Commentary
Tēnā koutou katoa. Da jia hao. Good morning distinguished guests, ladies and gentlemen.
Thank you for this opportunity to speak at the China Business Summit.
It is a great pleasure to share my thoughts on one of New Zealand’s key relationships, for the second time at this event.
New Zealand’s trading relationship with China itself is one of our most important and far reaching. It continues to thrive – creating new opportunities between our two countries.
Today I would like to focus my comments on our bilateral relationship with China, my recent trade mission to China, before commenting on how this government is navigating the choppy currents of the global trading environment.
Bilateral relationship with China
Let me start with the obvious: China matters to New Zealand.
Our two countries have significant political, economic and people-to-people links. We have deep history – the first Chinese immigrants to New Zealand arrived over 150 years ago. I’m from Dunedin and China settlers have left a strong mark there. Their descendants are strong partners in business and civil society.
China is our largest trading partner, largest source of overseas students, and second-largest source of overseas visitors.
Around 200,000 New Zealanders, or four per cent of the population, now are of Chinese ancestry, with the community having grown significantly since its 19th Century gold rush origins.
As the Prime Minister outlined earlier, her recent visit to Beijing has demonstrated how New Zealand and China enjoy a strong relationship at the highest political level. Given our vibrant trading relationship, it will come as no surprise that there was a strong trade and economic component to the Prime Minister’s visit.
Another key topic of discussion during the Prime Minister’s visit was strengthening and improving the multilateral trading system. I will also return to this when I turn to the topic of turbulent times for the global trading system.
Recent trade mission to China
My visit three weeks after the Prime Minister’s visit helped to maintain the positive momentum of our relationship with China.
This was my second visit to China in less than six months. I visited in November last year at the time of the International Import Expo in Shanghai.
I had three key objectives:
- To learn more about the Belt and Road Initiative to identify opportunities for mutually beneficial and transparent cooperation;
- To support New Zealand businesses with an interest in China; and
- To engage with senior Chinese political and business leaders to advance issues that matter to both countries.
I was proud to be accompanied by a delegation of senior New Zealand business representatives throughout the visit. They included leaders of successful food and beverage industries, the creative sector, tourism and logistics. It also included Chinese NZ business people who have succeeded in leading New Zealand business in China in the healthcare sector. I was struck by their insights into the Chinese market and the way they have adjusted their business models and often their products to be more successful.
My aim was to learn from those businesses about their operations in China and to emphasise to Chinese business and political leaders the importance that the New Zealand Government and business place on their relationships with China.
Guangzhou
Our first stop of the visit was Guangdong, the province with a population of over a 100 million; it has the largest GDP of any province in China at NZD$2.2 trillion, it equals Australia’s. It is the destination for approximately 15 per cent of New Zealand’s exports to China; the largest source of Chinese students and visitors to New Zealand; and the base for several New Zealand companies.
We were warmly welcomed in Guangzhou and had very useful meetings with Guangdong Provincial Leadership.
I also met with China Southern. It is Asia’s largest airline and is an important contributor to the growth in movement of people, as well as goods, between New Zealand and China – operating double daily direct flights to Auckland and daily direct services to Christchurch.
The business delegation discussed New Zealand serving as a hub between Asia and Latin America. I understand it will be discussed at the New Zealand China Council conference next month.
At Freshippo, an Alibaba subsidiary which is growing rapidly, I helped to launch a three week New Zealand Promotion throughout Freshippo’s online and offline channels. It was good to see so much New Zealand produce so prominent and popular amongst Chinese consumers.
And also to see the level of innovation amongst New Zealand companies and the way they have adapted their product for Chinese consumers.
This was again the case at the Fonterra Innovation Centre, where I tasted and then had a go at making a “tea macchiato” – tea topped with New Zealand dairy products.
It’s been very successful too – half a billion have been sold, with lines of customers frequently out of the door.
Beijing
In Beijing I had meetings with senior political leaders, including the Minister of Commerce; the Minister of Ecology and Environment; and the Vice Chair of the National Development and Reform Commission, the organisation responsible for economic and social development policy, as well as attending the Belt and Road Initiative.
From all these meetings, it was clear that the relationship is in very good health.
As instructed by Prime Minister Ardern and Premier Li Keqiang, the Minister of Commerce and I agreed the importance of speeding up FTA upgrade negotiations. I’m pleased to say the seventh round of negotiations is taking place at the moment in Wellington.
The Minister of Environment and Ecology and I shared perspectives on environmental and climate change issues.
We look forward to the Third New Zealand-China Ministerial Climate Change Dialogue, which will take place in New Zealand in September.
The NDRC Vice-Chair and I discussed investment, climate change and the BRI. I described how we have a need for more electric vehicles in New Zealand, necessary to meet our net zero target by 2050.
Finally, I travelled with the business delegation to visit the headquarters of JD.com. JD.com is one of China’s e-commerce giants. We also visited the 7Fresh supermarket. Both companies are at the vanguard of e-commerce and smart supermarkets.
The Belt and Road Forum
A key focus of my visit to Beijing was to attend the second Belt and Road Forum.
The BRI is a signature initiative of President Xi and the Forum was attended by around 40 world leaders and by Ministers from several dozen countries. I presented at a thematic forum on trade and sustainable development.
Let me say that New Zealand understands the importance of the Belt and Road Initiative to China.
My visit, and my attendance at the Forum, was a means to learn more about the Initiative and how we might cooperate with China in a way that suits New Zealand’s interests, and also China’s.
It is clear from statements by President Xi at the Forum that China is going on the front foot to address some of the concerns that have been raised about the Belt and Road Initiative, such as indebtedness and corruption.
President Xi said that China wants to pursue an open, green and clean BRI and that, in pursuing BRI cooperation, implementation should be transparent with zero tolerance for corruption.
President Xi also wants to broaden the BRI to look at other aspects, such as how they can improve their business environment.
China is making successful efforts to improve its World Bank Ease of Doing Business ranking – where New Zealand sits at number one in the world.
With the Belt and Road Initiative being broadened beyond infrastructure to include a much wider range of policy initiatives, it should be easier for us to identify areas of common interest. We can then include some of these in our Belt and Road work plan.
All in all, I came away from the visit with significant insights into the scale of growth and change in China, appreciation of the levels of innovation within the Chinese tech sector and a better sense of the value for New Zealand businesses that engage in China.
Despite China’s rate of growth slowing a little, its economy is still forecast to grow 6.0 6.5 per cent a year. In absolute dollar terms, that is more than NZD$1 trillion of annual growth.
The speed and scale of change in China is incredible.
In many areas China is a technology world-leader, for example with retail, logistics and distribution and big-data. China is also one of the world-leaders on electrical vehicles. I am told that 50% of the electric vehicles added to the world fleet last year were added in China. This is an area of potential cooperation that, as I mentioned before, I am keen to explore for New Zealand further.
And e-commerce engines are driving massive disruption amongst the 730 million internet users in China. 20 per cent of total annual retail is e-commerce, but 80 per cent of consumers are multi-channel, and e-commerce is growing fast.
It was clear that, within this dynamic and changing environment, the New Zealand story, focused around provenance, product authenticity and product integrity resonates strongly with the new Chinese consumer.
To do well in such an environment, we need to do what worked well in this trade mission. We need to make the most of the advantage we have as a small country and foster a positive, powerful and collaborative dynamic between government and business.
The global trading context
New Zealand’s external operating environment remains challenging. Pressures continue to build in systems and parts of the world that matter deeply to us.
New Zealand relies more than some on the post World War II rules based international system – multilateralism, international law and international norms – that work to constrain the power of larger nations and empower smaller ones.
That system has been under strain for some time. States have jockeyed for position. Non-state actors have exerted greater influence. And emerging economies have become more adept at leveraging the system.
There is no imminent risk that this system will collapse. But, states have withdrawn from international agreements. Moreover, the future of the WTO’s dispute settlement system is uncertain, because of the impasse over appointments to the Appellate Body.
More broadly, economic and security issues over the last decade have further buffeted the international system and its institutions, partly as a result of an anti-trade populist sentiment that has been on the rise in recent years.
The result has been a decline in international support for trade, as some elected leaders have pursued nativist policies, rejecting globalisation and the institutions that support and enforce it.
These trends have negative implications for multilateralism, for international liberalism, for democracy and for solutions to global problems.
Global growth is projected to slow from 3.6 per cent in 2018 to 3.3 per cent in 2019, before picking up slightly to 3.6 per cent in 2020.
Trade disputes between the US and China are part of this broader geopolitical context.
But, within our region, the balance of risk and opportunity remains.
The overall prosperity of the Asia-Pacific region is real. It is growing, and it is of great benefit to New Zealand.
Navigating the global trading environment
As President Xi Jinping said at the Belt and Road Forum, if you are in a strong current and stop moving forward then you go backwards. And with the rest of the world, the New Zealand government continues to closely monitor developments in trade.
We’d be naïve to think that actions taken by such heavyweight trading nations – solely because they are aimed at one another – will have only small effects on a third party like New Zealand.
So what can a small economy like New Zealand do?
There are six ways this government will be promoting New Zealand’s interests:
- Defending the rules-based system through supporting the WTO;
- Embedding New Zealand in the emerging regional economic architecture through regional agreements such as the CPTPP and RCEP;
- Supporting regional and global public goods such as the OECD, APEC and the Commonwealth;
- Advancing the concept of ‘open plurilateralism’ by supporting trade agreements with clauses that allow others to join if they can match the standard of commitments set by the original partners;
- Developing a Trade for All agenda in consultation with New Zealanders; and
- Intensifying our Economic Diplomacy through New Zealand’s network of embassies and high commissions.
On top of this, we will engage with China and our other trading partners.
We want to address these challenges in a way that is consistent with international law and the interests of the global economy.
Domestic economic development
So what about New Zealand’s economy?
This government has put in place measures for a more sustainable, productive and inclusive economy; measures to lift consumer confidence and stimulate the real economy.
And our success will not be measured by GDP alone. We are moving towards a wider ‘wellbeing budget’ approach – because human, social and environmental outcomes also matter.
This government will be boosting the regions, injecting NZD$1 billion a year into the regions through the Provincial Growth Fund. We have introduced a 15% research and development tax credit to support innovation, and an overhaul of workplace training. We need to meet the challenges of the future of work.
High quality and productive foreign investment supports New Zealand businesses to grow and increase their productivity. New Zealand needs to maintain its reputation as an attractive destination for such beneficial investment.
As you know, we are consulting on options to reform the Overseas Investment Act. The options being considered seek to reduce complexity, improve investor certainty and cut unnecessary red tape. We also want to ensure investments are in New Zealand’s national interest.
We want your feedback on the reform options. More detail can be found in the consultation documents available on the Treasury’s website.
We’ve consulted extensively with New Zealanders on creating a Trade for All policy. The feedback from that consultation is public. The job of analysing it and developing tangible recommendations is now in the hands of the independent Trade for All advisory board. I’m looking forward to seeing those recommendations later this year.
We must ensure the benefits of trade flow throughout the economy, from the farm worker to the factory worker as well as the farm or business owner. We need to help small businesses, Maori and women all access the benefits of trade.
I see the Trade for All process as another element in our pushback against the anti globalisation sentiments which are feeding protectionism abroad.
We understand that market access is a key to diversifying our export markets and improving our export earnings.
That is why we have a very active programme negotiating new – and upgrading existing – trade deals: the China FTA upgrade, the EU FTA, RCEP and the Pacific Alliance.
Conclusion
In the context of increasing uncertainty in the international environment, it is crucial that New Zealand stays connected.
China is a crucial relationship for New Zealand. We need to keep our ties vibrant.
There is much to be gained by working with China on critical international issues such as climate change, regional security, open markets and the rules based multilateral trading system.
China is a key player and we can be an influential partner.
Thank you. I wish the summit a great success.
Xie Xie.
6 May 2019
May 15, 2019