Fran O'Sullivan: Smiles all round in China

Chinese Premier Wen Jiabao's indulgent beam spoke volumes as he assured John Key that China's relationship with New Zealand was the "very, very best it had ever been."

When Helen Clark used to come to Beijing, Wen's body language was formal and upright as he practically stood to attention in her presence. But his posture was almost languid as he smiled while he waited on Key to arrive at the Great Hall of the People then grinned delightedly at the unashamed fashion in which Key displayed how chuffed he felt representing his country in Beijing in his first overseas state visit.

There has clearly been a marked change from the way Clark approached China. The National leader is primarily focused on "putting New Zealand's interests first". He doesn't pretend to deep political expertise on international affairs that he has yet to build but plays to his own strengths as a long-time high-level practitioner in the financial markets.

Key is also quite pragmatic on human rights. He did not seem bothered enough on China's record to make ritualistic forays on this score.

Potentially tricky issues like the upcoming visit of the Dalai Lama to New Zealand did not even make it on to the agenda for his meetings with the Chinese leaders - instead they were skilfully orchestrated under the table in prior meetings between officials.

On Fiji, where New Zealand, like Australia, has had strong concerns that China's "no-strings-attached" aid programmes are not helping the cause of good regional governance, Beijing has now sent the island nation a message to "listen to its neighbours" and said it will co-operate more with New Zealand in the Pacific.

This has the potential to bolster New Zealand's leadership role in Pacific. But it is also clear the orchestration will come from Beijing as much (if not more) than Wellington.

The Chinese leadership is wonderfully practised in the art of political seduction, as evidenced by the high style in which they welcome the passing parade of international political leaders to Beijing's impressive Great Hall of the People.

Not only was Key personally flattered by Wen as an international finance expert whose insights into the financial crisis were of considerable importance to the Chinese Premier. But Wen also told Key him he had read everything the New Zealand Prime Minister had to say on China.

That endorsement was solidified by the personal invitation Wen arranged to ensure Key took part in this weekend's Boao Forum for Asia where about 1000 top level business leaders will examine how Asia - "Manages beyond the Crisis".

Toss in the high-speed motorcade that enabled Key's official party to get from Pudong Airport into the heart of Shanghai in 15 minutes flat, and, the mysterious way in which a flight schedule was rearranged so Key could get across to Hainan Island in time for the Boao forum and it is no wonder that Key was marvelling at how China does capitalism.

But there was much more to Key's visit than a puppyish delight in conversing with one of the world's most powerful political leaders.

The Prime Minister's diplomatic team skilfully orchestrated the visit so that New Zealand's vital business interests in China were enhanced.

Wen made clear that China has drawn a line under the tainted milk affair at Fonterra's now bankrupt Sanlu joint venture and welcomed increased participation in its fledgling agriculture industry.

Air New Zealand has also won a departure slot at Beijing International Airport that will help it encourage more Chinese visitors to come to Auckland, arriving at around 6am rather than just before 3am.

Key's meetings with the prime Chinese customers of some of New Zealand's major firms will also help in easing some barriers to doing business.

Clark's own high-level political skills and feel for international affairs enabled New Zealand to secure last year's historic free trade deal with China. But now the FTA is into the "implementation phase", Key's business skill-set is proving valuable.

Not only to the select group of seven business leaders that accompanied him to China, but also in the way in which he was able to wow Chinese businesspeople at the opening of New Zealand Central in Shanghai by talking their (business) language.

Key has just seven minutes to make his own points about the financial crisis at a session of the Boao Forum today. It is a tricky balancing act.

On the one hand Key will be tempted to urge Asia's creditor nations to allow a currency rebalancing to occur so that trade flows get moving again and tell them how adroit financial engineering can help countries through the deleterious impacts of the financial deleveraging that is now underway.

On the other hand, he will be conscious of cold reality he received from this week's OECD report which has renewed international speculation that a sovereign downgrade is likely.

This fact that this issue - rather than Key's first foray to China - was the topic du jour for Financial Times correspondent Jamil Anderlini when he met Key in Beijing was clearly sobering. Key made plain that the May 28 Budget would be focused on fiscal consolidation not stimulus:

"We don't want to challenge the ratings agencies by being provocative. We don't want to do anything that would precipitate a downgrade."

Fran O'Sullivan received assistance from Air New Zealand to travel to China.