Liam Dann: PM gets win on China problem she never acknowledged

Prime Minister Jacinda Ardern meets Chinese President Xi Jinping at the Great Hall of the People in Beijing last week. Photo / Audrey Young

COMMENT:

After all the fuss and concern at the start of the year, Jacinda Ardern appears to have put relations with Beijing back on an even keel – for now at least.

Of course, to what extent they were uneven was never particularly clear.

The Government steadfastly refused to accept that anything had gone wrong.

But there were enough signals coming from pseudo-official Chinese sources to take the threat to the relationship seriously.

The US had been putting the hard word on friends and allies to block Chinese tech company Huawei from the global 5G build, and New Zealand appeared to have caved.

On that basis it's no small triumph for the PM to see off this diplomatic issue – even though her "nothing to see here stance" makes it difficult to claim a win.

Ardern seems to have been able to restate the message that New Zealand is open for business with China while maintaining an independent and progressive outlook.

Given the strength of the relationship over the past decade it might seem like stating the obvious.

But in the wake of pressure the US is putting on China with trade tariffs, a hard line on Huawei and renewed focus on the Asia pacific region – it was something the Chinese establishment needed to hear.

The big diplomatic challenges in balancing the relationship between the US and China won't be going away unfortunately.

As visiting US journalist John Pomfret pointed out this week, America's foreign policy stance on China has hardened since 2012.

The belief, among elite Washington policy makers - that the US needs to stand-up to China in the Pacific – runs deeper than just Donald Trump's rhetoric.

Meanwhile, Xi Jinping hasn't been shy about pushing China's political system in a more authoritarian direction.

The Chinese market remains vital for our exporters and tourist industry.

Based on latest commodity prices and tourist figures the economic relationship remains strong - despite signs of slowing Chinese growth.

Most New Zealanders don't mind that relationship – it has kept the economy in growth mode for more than a decade.

Kiwis express more concern and sometimes outright xenophobia about Chinese direct investment this country.

The foreign-buyer ban for residential housing was a response to unconfirmed fears that Chinese nationals were bidding up Auckland house prices.

However real that phenomenon was, it largely disappeared when Beijing tightened the rules allowing residents to get capital out of the country at the end of 2016.

Beyond housing-market concerns, the buyout of New Zealand dairy companies and farm land attracts a lot of public attention.

But the latest KPMG foreign direct-investment report shows the investment trend out of China is static.

The new statistics for the 2016-2018 period show that it is not Chinese but Australian (18 per cent) and US (16 per cent) money that continues to dominate the buy-up of large Kiwi assets.

China is the origin for the third-largest amount of investment dollars (10 per cent).

Canada is the origin of the fourth-largest chunk (5 per cent). That's probably the most remarkable point based on the relative size of Canada's economy and its lack of traditional trading relationship with New Zealand.

Jokes about Shania Twain aside, anti-Canadian xenophobia hasn't commanded too much time in the domestic political spotlight.

The slightly dull reason for the prominence of Canada in these kind of surveys tends to be the activity of its large state pension funds.

Since 2013 the KPMG report has been breaking down foreign direct investment as captured by the Overseas Investment Office.

It records transactions worth more than $100 million or deemed culturally significant.

Across 2013-2018 just five countries have accounted for more than half of all foreign direct investment – the four mentioned and Singapore.

Comparing the period of 2013-2015 with 2016-2018 shows both Australian, US and Chinese investment levels have increased. Australia was up by four per cent, the US two per cent and China just one per cent.

The trend across the last couple of years reflects the easing of the dairy boom, with a decline in agri-business investment.

Because big farms tend to be at the lower end of the OIO's range for consideration the trend means less applications overall were approved between 2014-2016, KPMG notes.

However, the total value of investment has increased.

One explanation for heightened public interest in Chinese investment could be that it has been more focused on agricultural production – something which still has a strong place in our national identity.

In contrast, the biggest US purchases in the past couple of years have been an insurance company and two plastics manufacturers.

It would naive to discount a sprinkling of the racism that has featured in New Zealand commentary about China since the 19th century.

But it would also be naive to discount the same concerns about the rapid rise of China as global power that seems to be fuelling renewed US animosity.

As I have written before, China's political direction of travel is concerning.

America's hard-ball response to that direction isn't making life easy for countries like New Zealand.

But after what looked like some missteps last year the Government seems to have the situation as well covered as possible at a difficult point in our diplomatic history.