Exports to China have soared over the last 20 years, which could make New Zealand more vulnerable to the disruption caused by coronavirus. Photo / Mark Mitchell
Exports to China have soared over the last 20 years, which could make New Zealand more vulnerable to the disruption caused by coronavirus. Photo / Mark Mitchell
COMMENT:
The impact of coronavirus on New Zealand's economy is still highly uncertain, but the warning signs are becoming ominous.
Andrew Gaddum, chief operating officer of Eastland Group, owners of Gisborne's Eastland Port, went so far as to squash rumours the port was poised to suspend operations.
"This is a challenging time, globally and locally, and the impacts are now being felt across New Zealand and here in Tairāwhiti," Gaddum said.
A week ago many commentators seem confident that any impact will be short-lived, pointing to the experience of the Sars outbreak in 2003.
But back then China was a far smaller part of the global economy, the global economy was less integrated then than it is now, while social media ramps pressure on Governments to be seen to act swiftly to keep their countries safe. (When the impact on New Zealand's economy becomes clear we must remember that the National Party has virtually goaded the Government into hasty decision-making).
Seafood prices have taken a hit and economists have predicted a swift impact on other perishable exports such as fruit and other premium food products.
The comments of the port companies suggest the impact could already be spreading to trade more generally.
It is easy to see why this may be the case. Much of the Chinese workforce is on an unscheduled holiday after authorities announced an extension of the current Lunar New Year holiday by more than a week.
Although the growth in business with China may not seem to be what it was a few years ago, this may simply be that earlier in the decade we were coming off a lower base.
Port of Tauranga boss Mark Cairns. Photo / File
Take beef exports for example. Exports to China more than doubled in 2019. Sales of beef to China are now close to the value of sales to beef to all other markets combined.
As a whole, exports to China were around $16.7b in 2019, a 21 per cent increase, led by increases in dairy products, beef, lamb, fish, and fruit, all products which would be vulnerable to a sharp decline. (These figures exclude exports to Hong Kong and Taiwan, which are both top-10 export markets).
This was in a year when exports to Australia dropped below $9b, the lowest in more than a decade.
Similarly, exports to the European Union and the United States were flat.
As well as the short term disruption to travel, there are concerns about what the coronavirus may do to demand within China, and this could have longer lasting impacts.
Within trade circles there are concerns that if China slows, it may end up reinvigorating the trade war.
As part of the trade deal Beijing signed with the US in January, China promised to buy an additional US$200 billion worth of products from the US over the next two years.
This was an ambitious pledge at the time, but if demand from China softens, it may be that it struggles to meet the target.
A hefty chunk of the pledge by China is a sharp increase in the amount of agricultural products it buys from the US, some of which are products which compete with our own.
