Mike Eldridge

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More Chinese investment in New Zealand farms and infrastructure will be targeted by the Government.

Prime Minister John Key today released a strategy to double trade with the Asian super power by 2015, saying it is critical for the country’s financial wellbeing.

Opening Our Doors to China has taken over a year to develop and comes as public anger grows over farm land sales to foreigners, particularly the Crafar farms bought by a Chinese company.

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The idea of Chinese investors taking over the Crafar farms has not sat well with many and the Green Party says the farms were sacrificed for the sake of a stronger relationship with China.

But Key is eager to develop the relationship with Beijing, believing New Zealand can be prosperous on the back of “probably the fastest growing economy in the world”.

“They’re our second largest market…by 2020 they’re likely to be the largest economy in the world,” said Key.

Remarkable benefits

The New Zealand – China strategy is designed to double two-way trade with the People’s Republic to $20 billions ...
... by 2015. It aims to increase the number of Chinese students in NZ, assist NZ food, beverage and agribusiness exporters and target Chinese investment in infrastructure and farmland.

The strategy would mean more sales like the Crafar farms which the Greens say was approved to facilitate the broader strategy of the China/New Zealand trade and other arrangements.

Co-leader Russel Norman accepts the relationship is important but is quick to point out New Zealanders can’t buy land in China.

Key says the long term benefits are remarkable and he believes the Government has got the balance around ownership “about right”.

Key said the strategy sets out “ambitious” medium term goals and provides a clear direction for a co-ordinated Government effort over a five year period.

It has a strong trade focus but also looks at building political and diplomatic ties through a set of five goals that specify action such as developing more high-quality science and technology collaborations.

Two-way trade with China was up 22% last year.

Investment encouraged

The Government also says in the strategy that Chinese investment in New Zealand is tiny compared to Australia and needs to grow “to levels that reflect the growing commercial relationship with China,” for continued engagement with the world’s fastest-growing superpower.

Investment into China by New Zealand firms is also minuscule, at $541 million, compared with $36 billion of Australian investments in China, partly because of New Zealand’s wider track record of exporting commodities for others to process rather than investing in its own high-value production.

Part of the problem, the strategy says, is that “Chinese investors are unaware of New Zealand opportunities”, with resources to improve two-way understanding of commercial opportunities to be beefed up by, among other moves, establishment of a high-level New Zealand China Council.

The relatively small size of investment opportunities in New Zealand was also a factor in limited Chinese inward investment, as well as the strict controls that apply to Chinese companies seeking to invest outside the Chinese mainland.

New Zealand firms’ inexperience of Chinese markets was a major reason there was not more investment flowing from this country into China.

While China invested approximately US$60 billion globally in 2010/11, Chinese-owned assets in New Zealand amount to only NZ$1.87 billion in total, compared with $100 billion invested by China in Australia.

What China wants

Before Key’s speech, PwC Partner Colum Rice told TV ONE’s Breakfast that the business community will be looking for a “positive statement” from the Government.

“Bill English has made statements about encouraging trade but this will be where the rubber hits the road and we’ll see what they have come up with,” he said.

Rice says the release of an official strategy will be the proof that the Government is strongly committed to a bigger relationship with China, despite the worries of some Kiwis.

China is already New Zealand’s number two trading partner but Rice says there has been much less work done on the investment side.

Rice, who deals with Chinese business people looking to invest, says assuming Chinese only want dairy farms is wrong because they are looking for good opportunities across a broad range of sectors.

He encourages New Zealand businesses to embrace the opportunities of dealing with China and says the current relationships established are only scratching the surface of what the FTA can offer.