Sam Stubbs: Meal ticket will expire

Opinion

The China story is reiterated repeatedly when looking at the destiny of exporters such as Australia and New Zealand.

Focusing on trade with China, which still has plenty of growth to undertake in the decades ahead, is where the future lies for a country like ours, we are told.

China is a huge and ever-expanding market for our goods and services. It has a massive population and an average standard of living that keeps improving.

One symptom of rising living standards is increased animal-protein consumption, and we can see that in our exports of meat, fish and dairy, in particular, to China's consumers.

Moreover, China's one-child-per-family policy, introduced in 1979 to apply mainly to its Han ethnic majority (exceptions are permitted for China's ethnic minorities), has meant there is more family income per head to spend on quality nutrition.

All of this is good news for New Zealand as "China's farm", but we need also to be aware that we cannot place all our bets on one export market.

There was a time when we were "Britain's farm", then the Brits joined the European Economic Community in 1973 and harsh export quotas were slapped on what we were allowed to sell to our former main customer.

We learned a hard lesson, complete with prolonged economic downturn, about the need to diversify our export markets if we wanted stable improvement in our own standards of living.

We are now in a sweet spot so far as the growth of the Chinese export market is concerned, but it would be foolish to grow complacent about the Middle Kingdom being our meal ticket for generations to come, just as we once believed the Old Country would be.

China has some problems, not least the one-child policy, which will make its society age as rapidly as in developed economies.

The baby-boomers (born 1946-64) of the developed economies have started to hit 65 this year and many are already retired or getting ready to do so.

As the boomers put their feet up, their ratio to the working population will keep rising and place enormous strains on the economies supporting them.

The one-child policy in China has artificially created a similar effect - from 2015 the ratio of younger workers to older retirees will start a similar decline. China is headed towards the situation Japan is in now - facing a shortage of young workers to sustain a greying population.

But it may not become as rich per capita as Japan in time to be able to afford the bill - or consume as much of what we produce as we are expecting.

New Zealand needs to exploit its opportunities to trade profitably with China, but should also have a national export strategy to ensure prudent diversification of our overseas markets.

* Sam Stubbs is CEO of default KiwiSaver provider Tower Investments. Sam.Stubbs@tower.co.nz