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.