Part of it is the fact that because the Chinese economy has grown so large, and New Zealand’s trade with it is so mature, a slowdown in the growth rate is almost inevitable.
Prime Minister Christopher Luxon told Mike Hosking on Newstalk ZB this week that the focus would be the economy, in part because that is also the focus of Premier Li in the Chinese system.
“He’s very much responsible for the economic agenda in China and he’s concerned because China is hitting headwinds,” Luxon said, citing China’s declining population, productivity crisis and moribund property market (on two of these three, Luxon and Li might find they have something in common - although the problem with China’s situation is that there is too much supply, rather than too little).
“His interest is about productivity and the trade piece will be an important part of that,” Luxon said.
New Zealand Contemporary China Research Centre director and Victoria University associate professor Jason Young told the Herald that Premier Li’s position second in the ranks of the Chinese communist party (behind General-Secretary Xi Jinping) made him part of the “loyalist inner circle of the Chinese Communist Party”.
“He was a loyal deputy in Shanghai when he was head of the Communist Party there and did the lockdown and dynamic zero Covid policy and from that many observers say he is part of the inner circle,” Yong said.
Premier Li’s other role was as Head of the Government of China.
“He runs the Government and implements policy. In the Chinese system the Chinese Communist Party comes up with the direction and policy direction for the nation, but then policy is implemented through the government system.
“He sits at the head of the government and therefore is charged with implementing the policy of the Chinese Communist Party,” Young said.
He added that traditionally a big part of this was to “focus on the economy and economic development and international economic engagement”.
Despite President Xi’s statist economic turn, Young said that some observers had concluded Premier Li to be a “proponent of a more market-orientated system for China and for China’s international engagement”.
Young said it was “impossible to say” how this coloured his relationship with President Xi, given the extent to which state and market had been blended in China.
“It seems contradictory [to be both pro-market and statist] but within the Chinese system, they would not see it to be contradictory.
One of the areas for growth is in services trade. New Zealand has a sophisticated and far-reaching Free Trade Agreement with China, but the chief beneficiaries of this have been goods. In the year to June 2023, our top exports were dairy, meat, wood, and “milk preparations, pasta and baking products”. Dairy exports were worth $6.8 billion - that’s about $1b more than all of New Zealand’s exports to the European Union in that year.
Services are often a tougher win for FTAs because the barriers they face to entering a market are not necessarily tariffs, as is the case with goods exports. Instead, services face non-tariff barriers like domestic regulations making it more difficult to compete.
New Zealand’s FTA with China includes provisions for China to keep New Zealand education providers on its “study abroad” website to boost Chinese consumers’ confidence in those providers.
Stephanie Honey, trade policy consultant at Honey Consulting told the Herald that “since the pandemic there has been a dip in services exports”.
In 2019, services exports were worth $3.3b. In the year to June 2023. that figure was $1.6b - recovering slightly from pandemic lows.
Honey said that this was dominated by the likes of tourism and education, with the rest of the services sector’s trade with China being “undercooked”.
She said New Zealand should look to these sectors for deepening services trade.
Potential sectors included business services and digital services like video gaming.
“[Video gaming] has been an important sector, but it has been quite constrained over the last few years in China by how they regulated access to the market,” Honey said.
Video games are an example of the way New Zealand could try to negotiate better market access for services exports. Video game developers need licenses to sell in China. Allowing Kiwi companies more licenses would make it easier for them to trade in the country.
“There’s real potential for growth if we can get market access opened up,” Honey said.
This wouldn’t require a wholesale revision of the FTA, but lower-level talks between the two countries and an agreement to change domestic regulatory settings within China itself.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
