At this moment, the U.S. government is signalling in its budget that it is in an accelerated retreat from aid and soft power influences, and a further retreat from international allegiances of any sort: the U.N., NATO, NAFTA. The U.S. proposed budget will shrink the power of its state as never before.
And on the other hand, the Chinese political and business leadership are in town.
In such a moment, New Zealand bears some similarity to Singapore.
Singapore has long had an outsize influence and strategic importance because it controls a vital access point through the Malaccan Straits for the maritime trade routes connecting Europe, Africa, and Asia. The U.S. valued Singapore’s first Prime Minister, Lee Kuan Yew, because among other things he was an ardent Cold War warrior determined like Holyoake and Muldoon to stop the spread of Communism in the region. While in political terms Lee verged towards authoritarian, Singapore would never become a Chinese ally. China harbours no illusions about Singapore’s allegiances.
New Zealand is no threat to anyone’s shipping trade. But by being the first to sign a Free Trade Deal with China, it signalled to the United States and to its other traditional allies like Australia that it was still prepared to be ‘turnable’ in its international allegiances. In a different way to Singapore, New Zealand is an axial point in China’s place in the world.
It’s worth reflecting for a moment on what New Zealand would be buying into with truly deepening ties into China. In recent years, China has taken a leading role in the establishment of a new set of international economic institutions, including the New Development Bank, the BRICS Contingent Reserve Arrangement, the AIIB, and the Silk Road Fund. Together these are counterweight entities to the Western-led International Monetary Fund (IMF), World Bank, and the European Central Bank, which have dominated the global financial order since after the Second World War.
China is arguably the only country in history, after Britain and the United States, with the capacity to shape and lead a global system of finance and trade. China is not (yet) proposing global financial dominance – it has consistently promoted the AIIB and other organisations as complements, not competitors, of the World Bank and Asian Development Bank. But their strength will accelerate.
The Chinese and New Zealand governments share a spirit of utopian capitalism, both driven by the belief that as long as state-owned enterprises continually withdraw or dissolve and are replaced by private firms, they will both be blessed by some miraculous market power with perpetual innovative capacity for value-added growth. New Zealand is an object lesson that without an enormous investment in systematic research and development over many decades, scattered concentrations of public capital and expertise fail to make much advance into lifting a country’s future productivity growth.
Donald Trump’s full impact of his budget underscores that we are in a moment of weakening international alliances. CER is the benchmark international model for comprehensive, enduring, and overwhelmingly positive economic cooperation across sovereign states. For those in the remaining international community who pay attention to enduring agreements, they can see that it works. Same applies to the New Zealand-China FTA, which, while it hasn’t been going as long as CER, seen as a major example by which an enormous and growing global power and a very small one can raise significant problems in commerce and iron them out into solutions without major diplomatic drama let alone military threat.
South Korea and Australia are key partners in U.S. efforts to contain China. Yet they, like New Zealand, have joined the AIIB. This is an implicit dissent from overbearing U.S. influence. Only Japan, a holdout from both the TPP and the AIIB, remains a faithful ally, largely because of continued U.S. support for its military. But even Japan may yet join the AIIB. The country is coping with an excess of capital, and is anxious for new outlets for its industrial exports.
The visit from China’s political and business leadership is yet another illustration that as the legitimacy of the Unites States’ sole-superpower status has slipped, the interests of other national blocs and alliances have grown more diverse. It would be a mistake to conceive of China seeking to simply replicate that U.S. hegemony. It would also be a mistake to see China sitting still in the Pacific and across the broader Asian sphere. Growing internal contradictions among the United States and its close allies are deepening by the day. China is actively working out its strategy for its best position in this changing global order. Over two decades of rapid economic growth, China has kept a low diplomatic profile relative to its size and strength. In the coming years, China’s diplomacy will need new ideas and tactics – and taking a pretty high level delegation to a tiny and strategically non-existent place like New Zealand is a clear signal that it is prepared to focus on even the smallest of partners to get it right.
For New Zealand, China is sending the message loud and clear that it can help us with the constraints of growth that we are hitting, particularly in infrastructure construction and funding to corral and sustain that growth. The scale of immigration and net population growth set within New Zealand will no longer be controlled by any future government: the growth has to be dealt with, and China sees where it can help.
The discursive power China is displaying in New Zealand this week will depend on China’s ears as much as its words. New Zealand has a few things that it would be useful for China to take on board. New Zealand has one of the historically fastest transitions from undeveloped forest and native plus settler culture to 90% urbanised, with the remaining agricultural base highly productive and efficient. New Zealand is going through major environmental pressures because of this. But it has done so over the last 100 years with only occasional recourses to really heavy-handed state intervention, and while sustaining a very active and evolving democracy. China could take heed of our successful political dimension, as it seeks to actively manage another further social and economic transition.
China can also observe New Zealand’s parallel rapid urbanisation with little regard for rural culture or ecological sustainability: if the government fails to address severe social contradictions caused by rising wealth inequality, environmental deterioration, and public sector distrust, then China’s slogans of “infrastructure-based developmentalism” will have little persuasive power overseas.
New Zealand may not resemble Singapore in regional strategic importance, but in the strategy of ideas, China’s visit here underscores our value in the contest of global concepts and alliances.