WikiLeaks cable: Vice Premier Li Keqiang visit underscores NZ's bilateral relationship with China
December 6, 2009 Vice Premier Li Keqiang visit underscores New Zealand's bilateral relationship with China
date:2009-12-06T22:42:00 source:Embassy Wellington origin:09WELLINGTON313 destination:VZCZCXRO8886 RR RUEHCN RUEHGH DE
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RUEHBY/AMEMBASSY CANBERRA 0043 RUEHCN/AMCONSUL CHENGDU 0001 RUEHGH/AMCONSUL SHANGHAI 0002 RUEHGZ/AMCONSUL GUANGZHOU 0001
RUEHHK/AMCONSUL HONG KONG 0003 RUEHIN/AIT TAIPEI TW 0001 RUEHSH/AMCONSUL SHENYANG 0001 RUEHWL/AMEMBASSY WELLINGTON
classification:CONFIDENTIAL reference: ?C O N F I D E N T I A L SECTION 01 OF 07 WELLINGTON 000313
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STATE FOR EAP/ANP, EAP/CM STATE FOR OES DAS MIOTKE, OES/EGC, OES/ENV, A... ?C O N F I D E N T I A L SECTION 01 OF 07
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STATE FOR EAP/ANP, EAP/CM STATE FOR OES DAS MIOTKE, OES/EGC, OES/ENV, AND OES/PCI STATE FOR S/SECC-STERN, S/P-GREEN,
EEB, AND ECA STATE FOR INR-B STATE ALSO FOR AGRICULTURE NSC FOR LOI E.O. 12958: DECL: N/A TAGS: OVIP, PREL, PGOV, ECON,
SENV, CH, EAID, ETRD, EINV, EAGR, AU NZ SUBJECT: Vice Premier Li Keqiang Visit Underscores New Zealand's Bilateral
Relationship with China
CLASSIFIED BY: Robert Clarke, CDA, State; REASON: 1.4(B), (D)
1. (C) Summary: During a November 27 meeting with ChargC), Political and Economic Chief and Econoff, New Zealand
Ministry of Foreign Affairs China Desk Director Grahame Morton gave a read-out of Chinese Vice Premier Li Keqiang's
November 1-3 visit to New Zealand. Morton said Li's initial visit to the region had been put on hold after it became
entangled in tensions between China and Australia over the alleged Rio Tinto espionage issue. The main focus of the
visit was economic, with discussions about currency, trading and investment. Morton also reported that Li was "forward
leaning" on New Zealand's Global Alliance proposal that aims to reduce agriculture related greenhouse gases through
joint cooperation on research. During the visit, China and New Zealand signed four agreements on education, temporary
workers, dairy product certification, and offal standards. Regarding Tibet issues, New Zealand's Prime Minister Key
confirmed he will not meet with the Dalai Lama during his December 4-7 visit to Auckland, but New Zealand officials did
press Li on Tibet and encouraged dialogue between the two sides. End summary.
Visit Comes as a Surprise to New Zealand
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2. (C) Li's visit was originally scheduled for September but was postponed because it was scheduled in coordination with
a trip to Australia, which, according to Morton, was delayed as China and Australia hammered out their differences over
the alleged Rio Tinto espionage case. New Zealand assumed the entire trip was called off because the Dalai Lama is set
to visit New Zealand in December, but they were "surprised" when they were given only a week's notice for the very
"unusual" visit. Morton said that close to all of China's top Politburo members have visited New Zealand -- usually in
conjunction with a visit to Australia, but this was Li's first visit to the country. He came with a large delegation of
43, including 6 ministers or vice ministers, and a press contingent. He arrived at his first stop in Christchurch in a
Boeing 747 and prepositioned a Boeing 737 to make the flight to Wellington. (Note: Wellington International Airport is
not equipped to handle 747's. End note.) Given the short notice, New Zealand had the option of saying "no", according to
Morton, but didn't because "Li is one of those in line for the top position." Morton said they were lucky they could
muster the right New Zealand ministers to meet Li on such short notice, but the press coverage was poor because many key
journalists were travelling with Prime Minister Key at the time.
3. (C) Morton said that one of New Zealand's objectives was to "show the seriousness with which they viewed Li's visit
to their country," and the GNZ pulled out all the stops to make it a quality visit. Li was officially hosted by Deputy
Prime Minister Bill English, who also serves as Minister of Finance. English chaired a roundtable for Li that was
attended by seven other key New Zealand ministers, including Foreign Minister McCully, Attorney-General Chris Finlayson,
and the Minister for Defense and Research, Science and Technology, Dr. Wayne Mapp, among others. Prime Minister John Key
was also able to return from his trip to Asia in time to have a meeting and host Li for a dinner. While in Christchurch,
Li visited the University of Canterbury, Christchurch, where he attended the founding ceremony of the Confucius
Institute and delivered a speech. He also met the Mayor of Christchurch Bob Parker. Morton added that Li and the rest of
the delegation left very pleased with the caliber of the visit.
Main Focus on Trade and Economics
--------------------------------------------- --
4. (C) Morton said the main focus of discussions with China were economic in nature, and Li's foremost message during
the trip was that China's stimulus package had been sufficient to combat the slide in its economy following the 2008
global financial crisis. Deputy PM English underscored how important China is to New Zealand's economy and raised the
issue of international currency. English relayed to Li that 65 percent of New Zealand's international trade is
denominated in U.S. dollars, and any move by China to devalue its currency against the U.S. dollar has a profoundly
negative impact on New Zealand exports. Li replied that China's currency needs to remain stable "to shore up demand,"
according to Morton. In the end, the two sides agreed to continue the dialogue on the currency issue. Morton noted that
China is New Zealand's third largest trading partner, following close on the heels of the United States, which is New
Zealand's second largest trading partner. Morton expected that China could soon overtake the United States to become New
Zealand's second largest partner. Bilateral trade growth has been brisk following the signing of the April 2008 free
trade agreement (FTA) said Morton. China's Ambassador to New Zealand claims China is already New Zealand's second
largest trading partner; however, Morton attributed the discrepancy to how the two countries factor in trade with Hong
Kong. Morton noted that New Zealand's trade to Mainland China will also be boosted by the FTA concluded on November 11
between New Zealand and Hong Kong. (Note: Hong Kong is New Zealand's eleventh largest export market and a significant
source of investment. End note.)
5. (C) According to Morton, New Zealand's exports to China have jumped following the signing of the FTA. One of the
biggest winners is the New Zealand dairy industry, which has "benefited greatly" because of safety concerns in China
following the 2008 tainted milk scandal. He added that PM Key's visit to China in April 2009 helped smooth over tensions
between NZ milk giant Fonterra and Chinese officials. New Zealand now has several projects in China to help companies
build better food safety chains, with a particular focus on the dairy industry. Morton said the objective is to help
Chinese companies build lines that are more suitable for export. Currently New Zealand does not allow Chinese dairy
products to enter the country for sanitary/phytosanitary (SPS) reasons. We do not want to "just say no", but we
eventually want to be able to bring them up to standards "so we can say yes to the Chinese on dairy." Morton said New
Zealand is also working with China to boost Chinese agriculture production. Fonterra, for example, has invested in
Chinese dairy farms and other agriculture producers and introduced the latest technology and farming techniques.
Although New Zealand's overall investment in Chinese agriculture is not huge, it has done reasonably well according to
Morton. On investment, Morton said that in proportion to the increase in trade between the two countries, the increase
in investment has been quite low. "We are open to investment in both directions," but we are not the focus of large
Chinese investment similar to Australia, said Morton. And, New Zealand does not have the same sensitivities to certain
assets, with the exception of land, as Australia. Morton believed, however, that as relations strengthened between the
two countries and as New Zealand companies become more accustomed to doing business in China, they would boost
investment there. WELLINGTON 00000313 003 OF 007
Li "Forward Leaning" on New Zealand's Global Alliance Proposal on Greenhouse Gas.
--------------------------------------------- ----------------------
--------------------------------------------- - 6. (C) In addition to economic issues, Li discussed climate change and
the run-up to the summit in Copenhagen in the roundtable with New Zealand ministers. According to Morton, Li had a more
"forward leaning" stance on New Zealand's Global Alliance proposition. (Note: New Zealand has been pushing for a Global
Alliance to research how to cut world-wide emissions from agriculture. The country sees itself in a unique position as
the only developed country with close to 50 percent of its greenhouse gases stemming from agriculture. New Zealand
officials repeatedly emphasize their desire to play a key role in helping the world address the twin challenges of
ensuring food security while reducing carbon emissions. End note.) Morton said New Zealand was "greatly appreciative" of
Li's support for and interest in the Global Alliance. Morton attributed part of Li's interest to the fact that for the
first time this year China began gathering statistics on agriculture emissions, and China is now the largest emitter of
agriculture greenhouse gases in the world. Morton believes Li sees New Zealand as a country that can bring "value added"
to reducing agriculture emissions inside China, noting that Li also underscored his interest in the Global Alliance when
he met with the PM Key.
New Zealand and China Sign Four Agreements
--------------------------------------------- ----------------
7. (C) New Zealand took the opportunity of Li's visit to sign four agreements that had been under consideration for some
time, according to Morton. The first was a memorandum of understanding on cooperation in education and training, with a
focus on high level research. Morton noted that there are currently 20,000 Chinese students studying in New Zealand.
This number was down from the peak in the mid-1990's when there were close to 50,000 Chinese students studying in the
country. Many of the Chinese students at that time were studying in short-term English courses. Now, most of the Chinese
students are in tertiary education and diverse fields of study. Morton noted that New Zealand is "more comfortable" with
the current number of students. Even with the lower numbers, China still remains New Zealand's most significant source
of foreign students. The second agreement addressed the issue of Chinese entering New Zealand for temporary employment,
a provision that was made in the FTA that New Zealand signed with China. Morton said the agreement was something that
the Chinese insisted upon because it spelled out the guidance on how Chinese workers would be recruited. He said the
Chinese were concerned that "middlemen recruiters" in China would take advantage of the program, and China did not want
the program to become a liability for the country.
8. (C) The third agreement was a provision that would facilitate New Zealand's dairy products into China. New Zealand
wants China to recognize its SPS testing measures and certification and is pushing for an eventual mutual recognition of
each others' e-certification. The agreement was a step in that direction whereby both parties committed to observing
each others' practices. The final agreement involved hygiene standards of New Zealand's offal exports to China. Morton
said China has not been happy with WELLINGTON 00000313 004 OF 007 New Zealand standards because they did not meet
Chinese market requirements. However, New Zealand has pushed back because they do not want China "to confuse
international safety standards with its own market requirements." The agreement sets out what the standards would be.
Dalai Lama's December Visit to New Zealand Discussed
--------------------------------------------- ---------------------- ------
9. (C) Morton said that PM Key had earlier conversed with Premier Wen Jiaboa concerning the Dalai Lama's December 4-7
visit to Auckland, saying that neither he nor any of his ministers would meet with the Dalai Lama. Morton said the
Chinese "obviously registered" this. Morton added that the PM and made this decision without any consultation, but
others in the Government are still obliged to respect it. However, Key has not said that other members of parliament
cannot meet the Dalai Lama. Morton also noted that before Key became Prime Minister, he met the Dalai Lama on other
occasions. However, "the quid pro quo" is that New Zealand continues to raise Tibet as an issue and encourages dialogue
between the two sides, said Morton.
Bio Notes on Li Keqiang
--------------------------------
10. (C) Morton, who attended events throughout Li's visit, made several comments regarding Li's style and character.
Morton said that from his experience, Li was "quite engaging" and had a different style than many Chinese leaders. He
likened Li to Western style politicians in that Li did not "retreat to rote statistics" but answered questions directly
and with a certain frankness. Li did not speak English in formal settings but was "quite comfortable" speaking English
in one-on-one side conversations. His English was not at a "high level, but it was sufficient to make himself
understood." Morton said that it was apparent that Li had "command of his delegation," which included Chinese Ambassador
to New Zealand Zhang Limin. However, Li was not overbearing and "commanding", but he sometimes made jokes about himself
and was comfortable asking other people in his delegation to respond to questions and add points to the conversation. At
one point, Li even asked the Chinese Minister of Agriculture Sun Zhengcai to make a presentation. Morton also said that
Li showed a "populist" streak. Much to New Zealand authorities' surprise, Li stopped the motorcade on several occasions
unannounced and got out to shake hands with onlookers.
Background on New Zealand/China Relations
--------------------------------------------- --------------
11. (SBU) New Zealand and China celebrated 35 years of diplomatic relations on 22 December 2007. The bilateral
relationship has grown to become one of New Zealand's most valuable and important. China is New Zealand's third-largest
trading partner, and a major source of migrants, students and tourists, and New Zealand views China as an important
bilateral, regional and multilateral partner. WELLINGTON 00000313 005 OF 007 The relationship between the two countries
is characterized by regular high-level contacts, and an expanding range of official dialogues - both formal and
informal. During Premier Wen Jiabao's April 2006 visit to New Zealand, an agreement to hold annual leaders' meetings was
reached, and two of these have since taken place - the first at the second East Asia Summit in Cebu, Philippines at the
beginning of 2007 and the second during Deputy Prime Minister Dr. Cullen's September 2007 visit to China. This was
followed by the visit of Prime Minister Helen Clark to witness signature of the Free Trade Agreement in April 2008.
(Helen Clark made four visits to China during her time in office.) Prime Minister John Key visited China in April 2009 -
his first bilateral visit to Asia. A range of New Zealand ministers have made visits to China over the past few years,
including those with responsibility for information and technology, food safety and police, defense, health, education,
finance, and research, science and technology.
12. (SBU) From the Chinese side, President Hu Jintao made a State visit to New Zealand in October 2003, and Vice Premier
Zeng Peiyan visited New Zealand in March 2007. Premier Wen Jiabao visited in April 2006, and the Chairman of the
National People's Congress Wu Bangguo visited in May 2005. Bilateral communication between New Zealand and Chinese
officials has also expanded over the years. Foreign policy, economic and trade talks are held regularly. There are
formal bilateral dialogues on SPS issues, agriculture, dairy and forestry as well as regular contact on a wide range of
other issues. Developments in Tibet in March 2008 put the focus on human rights issues for New Zealand, prompting
several Government statements of concern and a motion by the New Zealand Parliament. New Zealand is careful to abide by
its joint communiquC) of 1972 to refrain from official dealings with Taiwan. While supporting a one China policy, New
Zealand still maintains economic and cultural ties with Taiwan, an important trade and economic partner.
Trade Relations Growing Stronger
--------------------------------------------
13. (SBU) FTA negotiations were launched in November 2004 and concluded in April 2008 after 15 rounds of discussions.
The FTA entered into force on 1 October 2008. New Zealand is the first OECD country to conclude an FTA with China. Over
time the FTA will result in the elimination of tariffs on 96 percent of New Zealand exports to China and is projected to
lift New Zealand's export revenue from trade with China by between NZD 225-350 million (USD 162-252 million) per year.
The FTA built upon the bilateral economic relationship established by New Zealand's Trade and Economic Cooperation
Framework, signed in May 2004 by China's Minister of Commerce Bo Xilai and New Zealand's Minister for Trade Negotiations
Jim Sutton. In this Framework, New Zealand recognized China as "having established a market economy system." The
NZ-China FTA is a comprehensive agreement covering trade in goods and services as well as investment. A Most Favored
Nation clause further ensures that any provisions extended by either New Zealand or China to third parties in future
trade agreements will automatically apply to each other. New Zealand and China also entered into binding agreements on
labor and environment, aimed at encouraging dialogue and co-operation in these areas. More details on the FTA and its
outcomes can be found at www.chinafta.govt.nz.
14. (SBU) China is New Zealand's third-largest trading partner. According to New Zealand statistics, two-way merchandise
trade grew WELLINGTON 00000313 006 OF 007 to NZD 9.7 billion (USD 7 billion) in the year to April 2009. Exports to
China, valued at NZD 3.08 billion (USD 2.2 billion), increased by over 35 percent in the last year, while imports from
China increased by 12 percent. China is New Zealand's fourth largest export market, after Australia, the US and Japan.
China is New Zealand's second largest source of imports, after Australia. These statistics do not take account New
Zealand exports to China through Hong Kong (USD 527 million). Up to one third of exports to Hong Kong are destined for
the Mainland. New Zealand exports also end up in China via Singapore and other Southeast Asian countries. New Zealand's
exports to China are dominated by agricultural products. Dairy, wool and oils and fats are the largest agricultural
exports. New Zealand's exports to China have diversified, however, with forestry (now second only to dairy), seafood,
machinery, aluminum, and high technology products (especially telecommunications products) featuring in New Zealand's
non-agricultural exports to China. New Zealand's imports from China include electrical machinery and equipment,
textiles, clothing and footwear, toys, and a wide range of light consumer goods.
Chinese Visitors to New Zealand on the Rise
--------------------------------------------- -------------
15. (SBU) New Zealand's exports are also diversifying in the services sector; education and tourism are New Zealand
major services exports to China. Besides the large number of Chinese students that come to New Zealand visitor (business
and tourist) numbers from China have grown by a factor of six since New Zealand was granted Approved Destination Status
(ADS) by China in 1999. China has now overtaken South Korea to become New Zealand's fifth-largest source of visitors
(112,000 in the past year). Although there has been a recent down turn following the global economic crisis, New Zealand
estimates that Chinese visitor number will reach 200,000 in the near future, which would make China its third-largest
visitor market. New Zealand estimates that Chinese visitors make an economic contribution in excess of NZD 300 million
(USD 216 million) each year. China's investments in New Zealand totaled close to NZD 808 million (USD 582 million by the
end of 2008.
Bilateral Investment Increasing -- But Not as Quickly as Trade
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16. (SBU) Most Chinese investment in New Zealand has been in the forestry sector. There is also significant investment
in manufacturing and commercial construction. Sectors such as property, hotels and restaurants, meat processing,
electronics, fish farming and tanning have all attracted the interest of smaller Chinese investors. New Zealand
companies, including ANZ, Fonterra, Richina Pacific, NDA Engineering, Hayes International and PAN PAC have major
holdings in China. There are also a number of other companies closely associated with New Zealand with strategic
operations or investments in China: Beca Carter, Biovittoria, TL Jones Microscan, and University of Waikato in
Shanghai/East China, Air New Zealand Engineering, Intuto, Natural History New Zealand, Western Institute of Technology
Taranaki, and Wools of New Zealand in Beijing/North China. These companies see investment in China as important to
secure a long-term market for New Zealand products and to assist in the penetration of the enormous consumer market
WELLINGTON 00000313 007 OF 007 developing in China. Another company, Ice Breaker, has been able to use China as a global
manufacturing and distribution base for its New Zealand designed and marketed merino wool clothing. The New Zealand
China Trade Association is the lead business advocacy group in New Zealand that focuses on commercial linkages between
the two countries.
New Zealand Official Aid Drawn Down
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17. (SBU) Following a 2005 review its China program, the New Zealand Agency for International Development (NZAID)
determined that China would no longer be classified a core bilateral aid partner. This decision reflected both China's
significant economic development and NZAID's increased focus on New Zealand's Pacific neighbors. However, smaller
poverty alleviation activities, amounting to NZD 500,000 (USD 360,000) per year, continue to be carried out under the
Development Project Fund in seven Western provinces and autonomous regions (Tibet, Sichuan, Guizhou, Gansu, Yunnan,
Guangxi and Xinjiang). Many of these projects assist ethnic minority communities or women. In addition, there is a small
grant program of NZD 80,000 per year (USD 57,600) administered by the New Zealand Embassy in Beijing.
CLARKE
ENDS