Yes we could do the next five weeks on teeth and taxes, but actually China is pulling us down and our political parties need to make it an election issue.
Let’s put aside anything to do with territory and military matters for now, and go straight for stuff that makes New Zealand money.
When China moved hard against Australian trade in 2020, it did so because Prime Minister Scott Morrison dared to inquire if Chinese officials had caused the worldwide outbreak of COVID. So in response Communist Party bosses had good reason to believe in hard leverage. They crunched down hard on exports of timber, coal, lobsters, barley, and wine, on pretexts including exaggerated concerns about trade practices and pest infestations. That move took down 5.5% of Australia’s total exports. Australia survived, remarkably OK.
In fact Australia last year had its biggest-ever trade surplus equivalent to more than 7% of GDP. Gradually this year the major trades have re-started. Australia’s centre-left Labor government says cotton, coal, and copper exports are all resuming.
China’s trade embargo was deliberate, targeted at New Zealand’s most important ally. It was and is a serious warning to us to not criticise China for fear of what they will do to us in an even more vulnerable position than Australia.
China now accounts for 33% of our exports. In 2018 it was 25%. Our next largest export partner Australia accounted for 11.5%. China takes a third of everything we can sell to make our way in the world.
Chinese companies own 51% of Synlait. Chinese companies own Silver Fern Farms. A Chinese company owns Westland Milk. China has also bought out key dairy brands in Australia. A Chinese company owns the largest milk processor closest to Auckland.
This year National leader Luxon was asked if he was open to direct Chinese government investment to fund his NZ$26 billion road infrastructure policy through the Belt and Road Initiative. He replied: “Absolutely.”
1 News asked Luxon about the potential consequences of Chinese government-funded infrastructure, which in other BRI countries has resulted in an influx of Chinese migrant workers and a high level of debt owed to Beijing. When pressed Luxon replied: “That’s not going to happen. That’s quite a xenophobic response and a pretty simplistic response.”
Even Act believes that is too extreme a position on China’s investment in New Zealand.
David Seymour said he had real concerns about debt-trap diplomacy”:
[W]e can’t follow the lead of Pacific nations who have accepted investment from China, only to find out they’re now in serious debt to a communist regime flexing its muscles.”
He sought to distance himself from Luxon emphasising that “If National’s transport policy leaves the door open for the Chinese government to build New Zealand roads, ACT’s well thought out transport policy shuts it.”
Even ACT gets the risk massive Chinese investment puts us in.
It is really clear now that our rural economy is vulnerable to an economic collapse in China, according to Wigram Capital principal Rodney Jones. Discussing the property market, he said that:
It’s been building over a long period of time, but the big issue is the developers are all in a process of collapse. Fraud has been endemic. There’s a lack of cash in the developers, and we think there’s something like 70 million unfinished apartments — and the total value is more than $10 trillion of work in progress.
Economic collapse is a cumulative process, And once it gets going, it takes a lot of effort to stop it, so the risks are really accumulating.”
He said the downturn would have significant effects on consumer spending in China and, with it, demand for exports – particularly the dairy exports that underpin New Zealand’s rural economy.
That’s the phrase a key local analyst is using about China: economic collapse.
New Zealand’s reliance on trade with China is not helped by the United States essentially pulling investment out of China.
In August last year President Biden signed off the CHIPS Act which provides US$52.7 billion subsidies to semiconductor manufacturing and research. It was a direct move away from reliance in Chinese chip manufacturers and the start of greater chip independence from Taiwan.
In late July this year the US Senate passed a US$280 billion bill to pull US manufacturing investment away from China and back to the USA.
Most major US companies have now pulled out of China.
Given how much power China has in New Zealand it is weird that no political party this election is spending any time analysing this situation and what it means for our economy. National’s move to enable international investors to buy property once more just seems confused given the reciprocal tax agreements we already have in place.
It may well be that at the level of Prime Minister, New Zealand’s political direction has no option but to become extremely close to China’s own leadership, which is why Prime Minister Hipkins is pretty much on the same wavelength as previous Prime Minister John Key. China’s Premier Li Qiang said to Prime Minister Hipkins in June:
Our relationship’s become a fine example of win-win cooperation between countries with different social systems, history, culture, level of development and economic size. Next year we will celebrate the 10th anniversary of our comprehensive strategic partnership. China is prepared to work with New Zealand to further deepen our traditional friendship, promote our cooperation across the board, so as to deliver more benefits to our people and more benefits to the Asia Pacific and the world.”
Sure, have a mercantilist relationship. But let’s be really clear about what China stands for in comparison to New Zealand. Luxon and Key are right at the centre of enabling New Zealand to be taken over by Chinese state investment:
I think the historical issues where there has been either concern or debate, they’re not tremendously new, actually.
As I said when I was prime minister, and I’ve said since, New Zealand, if it can, wants to enjoy the best of both worlds.
A really strong relationship with our historical allies … [and] a great relationship, which may be a more mercantile-based relationship, with China.”
While Key didn’t think this meant it was smart to put all of New Zealand’s eggs in the China basket he also accepted that there were few realistic alternative markets when it came to products like crayfish.
“For as long as that market is there my advice would be to sell to it.”
That’s a pretty much identical message between previous Prime Minister John Key and National’s leader and aspirant prime Minister Chris Luxon.
So we need some reminders of why the politics of China matters to New Zealand.
The government of the People’s Republic of China is ruled by a totalitarian ideology under a one-party communist state. It deprives citizens of human rights on a sweeping scale and systematically curtails freedoms in order to retain power. People in China cannot practise religion or belief of their choice. They cannot express opinions openly, form unions, or join groups without fear of harassment. Members of minority groups are subject to mass arbitrary detention, surveillance, political indoctrination, torture, forced abortions and sterilisation, and forced labour.
The Chinese Communist Party has absolute control over law enforcement and the judicial system, and it uses both to stifle calls from Chinese citizens for freedom, human rights, and the rule of law. Those brave enough to speak out are often subject to prolonged and secret detention without access to legal counsel. Lawyers, human rights activists, intellectuals, journalists, religious leaders, and minorities are frequent targets of the state.
There is full state control of the internet and your search history, and Google, gmail, email, Youtube, and Twitter (X) are blocked, and anything you put on line as a citizen is tracked. Even Facebook has withdrawn out of China.
We have to admit a hard truth. New Zealand needs to be really clear that it cannot continue to be trade-indebted to China and also be free into the 21st century. We cannot be part of the Chinese century of which Xi Jinping dreams, the old paradigm of blind engagement with China that leads to them owning us.
We need political leadership that states on the line that we must not continue it and we must not return to it.
This election we need political parties that protect the New Zealand economy not sell it out, and protect our way of life not write it down to mere mercantilism. We are part of the free world, China isn’t, and we must join with other countries to ensure that we triumph against the form of world that China wants to impose.
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