "Eco health alliance". Also dont look at the gain of function virology papers relating to bat corona viruses that were published prior to 2020, or the the furin cleavage site, or the fact that the earliest genetic samples were perfectly adapted to humans with little mutation after. Even if it did come from a Chinese lab, it wasn't entirely their fault.
Anyway, can someone please explain to me why China would want to cripple NZ's hospital computers with a ransomware attack? Because that makes absolutely no sense to me.
What the USA and my home country did in Iraq years ago ought to be a lesson for China to clean up its human rights today. I'd agree with you that NZ shouldn't simply follow other countries (there are many who criticize China) and should have its own foreign policy just as China and the USA have. But Iraq or not Iraq, USA or not USA there is little doubt that today the Chinese govt (under its undemocratic communist party) are committing offences that embarrass all well-informed well-intentioned Chinese. When China was in absolute poverty govt's could do as they like but as the population becomes wealthier and better educated the Chinese people will regret this part of their history.
The Middle East are just as abhorrent in human rights by NZ standards. But why do we buy more than half our crude oil from them?
https://www.amnesty.org/en/countries/middle-east-and-north-africa/repor…
xing,
As a mouthpiece of a brutal regime, you are just doing your job. It is indeed true that the US has committed many reprehensible acts-in S America, in Asia and the Middle East, but for all its many faults, it is still capable of removing someone as despicable as Trump from office. That couldn't happen in an increasingly repressive China.
We are in an increasingly invidious position in which it becomes ever harder to avoid angering one or other of the 2 superpowers, but in the final analysis, I think we would have no choice but to remain firmly within the Western alliance even at a very considerable economic cost.
a brutal regime?
Are you kidding me? The CCP has lifted 600 million people out of poverty in such a short time, which was never achieved in the entire human history.
The West and NZ indeed has the ability to vote a leader out of office. However, it would never have the ability to grow a real competent leader and vote it into the office. The process of 3 or 5 year election cycle is merely a process to choose a less worse puppet.
Isn't it?
On February 12, 1912, Hsian-T'ung, the last emperor of China was is forced to abdicate. But he was followed by emperor Mao and now emperor Xi. China's First Emperor, Qin Shi Huang was also controversial. Absolute power means absolute corruption. I'll prefer democracy even when my fellow voters are deluded.
It was during that tumultuous time and on that China was drastically weakened. For instance lost territory such as Tsingtao, Mongolia and then the genocidal invasion by Japan leading to WW2 and civil war. Much of that territory has been reclaimed now and as well there was the annexation of Tibet very early on in the CCP’s regime. Where to next then. There is growing disquiet in Outer Mongolia regarding Chinese “CCP cultural” influence and elements being pressed onto society there, education, social behaviour etc. Well off the radar but an ideal geographical target if big muscles need to be flexed.
Perhaps you guys need to be careful, the USA is about to screw over thousands of interpreters in Afghanistan that are about to be abandoned at the 11th hour if they don't get their act together. There are tens of thousands of people that need to be relocated and fast.
XM, CCP didn't lift anyone until Mao's death. Mao, as one of the worst dictators of the 20th century, pushed the Chinese nation to the edge of a complete collapse. He was the one who created that severe poverty. If his successors didn't work with the West to reform, China would have become another North Korea. And you might have never had a chance to post here. The first 40 years of the People's Republic proves what a dictator can bring to a nation, again. Xi is on that trajectory. So you need to be careful what you wish for.
If this is what Chinese 'investment' often comes to, then thanks but no thanks:
https://www.nzherald.co.nz/nz/oio-forces-wealthy-foreign-investors-to-s…
To be fair this could happen to any business venture.
Lots of capital on hand ➢ Saw what looks like a good business ➢ Invest in the business ➢ Realise it's not working well ➢ Bail out / abandon project
The same failure could easily happen to the original owners. People should question why the original owners sold it at the first place if it was such a great business.
True, but I have seen this a lot with Chinese 'investments '. Lots of prime development sites in Auckland where at best nothing is happening and at worst the properties are going to ruin. Seems it's just a way of parking money away from China. Little benefit for NZ.
Let's be honest, any exporter that deals with China should be under no illusions that it is a market that can (and will) be shut off in a instant. There are few things in business that are more obvious than this. If you choose to chase the $$$ and put too many eggs in that basket, that's an massive issue of under diversification. One that it's hard to have sympathy with quite frankly. Go ahead and toast some marshmallows, but don't put your whole arm in the fire.
The meat industry, and to a slightly lesser degree dairy, had complete dependence on the UK and when the UK entered the EEC the manure hit the cooling device. According to an article here not so long ago, both these industries are now heavily dependent on China. Who sang history never repeats.
Also the fact that our merchandise exports are still made up of more or less the same items since the mid-20th century i.e. dairy and meat.
Our lack of focus on moving up the economic complexity ladder is blowing up bubbles of all sorts across our economy that a handful of trading partners could burst at will.
....does it mean that should allow China to dictate and bully in the name of economy. Is this not their game plan - To enter a country to do business and where possible finance and make that country dependent on them so can rule as they are aware that in democratic set up all politicians can be blackmailed with fear of economy slow down and no politician can afford or will lose vote / power as not all country have guts to stand against them even if they understand their game plan.
Greed forces government to be dictated...why did NZ allowed themselves to be so dependent on China in the first place....they came threw money and conquered.
Labour have failed in their covid response by wasting tens of billions of dollars unnecessarily. If Labour damages our good relations with China then we're really fu*&d. China is the largest economy in the world. We can’t afford to screw this up with careless rhetoric. You can say what you want about John Key but he fostered very good China/NZ relations.
Fact is we need them, end of story. China is on the rise and we simply cannot ignore that or pull away trade. No other country is going to take our produce, they are all to busy protecting their own famers with the likes of "America first" type policy. Wake up people or we will just end up another 3rd world pacific island.
Talk is cheap, strategy is quite another thing. If we are planning to do something about the mistreatment of ethnic groups in Xinjiang that is one thing, but if we have no means of holding them to account, but are going to sit here on our little island and "tell them off publicly" that is ridiculous and achieves nothing except possible trade sanctions.
Foreign policy is highly complex and difficult and is definitely not black and white, but I do think unless you're going to do something about it, publicly criticizing is just dumb.
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