There have been strong concerns about a growing divide between New Zealand and China. Photo/Getty Images.
Relations with China have improved since Prime Minister Jacinda Ardern's visit early this month, but New Zealand could find itself "in the dog box" if the dispute over Huawei is not resolved, Beijing-based Kiwi businessman, David Mahon, said.
He told the Herald in an interview that the visit helped to repair some of the damage done when the Government Communications Security Bureau (GCSB) vetoed Spark's proposal to use Huawei equipment on its 5G mobile phone network.
Read more:
• Why investing in the NZ-China relationship more important than ever
Mahon, who was a guest speaker at last week's Infant Nutrition Conference in Melbourne, said that relations had warmed since Ardern's visit.
"It was very important that she was invited," Mahon, who advises firms wanting to enter and expand in China, said.
"That was a sign from China that, in the end, it's the Prime Minister that counts," he said.
Mahon said the Huawei issue had parallels with the 2012 Crafar Farms controversy, which was defused by then Prime Minister John Key when he said the decision to sell to China's Shanghai Pengxin would be up to the Overseas Investment Office, which later gave it the green light.
Last month, GCSB Minister Andrew Little said there was no ban on Huawei. Rather, the GCSB vetted telcos' proposed network upgrades on a project-by-project basis.
It was possible that a revised Spark/Huawei proposal could gain GCSB clearance if technical changes were made to satisfy the security agency.
"There has been a huge amount going on behind the scenes between Wellington and Beijing, making sure that everyone has perhaps a clearer understanding," Mahon said.
"I think the odds of her being invited there were slim, but thanks to that, she has had that opportunity and a lot of it comes down to having that personal conversation.
"However, if Huawei is not approved, then we will go into the dog box without any question," he said.
"And there will be some form of trade retaliation, but it will be non-tariff. It will be a process being applied," he said.
The GCSB decision to block Huawei from Spark's upgrade was made public by Spark on November 28.
As of last week - more than four months later - Spark had yet to decide if it would submit a revised proposal.
On an analyst call after telco's interim result, Spark MD Simon Moutter said his company could, if necessary, upgrade to 5G on time and on a budget using gear from other vendors.
Some commentators have noted that if Spark does ultimately decide, on its own account, to go with another vendor then that will spare the government's blushes.
John McKinnon, who was New Zealand 's ambassador to China until last year and who also spoke at the conference, said it appeared Ardern's visit went well.
"She saw the political people, she saw the premier the current Premier is (Li Keqiang), she saw President Xi Jinping, she opened the embassy, which was the other thing."
"From what she has said and what the Chinese have said, it looks as if they have established a sound basis for her relationship as Prime Minister with the Chinese leaders," he said. "To me, it looked good," McKinnon said.
Mahon agreed, but he questioned New Zealand's initial reaction to the Huawei, which coincided with the arrest by Canadian authorities of Meng Wanzhou, Huawei's chief financial officer.
"I think they reacted rather unthinkingly and it was around the arrest of CFO in Canada," he said.
"If we had taken our time, and had talked about applying process, and then decided not to approve Huawei, then we might have been in better condition, but we kind of got out of sync to start with," he said.
Unfortunately, from the Chinese perspective, it would look like coercion from Washington if New Zealand did not go ahead with Huawei.
"Whether that is true or not - that's the perception – and I'm afraid that we will have to live with that if in the end we do not approve," he said.
Despite relations becoming strained since the Huawei decision, Mahon said it did not appear to have resulted in access issues at the Chinese border.
"I have not seen any instances that can be verified where non-tariff impediments have been applied to New Zealand products."
Commenting on the plan by China's Yili to buy Hokitika-based dairy co-op, Westland Milk, Mahon said China had a need to secure protein and to have investments that were not directly linked to its own economy.
"Most of the deals in New Zealand have been distressed assets – Silver Fern Farms, Crafar Farms and - probably - Westland will go that way.
"China will go on trying to secure protein. But the Westland deal is interesting because they have realised that it's more important to own the processor rather than the farms."
The $588 million Yili-Westland deal will go to a shareholder vote in early July.
Note - Jamie Gray Travelled attended the Infant Nutrition Conference in Melbourne, courtesy of the New Zealand and Infant Nutrition Council.