New Zealand is exceptionally well-placed to benefit from China's extraordinary rise. When we celebrate 40 years of diplomatic relations with China in December this year, we can look back with considerable pride on our achievements.
This did not fall into place by accident. It is the result of consistent political and diplomatic efforts by successive governments over many years. When the Prime Minister met his counterpart in Beijing, the relationship was described by Premier Wen Jiabao as at its best state ever.
And we have no intention of standing still. China's growth story represents a transformational opportunity for New Zealand. Turning this opportunity into a reality is at the heart of the recently released NZ Inc China Strategy, which in turn is an integral part of the Government's Economic Development Plan. The China Plan sets out five strategic goals, such as doubling our two-way goods trade by 2015, specific growth targets for services trade and increasing bilateral investment flows to reflect the commercial relationship.
The China Strategy is about prioritising and co-ordinating the effort of a small country playing on a global stage. This is a work in progress, but we have made a good start. Since the China New Zealand free trade agreement came into force New Zealand's goods exports to China have increased over 160 per cent, recently breaking the $6 billion dollar mark. Last year, the $1 billion increase in New Zealand's exports to China exceeded New Zealand's total exports to France and Canada combined. New Zealand now exports to China in about six hours what it exported in the whole of 1972, when New Zealand established diplomatic relations with China.
I do not consider it a negative that the majority of these exports come from New Zealand's traditional areas of strength: dairy, timber and wool. These traditional strengths strongly complement demand in China for safe, quality products. This is not going to change any time soon. A recent joint study by the World Bank and an influential Chinese think-tank noted that China adds the equivalent of a Tokyo or Buenos Aires to its urban residents each year. By 2020 half of China's urban population will be middle class, New Zealand's target market for the majority of our exports.
So our exports of higher value food products are expected to grow rapidly.
I used my time in Shanghai last month to support a number of innovative New Zealand companies who are leading the charge. The majority of companies accompanying me to Chongqing operate in high value/niche sectors:
* Rakon is a world leader in the design and manufacture of components crucial for GPS systems;
* Tait Radio Communications is a global leader in designing and delivering radio solutions for industries that include public safety agencies;
* Orion Health is a leading provider of clinical health workflow technology for the healthcare sector;
* Fisher & Paykel Healthcare has achieved considerable sales for its market leading healthcare products in China;
* Lanzatech, a clean-tech company, has joint ventures with two of China's largest SOEs to demonstrate innovative technology that converts waste gases from the steelmaking process into ethanol (and potentially aviation fuel);
* Vista is a leading producer of software for the cinema market that already dominates the vast Indian market and is starting to make inroads in China.
These and other Kiwi companies have already established successful operations in China, and are fronted by Chinese-speaking staff. It felt great to be a New Zealander listening to them do their pitch in Mandarin.
I had made it clear to them, and to my Parliamentary colleague Dr Jian Yang, who accompanied me throughout my visit, not to interpret back into English for my benefit (all the other NZ officials being fluent or near to it in Mandarin). I knew they would all be saying the right things for New Zealand.
And of course education and tourism remain crucially important both in terms of economic value and for the role they play in enhancing people-to-people links. China is the largest source of foreign students in New Zealand, and the fastest growing source of foreign visitors - more than 151,000 in the year to date. Ethnic Chinese New Zealanders now number around 200,000.
New Zealand companies are starting to make significant investments in China, for reasons that range from the strategic to the operational: Fonterra is about to open its second farm in China, each one about a US$40 million investment and with about 4000 cows, and has ambitious expansion plans; Rakon's US$35 million factory in Chengdu reflects China's central role in global and regional supply chains; and there is significant New Zealand investment in Globalhort, a fast-growing kiwifruit company based in Xi'an.
This underlines the point that trade and investment are increasingly linked in today's global supply chains. It is natural that the vast expansion of China-NZ trade links will also be accompanied by an expansion of Chinese investment in New Zealand. The reason is simple: it allows us to maintain a standard of living that would not otherwise be possible. We have some excellent examples of Chinese investment in New Zealand such as Haier into Fisher & Paykel Appliances; Agria/New Hope into PGG Wrightson and Bright Dairy into Synlait and I expect that the list will grow.
My most recent visit has simply reconfirmed my optimism about the opportunities for expanding our trade, technology, people to people, investment and other links with China.
Of course, there remains a lot of work to do.
But we are heading in the right direction and the Government, working with business, is 100 per cent committed to the task.
Tim Groser is the Minister of Trade.
