Concerns may have arisen about the recently decelerating Chinese economy, but here Chris Pritchard focuses on the booming relationship between the Asian giant and its principal Pacific Rim trading partner.
What if China tanks? What happens to us? It’s been an oft-voiced New Zealand fear, ever since the country hitched its wagon to Asia’s number-one economy. A former British colony, this South Pacific democracy has taken full advantage of its renowned clean, green and serene image to reposition itself as a key provider of food, education and holidays. A series of Chinese food scandals worked to New Zealand’s economic advantage.
Consequently, China displaced neighbouring Australia as New Zealand’s top trading partner. But this new pecking order brings edginess and fuels unease: Chinese economic hiccups, stock market instability, fears of a painfully bursting property ‘bubble’ and plunging prices for iron ore and other key commodities.
Dropping mineral prices are more worrying in Australia (which ships raw materials dug from the ground to China). Across the Tasman Sea, concerns are overwhelmingly about food, with New Zealanders discovering that surging shipments of edibles to China have quietly become a major economic activity.
Respected analysts suggest fears of diminished Chinese demand are overblown. According to their argument, a slowdown can’t be denied but development nonetheless continues at a pace envied by many other countries. China will keep advancing, argue commentators subscribing to this upbeat view. It certainly isn’t a time of doom and gloom, they contend. As Alexandra Grace, Education New Zealand’s Beijing-based regional director, summarises the situation: ‘China’s growth is still strong.’ And, with considerable publicity focusing nervously on share market woes, Nargiza Salidjanova, senior economics and trade policy analyst at the United States-China Economic and Security Review Commission, puts the situation in perspective, noting that ‘stocks account for less than 15 per cent of household financial assets’.
New Zealand has become China’s clean food bowl in the South Pacific. Food is the main China-bound export, with dairy products in top position and China taking 12 per cent of all New Zealand’s exports. As post-Mao China opened to the world, New Zealand was a pioneer, becoming the first Western country (in 2008) to establish a Free Trade Agreement.
Relations between the two countries are warm. Some experts maintain this is partly because Beijing doesn’t regard New Zealand as an important political player in the Asia-Pacific region. Indeed, Wellington goes to great lengths to promote a peaceful, unthreatening and even remote image.
Recent attention focused on survey results concluding that people of Chinese ethnicity now buy nearly 40 per cent of residential property in Auckland, New Zealand’s largest city. Politicians suggest so high a figure indicates buyers can’t possibly be predominantly New Zealand Chinese, and that much is purchased on behalf of buyers resident in China.
However, China has long had close links with New Zealand. In fact, the first Chinese settlers were attracted by a gold rush in the South Island’s Otago area in the 1860s. A false perception in other parts of the world is that New Zealand-revelling in relative obscurity-is a small country. In reality, it is almost 20 per cent larger than the British Isles.
But with only 4.5 million people (of whom three per cent describe themselves as being of Chinese heritage), New Zealand is a mere minnow compared to China’s 1.4 billion inhabitants. China is also New Zealand’s second-largest source of tourists after nearby Australia. Of nearly three million tourists visiting New Zealand last year, more than 220,000 were from China.
Aside from the important tourism sector, education is an important earner of foreign exchange. About 100,000 foreign students study in New Zealand. They come from all over the world but the biggest group, 23 per cent, is from China, followed by South Korea and India, both on 13 per cent but with student numbers from the latter expected to climb quickly. New Zealand politicians are fond of pointing out that foreign students return from New Zealand to their home countries as unpaid marketers, speaking positively about New Zealand products and hospitality.
While Australia and New Zealand compete strongly for Chinese students, surveys identify reasons for Chinese parents’ fondness for New Zealand: lower costs, less likelihood their offspring will be crime victims, high educational standards and an emphasis on discipline. Australia, by contrast, is perceived by some Chinese parents as having a more American approach with less pressure and fewer disciplinary boundaries.
New Zealand’s flourishing food exports to China result from cleverly taking commercial advantage of the Asian giant’s own food sector shortcomings. Perhaps surprisingly, this hasn’t dented the close relationship between the countries.
The best-known of China’s many food scandals occurred in 2008 when melamine (which has various uses, including as a cheap ingredient of some plastics) was added to made-in-China baby formula, causing 300,000 babies to fall ill, with six dying from kidney disease. This ugly episode was hugely publicised in China and globally, with Chinese tourists stripping supermarket shelves of the prized product in other countries in order to take it home
But there’s more. Lesser-known scandals include tofu laced with raw sewage, recycled cooking oil sold as ‘new’, contaminated fish products, insecticide in dumplings, human hair from dirty sources used to manufacture an amino acid for soya sauce, dyed green beans and 40 year-old frozen meat transported in non-refrigerated trucks to cut costs. Producers’ greed and petty officials’ corruption at provincial and village levels contributed to shady practices. Lax enforcement of laws has allowed dishonesty to thrive. Some large companies were embroiled in scandals because they depended on sleazy suppliers.
Against this background, New Zealand’s export of ‘safe’ food to China has flourished. China became New Zealand’ssecond-largest market for beef and the largest for lamb in the financial year to last March 31. Aside from list-leading staples (topped by dairy products), New Zealand’s exports to China increasingly encompass luxury items such as wine, abalone, oysters, mussels and lobsters, thanks to growing middle-class demand. Other New Zealand exports to China include wool, wood and wood pulp. Among China’s exports to New Zealand, important foreign exchange earners include machinery and electronics as well as consumer goods including home electronics and clothing.
The main reason for China’s hunger for New Zealand food imports is ‘demand, plain and simple’, maintains Dr Natasha Hamilton-Hart, University of Auckland professor of Asian business. ‘We’re not the only suppliers competing for market share,’ she adds, ‘but New Zealand is helped by its food safety standards and ability to meet exacting Chinese import requirements.’
New Zealand’s expansion of food exports to China has been rapid during the past decade. Despite a slowing of China’s long march to prosperity, this trend is set to continue, even if not at the recent breakneck speed.
- CHRIS PRITCHARD is a Sydney-based writer who frequently visits New Zealand and is a keen observer of the country’s political and economic scene.