The New Zealand-China equation risks geo-politic polarisation

Notwithstanding trade, Wellington cannot ignore its global obligations

China is New Zealand’s largest trading partner (Two-Way Trade valued at $37.7 billion): Jacinda Ardern with Xi Jinping
(INL File Photo)

Venkat Raman
Auckland, October 24, 2022

The ‘self-assertion’ of Xi Jinping as the third-term President of China and the absolute power that he has assumed as the Head of State, the General Secretary of the Central Committee of the Chinese Communist Party and the Chair of the Central Military Commission are almost unparalleled since the days of Mao Zedong, who was at the helm in China for 33 years.

Presiding over the all-powerful, seven-member Standing Committee of the Politburo, Mr Jinping has virtually appointed himself President for life, with all the other six members owing their allegiance to him. Despite global challenges, the Chinese economy has performed well, growing at 8.11% last year, beating the World Bank forecast of 2.3%.

The rising risks for New Zealand

As the world’s most populated country (1.40 billion, slightly ahead of India whose population is estimated to be 1.38 billion), China has a vast appetite for consumption. This bodes well for New Zealand. Since the signing of the Free Trade Agreement in 2008, China has become New Zealand’s largest trading partner with exports valued at $37.7 billion, more than double that of Australia ($14.8 billion) in 2021.

New Zealand has not developed a major alternative market for its exports (largely agricultural and dairy products, meat and meat products, timber, wool and wine), exposing itself to risks.

Those risks have surfaced in the past two years when New Zealand was called to take a stand on China’s alleged human rights violations, threats to invade Taiwan and importantly, the trade war with Australia.

In an interview with the Guardian, New Zealand’s Foreign Minister Nanaia Mahuta likened the situation to being at the centre of a storm, one which could easily engulf New Zealand.

“New Zealand needs to think very, very cautiously about what it says about China”: Sir John Key, speaking to Australian media; seen here with Xi Jinping (INL File Photo)

Chinese presence in the South Pacific

“We cannot ignore, obviously, what is happening in Australia with their relationship with China. And if they are close to an eye of the storm or in the eye of the storm, we have got to legitimately ask ourselves – it may only be a matter of time before the storm gets closer to us,” she said.

The increasing influence of China in the South Pacific, the recent Defence Or Security Agreements that it signed with the Solomon Islands and Samoa and its efforts to get closer to Fiji and other countries are politically sensitive to New Zealand.

Prime Minister Jacinda Ardern tried to address these issues with the leaders at the Pacific Islands Forum Summit held in Suva in July 2022 but there was little success.

China continues to have its sway in the region and can soon make New Zealand vulnerable.

Australia has taken steps to diversify its export base following the sanctions imposed by Beijing. A major step in this direction was a Free Trade Agreement that it signed with India last year.

Although agriculture and dairy products are not included in the Agreement, Australia sees the pact as a major development in its trade growth.

New Zealand has thus far failed to any progress in securing an FTA with India, although several rounds of talks have been held over the past 14 years. Relations between the two countries have not been cordial in recent years and hence efforts must be made to improve ties.

Wellington must make the right moves with New Delhi and clear the air for talks.

New Zealand should get closer to India: Jacinda Ardern with Narendra Modi (INL File Photo)

China Watcher’s comments

Anna Fifield, Editor of the Wellington-based The Dominion Post closely followed developments in China when she was employed as the Beijing Bureau Chief of Washington Post.

She told Stuff Explained Presenter Sapeer Mayron recently that decisions made in China could have implications in New Zealand.

“Xi is making it increasingly clear that this is not a One Party state anymore it is more and more a One Man state, run by him. If he does make more aggressive moves toward Taiwan, a country of 24 million people, then that could force us to speak up at least and possibly to make some bolder decisions,” she said.

Ms Fifield had earlier given credit to New Zealand for its pragmatic view on China’s increasingly authoritarian stand over Hong Kong, Tibet or the Uyghur people.

“It is our biggest trading partner with $37.7 billion in two-way trade each year. Therefore, New Zealand does not want to upset China in any way, unlike Australia, the US, the UK or Canada, our Five Eyes partners, who have been bolder,” she said.

Disproportionate influence

Major Maia Baker, Senior Manager (Infrastructure Advisory) at EY Wellington said in an analysis that by joining the Asian Infra­structure Investment Bank and supporting the Belt and Road Initiative (BRI), New Zealand has furthered China’s broader economic aims in the South Pacific.

New Zealand enjoys a disproportionate influence in international forums, as Wel­lington administers the foreign and defence policies of three other Pacific Island nations: Niue, Tokelau, and the Cook Islands. New Zealand’s support can thus garner four votes in international forums such as the United Nations. New Zea­land is a claimant state in Antarctica and administers the Ross Dependency, which is a large area of the continent and adjoining sea. Chinese officials, perhaps erro­neously, believe that the Antarctic Treaty will expire in 2048. In anticipation of a polar land grab, Beijing seeks to stake China’s claim in the continent, which offers vast natural resources, a base for tracking space-based military technologies, and other geostrategic advantages,” he said.

New Zealand’s airspace has relatively little traffic, making it a promising testing ground for space and near-space technologies. It appears that China has launched near-space dual-use equipment from Chinese-owned New Zealand farmlands.

“As a small and non-threatening country, New Zealand serves as a sandbox environment for diplomatic and trade negotiations, allowing China to refine its process in a low-risk environment be­fore engaging with larger economies,” Major Baker said.

John Key visited India twice as Prime Minister- in 2011 and 2016; he is seen here with Narendra Modi in Delhi on October 26, 2016 (INL File Photo)

India’s growing importance

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers globally over the next 10-15 years, backed by its robust democracy and strong partnerships.

India’s nominal GDP at current prices is estimated at US$ 3.12 trillion in the current financial year. With more than 100 unicorns valued at US$ 332.7 billion, India has the third-largest unicorn base in the world. The government is also focusing on renewable sources to generate energy and is planning to achieve 40% of its energy from non-fossil sources by 2030.

According to the McKinsey Global Institute, India needs to boost its rate of employment growth and create 90 million non-farm jobs between 2023 and 2030 to increase productivity and economic growth. The net employment rate needs to grow by 1.5% per annum from 2023 to 2030 to achieve 8-8.5% GDP growth during this period. India’s current account deficit (CAD), primarily driven by an increase in the trade deficit, stood at 1.2% of GDP in 2021-22.

Exports fared remarkably well during the pandemic and aided recovery when all other growth engines lost steam in terms of their contribution to GDP. According to Piyush Goyal, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Indian exports are expected to reach US$ 1 trillion by 2030.

Building the New Zealand-India relationship

Although New Zealand and India share values of democracy, liberty, equality, freedom of speech, human rights, Cricket, the Rule of Law and many other common factors, good bilateral relations have remained elusive.

While stranded migrants and delays in processing student and work visas are often cited as prickly issues, these are not the basis for improved bilateral relations. These should be founded on shared interests in promoting global security, stability, and economic prosperity through trade, investment, and connectivity.

India’s Prime Minister Narendra Modi will appreciate New Zealand’s support of India’s rise as a leading global power and a vital partner in efforts to safeguard the Indo-Pacific as a region of peace, stability, and growing prosperity.

New Zealand’s Prime Minister should follow the example of the US President in promoting strong people-to-people ties between the two countries, constructive engagement of the Indian Diaspora, vibrant educational exchange and cooperation in varied dialogues.

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