David Lei Wang: Opportunities for trade in other sectors

New Zealand should seize opportunities beyond the FTA, David Lei Wang writes. Photo / Greg Bowker

China and New Zealand's joint goal is to reach the $30 billion mark in two-way trade by 2030. An upgrade to the New Zealand-China Free Trade Agreement - particularly in the agricultural sectors - is pivotal to achieving this.

New Zealand export industries like dairy, meat, seafood, processed wood products and horticulture anticipate easier access to the China market via the FTA upgrade. What's more, they hope to gain a competitive advantage over international rivals such as Australia.

Laying the foundation for the FTA upgrade process is China's and New Zealand's commitment to promoting an open, integrated world economy, developing global free trade and challenging protectionism.

However, I urge New Zealand to look beyond the FTA. New Zealand exports to China are limited to sectors like dairy, meat and wood. Rather than focus simply on boosting volumes as part of the upgrade, New Zealand needs to diversify and explore higher-value chains.

Significant opportunities exist within other sectors to build stronger ties with China - such as commercial services, technology, finance, marketing, telecommunications, film production and tourism.

Further potential also applies to education, culture and environmental protection. By playing to their strengths, both countries can work together to foster higher levels of bilateral economic co-operation and, importantly, fuel growth.

Notably, China has evolved from a trade-focused country to an investor. Accordingly, it wants a level playing field for its investors during negotiations for the trade pact.

Outbound Chinese investment reached US$170.11 billion worldwide in 2016. However, Foreign Direct Investment (FDI) from China to New Zealand remains low at around US$3.9b (NZ$5.4b), capturing just 2.3 per cent of China's total global investment.

A NZ Institute of Economic Research report on Foreign Direct Investment in New Zealand estimated this country needs up to $200b of additional investment to support export, economic growth and research and development targets. Given New Zealand's narrow capital base, much of this investment must be sourced from overseas. China is ideally placed to help make up the shortfall.

According to the report, most economic evidence points towards FDI being beneficial for the host country. For example, the investment can lead to greater efficiency with the introduction of new technology and management techniques that drive local competition and productivity. And FDI can promote employment by generating fresh opportunities that wouldn't otherwise arise.

In recent years, under the One Belt One Road Initiative, China has been involved with numerous overseas infrastructure development projects, from building highways in Pakistan and constructing deep-sea ports in Myanmar to building rail networks in Central Asia and supporting power generation and transmission projects in Egypt.

Similarly, New Zealand should seize the opportunity to work with China to attract investment that will improve its own infrastructure and maintain the momentum of the local construction industry.

Bank of China already plays an important role in facilitating New Zealand-China trade and investment. We are looking to expand our assistance to Chinese and New Zealand businesses and further strengthen economic ties between the two countries.

This year marks the 45th anniversary since China-New Zealand diplomatic ties were established. As champions of free trade, China and New Zealand can work together to maintain an international trade regime and build open economies.

Clearly, New Zealand and China stand to gain a great deal from developing stronger bilateral ties and economic cooperation.

David Lei Wang is the Chief Executive of Bank of China (NZ)