China: New Zealand’s Friend or Foe?

The answer to the question of whether China is New Zealand’s friend or foe depends for the most part depends on which government department you ask.

The NZ Free Trade Agreement (FTA) with China, the first of its kind between the Middle Kingdom and a western nation is indicative of the importance of the vast Chinese market for New Zealand’s economy.

In February this year, Prime Minister John Key introduced the NZ Inc China Strategy – a vision for New Zealand’s developing engagement with China.

Clearly, the business and export orientated New Zealand government departments have been tasked with assisting local businesses with strengthening their capabilities to “get ready to export” to China’s burgeoning middle class.

The approach to the lucrative opportunities in the vast Chinese market must however be a cautious one.

It should be qualified by the fact that a vast chasm exists between China's astonishing economic progress and its system of internal governance.

Corruption, an undeveloped legal system and slow reforms in property rights will be significant impediments to productivity and investment in China

Despite the impressive growth of the Chinese economy, it remains a nation in which a substantial segment of its population is dependant upon farming as a primary source of income.

A growing concern for the ruling elite in China recently has been mitigating the consequences of unimpeded economic liberalization.

A repeat of the kind of convulsions seen during the Tiananmen Square incident cannot be discounted entirely in a country still making the transition from a communist regime into a market economy, especially given the large gap in income of the urban and rural population.

The recent signing of the Washington Declaration on defence co- operation with the United States and New Zealand however paints a curiously schizophrenic picture of New Zealand’s trade and defence policy.

Although the Pentagon has never clearly articulated which major nation-states it perceives to be a serious threat to its national security, it has its eyes clearly set on its former Cold War foes China, and to a lesser extent Russia.

China is investing heavily in the modernisation of its military.

Its rapidly expanding network of reconnaissance satellites and the development of anti-ship ballistic missiles and an aircraft carrier will eventually reduce the scope of the US military power in the region.

New Zealand’s security agencies are also likely to view China through less rose tinted glasses than their business and trade counterparts.

The Washington Declaration must however be put in context.

While it served as a good photo-op for the government in hailing closer ties with the US, the truth remains that beneath the political battle for headlines and the nuclear free issue, ties between the US and NZ military have existed quietly beneath the political noise since World War II.

The existence of the Waihopai satellite relay station and its crucial role in the Western world’s global military defence network is the clearest indicator of which side New Zealand falls on in the realms of international security.

This is of course in stark contrast to the government’s imperative of raising New Zealand’s economic performance by targeting China, India and South- East Asia for trade and commerce.

The government’s launch of the NZ Inc India Strategy, which is intended to make India “a core trade, economic and political partner by 2015” is another curious example of courting a country at odds with China.

Even though China-India relations can hardly be described as hostile, tensions do exist between the two nuclear capable, economic titans of the east.

Washington’s support for India is not based on altruism, but old fashioned balance of power politics.

India is viewed by the Pentagon as the most likely regional power capable of balancing China’s growing economic and military muscle.

Nominally democratic India is not without its own internal problems, with its rigid caste system and enormous gaps in wealth between rich and poor.

The fundamental difference however which New Zealand business should take note of is that in India, economic growth is primarily driven by the private sector, while doing business in China means doing business with the Chinese government at some stage in the economic food chain.

Nevertheless, New Zealand’s fragmented approach to international commerce and international security policy should not be exaggerated.

As a small country without the hard instruments of coercive power on the international stage, it is unlikely that Wellington will be forced to choose between Beijing, Washington and New Delhi in the near future.

While it would be a nice problem to have, Wellington remains a minnow in corridors of global power and is unlikely to even register on the radar global politics, much less affect it.

The matter of New Zealand’s divergent policies on trade and security does however merit further consideration.

Aaron Lim completed his master’s thesis on military strategy and foreign affairs. He has worked as an analyst for the New Zealand Army and as the online manager for New Zealand Trade and Enterprise. He has also worked as the financial markets editor for Fairfax Digital and as a client advisor for stock market operator NZX.

© Scoop Media