Will We Go Down With China?

Written By: - Date published: 11:24 am, August 22nd, 2022 - 19 comments
Categories: China, Economy, Free Trade, International, trade, us politics - Tags:

Muchn’all as I try and stay positive about New Zealand’s economic direction, our reliance on China is getting much, much worse, and we need to move as China declines.

China has gone from taking 26% of our total exports in 2019 and 2020 to a full 33% last year.

For over a decade it has been assumed that the Chinese economy would within a decade overtake that of the United States.

It’s not going to now. More and more signs point to a China that is fully unprepared for the competition with the United States it once sought.

This year the United States economy is forecast to grow faster than China’s for the first time since 1976.

Xi isn’t stabilising China’s growth model and is instead doubling down on the very economic policies that got China into today’s deep economic bind.

What if, like the USSR of old, China instead of being a competitor cannot actually afford to compete against the United States?

To go back to Xi’s foundational rise, when Chinese officials noted the depth of the weakness of Washington from the 2008 financial crisis, Chinese officials bet that overseas investments and economic coercion would be the keys to outcompeting the West. They were mostly right.

China’s economic clout in the decade the followed provided Xi Jinping with the confidence to shape the economic futures of many countries in its economic orbit. Yes, that includes us. We signed up to China in 2008 and never looked back.

The fruits of China’s economic expansion underwrote its power projection, which we have seen throughout the South China Sea and into Russia this year. This growth also paid for the economic power projection of the Belt and Road initiatives, military commitments, and infrastructure modernisation.

But its meteoric economic rise appears over. What use to be 12% growth went to 6%, and now forecast to 3% in the coming year.

It has actively crushed its key entrepreneurs, threatened to invade Taiwan with dire investor confidence results, has a real estate developer market in freefall from debt, and has a shrinking workforce.

Its COVID-response repression has led to plummeting industrial output, surging unemployment, capital flight, and a sinking currency.

This leaves New Zealand’s very high dependence on the Chinese economy very exposed indeed.

Worse, Australia is at least as reliant on China as we are, and Australia is the country we rely upon the most for trade, security, and diplomatic and military strength.

The United States in response to the growing military threat and terrible political leadership from Xi Jinping is now fully gathering its manufacturing capacity back to itself for clear strategic reasons.

There is still no sign that either key New Zealand industry like Fonterra or Zespri or the Chinese-owned Silver Ferm Farms/Shanghai Penxin/Beijing SanYaun Foods/Super Organic Dairy/Synait/Waste Management/Fu Wah Hotels etc will diversify much away from China and just ever-expand our dependence upon China.

New Zealand’s reliance on China for trade and investment has a close corollary in the reliance of Europe on Russian gas and petroleum.

We know what happens when the taps are turned off because we’ve seen it in Germany, Austria, Poland, Ukraine, and more.

China is to New Zealand what Russia is to Europe.

Our key companies need to diversify quickly and the government needs to lead this effort urgently.

Otherwise China is going to take us down with them.

19 comments on “Will We Go Down With China? ”

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  1. Finn McCool 1
    22 August 2022 at 12:07 pm

    Not only is their economic outlook gloomy, but the country seems to be imploding socially. Should civil war break out, I dread to think what the political and economic fallout will be for the world.

  2. roblogic 2
    22 August 2022 at 12:15 pm

    What has this relationship added to NZ? Undermined democracy, turned the property market into a Ponzi scheme, enabled sex trafficking, turbo charged destructive dairy farming (and made farming non viable – our rural sector farms for capital gains now).

    The CCP does not respect normal accounting rules, intellectual property, human rights, or stick to its agreements.

    NZ will always be the plaything of the super-powers around us. I just hope that we don't become strategically important

    • Stan 2.1
      22 August 2022 at 1:42 pm

      You can add to that list nitrate levels in Canterbury drinking water, soon to come to Christchurch's previously pristine drinking water.

  3. tsmithfield 3
    22 August 2022 at 12:18 pm

    Totally agree with this post.

    Worse still, the worsening economic situation in China may well become a catalyst for an invasion of Taiwan, as a means to divert internal attention away from their economic problems.

    Having so much of our economy tied up with a potential enemy is of great concern.

  4. Blazer 4
    22 August 2022 at 12:27 pm

    The only place China is going is up.

    China has been beating the U.S at it's own 'rules',so now the U.S wants to change..those rules.

    The BRIC countries along with Americas post war enemies are seeking to break the dependence on U.S financial/military hegemony.

    They will succeed.

    NZ used to rely on the U.K ,but when they dropped us we found other markets.

    No loyalty in business.

    When I look at the leaders of the countries in the world and their spokespeople and representatives,the Anglo/American actors are plain disappointing.

    Look at the CCP ambassador on Q&A…very polished,look at Lavrov or Putin dealing with western media..the existing double standards are exposed for all to see.

    Biden,Johnson,=hopeless.As for Truss….you can't be …serious.

    • roblogic 4.1
      22 August 2022 at 2:18 pm

      China is unsustainable. Its hollow "growth at any cost" economy is cratering, it is utterly dependent on shipping lanes for food and fuel. the people are growing restless as their life savings, invested in ghost cities, are going up in smoke.

      And there's a frightening demographic time bomb.

      China will fail. It is an inevitable consequence of its embrace of all of the worst aspects of capitalism, abandoning the communist ideals of equality, and no social safety net

      • tsmithfield 4.1.1
        22 August 2022 at 3:21 pm

        "it is utterly dependent on shipping lanes for food and fuel."

        Yes. All that is needed is to blockade the Malacca strait and China is in deep trouble.

    • Jenny how to get there 4.2
      22 August 2022 at 3:00 pm

      Blazer

      22 August 2022 at 12:27 pm

      ….The BRIC countries along with Americas post war enemies are seeking to break the dependence on U.S financial/military hegemony.

      They will succeed.

      The only way they can seek to break U.S. financial/military hegemony is through military adventures.

      They will fail.

    • tsmithfield 4.3
      22 August 2022 at 3:10 pm

      Google "Ghost Cities China". Then you will understand why they are in deep trouble.

      Along with Covid lockdowns, and one of the fastest declining populations in the world, they are in deep trouble. Think about the effects of decades of the one-child policy on demographics.

      You will find this video by Peter Zeihan very enlightening.

      • Blazer 4.3.1
        22 August 2022 at 4:00 pm

        Google the decline of America…and you will see things are not so rosy in the…West.

        '“If the American people allow private banks to control the issue of money, first by inflation, and then by deflation, the banks and corporations that grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” – Thomas Jefferson.

        U.S.A

        -huge homelessness problem

        -40 million on foodstamps

        -mass shootings every week

        -25% of the worlds total incarcerated are in American prisons(money in it)

        -horrendous inequality

        -fentanyl epidemic

        -record private and public debt

        -corruption in politics

        -erosion of free speech

        I could go…on.

      • arkie 4.3.2
        22 August 2022 at 4:00 pm

        Today, China’s so-called ghost cities that were so prevalently showcased in 2013 and 2014 are no longer global intrigues. They have filled up to the point of being functioning, normal cities — ex-ghost cities are rarely news.

        https://www.forbes.com/sites/wadeshepard/2018/03/19/ghost-towns-or-boomtowns-what-new-cities-really-become/?sh=4f327c785e3f

  5. Stephen D 5
    22 August 2022 at 12:28 pm

    So when will the much vaunted NZ business sector do something about it?

  6. Tiger Mountain 6
    22 August 2022 at 1:35 pm

    The NZ ruling class is hitched to the Anglosphere via 5 Eyes, ideologically and in reality, plus the yankee devils would now like us in AUKUS as well apparently.

    The irony is…try and get bulk quantities of NZ Dairy products into the USA or Europe–not a happening thing. As another commenter alluded to “business is business” and domestic Real Politik trumps lil ’ol Noo Zeeland all day every day.

    Best for Aotearoa NZ to have as independent a foreign and trade policy as possible in this current world.

    • Drowsy M. Kram 6.1
      22 August 2022 at 1:57 pm

      Best for Aotearoa NZ to have as independent a foreign and trade policy as possible in this current world.

      yes

      Re Ad's post, is the economy of China (popn 1,451,159,772) in danger of recession?

      China [1,451 M] is to NZ [5 M] what Russia [146 M] is to Europe [48 countries; ~537 M (excluding Russia and the UK)].

      Not seeing it, but my crystal ball is cloudy.

      The recession is here: Keep calm and continue investing
      Third, if China’s government eases on its zero-COVID restrictions, its economy is likely to come roaring back after it passes the initial wave of infections. This means that the world’s factory can run at full throttle again which will mitigate supply chain disruptions substantially.

      Sound and fury – worry about the little things, and big trends will 'take care' of you.

      https://www.lemonde.fr/en/climate-change/

  7. Bearded Git 7
    22 August 2022 at 1:53 pm

    Ad-China's real estate was valued at $52 trillion in 2019. The 90 billion loss you refer to in your link is peanuts.

    There are, however, other more serious issues with the China real estate market-read here.

    https://www.businessinsider.com/china-housing-market-explainer-cost-debt-wealth-evergrande-impact-2021-9

  8. barry 8
    22 August 2022 at 7:40 pm

    What a load of drivel.

    China cannot compete with the US, but nor does it need to. Why do you think that it is a zero sum game?

    China is going through a painful transition. It's growth rate was unsustainable. China's leadership is attempting to a transition to more mature economy where the economy is more balanced. It is not easy, and there are pressures to get quick results.

    Long term the outlook for China is positive. Their technology has moved from copying to innovating, and they are generating patents at a rate in advance of any other economy. https://www.reuters.com/article/us-un-patents-idUSKCN2AU0TM

    Zero-covid is hurting, and reducing demand. People are not buying houses, phones and cars at the previous rate. They still want quality food. NZ's exports will be the last sector to suffer.

    Of course we should diversify our markets. We don't need to panic because of China's slowdown, but we need to move away from being a commodity exporter, so we can get richer ourselves.