Fran O'Sullivan: China ready to back NZ's UN bid

Chinese Vice President Xi Jinping waves to a group of supporters as he leaves after his meeting in Wellington. Photo / Mark Mitchell

Prime Minister John Key secured China's backing for New Zealand's bid to win a seat on the United Nation's Security Council during private talks with the man who is tipped as next in line to run the world's most populous country.

That was the main diplomatic take from the three-day visit by Chinese Vice-President Xi Jinping that winds up in Wellington today.

Xi told Key that China would "look favourably" on New Zealand's bid to join the council in 2015.

The high-level affirmation will give the New Zealand bid an important boost. While China is one the council's five permanent members (with Britain, France, Russia and United States) its influence extends well beyond its own vote.

Slowly - and inexorably - New Zealand is being drawn into the web of influence that China is exerting on the Asia-Pacific region. This was made clear at a business lunch where Xi - the first senior Chinese political leader to open a free trade agreement seminar anywhere - strongly suggested New Zealand and China should work together within the World Trade Organisation, Apec and the East Asia Summit.

Xi did not publicly mention New Zealand's Security Council bid. But judging by his comments it is likely that New Zealand's focus on creating and maintaining peace and security in the Asia Pacific area resonated with the Chinese leadership's desire to stress the positive role that China can play in the region.

The Vice-President produced some staggering figures that underline the role the Chinese economy has played in this country since the global financial crisis.

Already Chinese exports to New Zealand are up 25.8 per cent this year to US$940 million ($1.3 billion). Importantly, this country's exports to China have also increased by 65.8 per cent to reach US$1.54 billion in the same period.

Dairy exports are the main contributor. But behind the scenes the Chinese Vice-President has conveyed China's deep concern that prices for commodities - particularly dairy - might rise to the point where they simply become too expensive for the Chinese market to absorb.

This country's economic fortunes are strongly aligned with global dairy prices. During the last dairy boom, Chinese food manufacturers such as the Hangzhou-based Wahaha group seriously considered buying Kiwi farms to secure their supplies. But the "white gold" bubble burst.

There are indications that China - which has growing numbers to feed - is keen to secure its own international food supply chains. A deal signed yesterday by the China Development Bank and ANZ could pave the way for such investment here.

Key is personally concerned that New Zealand does not sell the golden goose - its prime dairy land - at the expense of future prosperity. But unless the Government makes some very specific "national interest" amendments to our overseas investment rules that could happen.

The May Wang-led bid for a bunch of dairy farms controlled by the Crafar farms' receivers is not likely to pass muster with the Overseas Investment Office because it is led by people with dubious business histories. But a bid led by a credible Chinese food player would be difficult to turn down.

Xi also indicated that the Chinese Government was not overly concerned with the domestic housing price bubble, which is predominantly speculative, and expressed confidence that economic growth would continue at around 8 per cent. A leading Chinese banker travelling with the Xi party indicated that China's currency could appreciate by about 20 per cent in the next five years.

This all bodes well for New Zealand's prosperity. Xi has also confirmed China's intention to remain as a force against international protectionism.

Since opening its doors when it joined the World Trade Organisation in 2001 its imports have quadrupled. But as was made clear in an adjoining free trade seminar, China is now facing considerable cost pressures as workers demand higher wages.

Economic integration between New Zealand and China will continue to deepen. Xi focused on areas such as new energy, green environment, biotech and new technologies and deepening regional co-operation and expanding student exchanges and tourism.

The Xi visit is very important to this nation. The Vice-President is clearly on the way up. He remains the energetic and engaging figure who captivated the minds of locals and foreigners when he was party boss in the thriving Zhejiang Province.

News media have underplayed the Xi visit - but in the longer term it is probably of more importance than, say, a visit by US Vice-President Joe Biden.