06.05.2019 Author: Sofia Pale

New Zealand Working to Stabilize Rocky Relations with China


On March 30, 2019, New Zealand’s Te Papa National Museum in the capital city Wellington hosted the Grand Opening of the China-New Zealand Year of Tourism. Chinese Minister of Culture and Tourism Luo Shugang attended the ceremony along with New Zealand’s Minister of Tourism Kelvin Davis, who both read out opening addresses, passing on warm wishes in letters from the leaders of the two countries – Chinese President XI Jinping and the Prime Minister of New Zealand Jacinda Ardern. This is a remarkable event, as it proves that the two states have been able to work out a solution to the crisis in China-New Zealand relations which began at the end of 2018.

We should not forget that New Zealand is a member of the Five Eyes intelligence alliance, which also includes Australia, the United Kingdom, Canada and the United States. The purpose of this alliance is to facilitate cooperation between intelligence services from all five states, so that they can all receive and protect intelligence which could have an impact on their security. The Five Eyes have long been feeling concerned about the dominance of Chinese companies in the Western information technology market. Firstly, it causes economic damage to Western IT companies. Secondly, with Western consumers using Chinese devices which are cheaper while still capable of delivering a fairly high level of quality, Western companies are left with no incentive to develop their technologies. Thirdly, using Chinese devices in communication networks could theoretically allow Chinese intelligence services access to information that is transmitted through these networks.

In this regard, the Five Eyes has been gradually pushing the leading Chinese telecommunications companies Huawei and ZTE out of their markets for several years. The struggle entered a critical phase in 2018 against the background of the trade war with China, when the United States rallied its allies to gang up on Huawei and ZTE. Throughout the year, Washington banned the distribution of one Chinese product after the other on American soil, and issued an ultimatum demanding that the remaining “Four Eyes” follow suit. At the end of 2018, the Government of New Zealand banned the use of Chinese equipment in the new 5G network connection from telecommunications services provider Spark New Zealand Ltd in response to these appeals, and based on recommendations from New Zealand’s Government Communications Security Bureau, the GCSB, which also suspects Huawei and ZTE have links with the Chinese intelligence services.

China has not made light of the blows that its largest telecom companies have been dealt, which contribute greatly to both the Chinese economy and the country’s scientific and technological progress, and was quick to react to New Zealand’s actions: the Chinese canceled the Prime Minister of New Zealand Jacinda Ardern’s official visit to Beijing, which was planned for the early 2019. The Chinese leadership explained that the visit would clash with the schedules of Chinese officials who were supposed to accept Ardern. In diplomatic speak, it was a real slap in the face for the leader of the New Zealand. After that, the media reported in New Zealand that Bejing had given Ardern the “cold shoulder”. At the same time, New Zealand companies operating in China have begun to face problems.

In January 2019, the Chinese leadership advised representatives of large Chinese corporations not to travel to Five Eyes countries unless absolutely necessary. This has led to a decline in China-New Zealand business activity.

It should be noted that while countries such as the United States or Australia can afford a trade war with China because they have enough resources to at least partially compensate their losses, it is far more difficult for New Zealand to offset the effects of cooling relations with Beijing.

Back in 2005, Australia was New Zealand’s main trading partner. This partnership is not surprising, given that Australia and the New Zealand share a common history, culture, language, politics and close geographical proximity (New Zealand is located on isolated Islands in the Pacific, and Australia is far closer than any other state). In 2008 however, the New Zealand–China Free Trade Agreement was signed, and after that their economic relations began to develop rapidly. In 2018, New Zealand’s main trading partner was China, where almost 25% of all of New Zealand’s exports were sent. At the same time, New Zealand’s main exports are agricultural products. In the summer of 2018, New Zealand’s beef exports reached a record high of 43 thousand tons. The primary driver is said to have been a significant increase in demand in China. China is also the main importer of New Zealand’s seafood.

Agricultural products and seafood are perishable goods that need to be delivered to their destination quickly, and which are likely to go bad if the buyer pulls out of the deal at the last minute, which means the seller will be left with irrecoverable losses. Thus, China has gained considerable leverage to influence New Zealand’s economy.

When New Zealand confronted Huawei, China began to put pressure on those levers, not very much pressure, but just enough to remind New Zealand that they are there. Thus, in January 2019, the New Zealand company Sanford which supplies seafood to China started having issues getting its products cleared with the Chinese customs. Most experts believe that this was directly related to New Zealand’s move to ban Huawei from its market.

Another important source of New Zealand’s income is tourism. In recent years, China has become one of the world’s major tourism source countries, with many of these Chinese tourists travelling to New Zealand. Chinese tourists bring New Zealand billions of dollars.

In March 2017, the Premier of the State Council of the People’s Republic of China Li Keqiang visited New Zealand to discuss further liberalizing trade with the New Zealand leadership. In addition to this, an agreement was signed on the Chinese economic One Belt One Road Initiative. The Chinese were pleased with the results of the negotiations and expressed their gratitude by agreeing to name 2019 the China-New Zealand Year of Tourism, with the aim of massively boosting the flow of Chinese tourists into New Zealand. The Grand Opening for the Year of Tourism was scheduled for February 2019. However, due to the actions taken against Huawei, the Chinese postponed the event for an indefinite period.

The media subsequently criticized New Zealand’s government, demanding that the mutually beneficial relations with China be restored, relations which have gained far too much leverage on the country’s economy. These ideas have also found support within the government itself.

Apparently, New Zealand’s leadership has heard these voices and has begun to repair relations with China, while the ice which had begun to chill China-New Zealand relations thawed in the end: as this article has already mentioned, the Year of Tourism finally started on March 30, and Jacinda Ardern’s long-awaited visit to China took place on April 1, 2019.  Some say that this was a rather “repentant” visit. According to the South China Morning Post, in meetings with XI Jinping and Li Keqiang, Jacinda Ardern sought to a) convince the Chinese politicians that in the future she would try and ensure a better protection for China-New Zealand relations and b) come up with excuses for anti-Chinese statements of certain members of New Zealand’s government. Huawei’s return to New Zealand’s market was not discussed directly, but XI Jinping made it clear during the conversation that the development of bilateral relations should “hold on to the principle of mutual trust and mutual benefits.”

It looks like Huawei is soon to make a return to New Zealand’s market. New Zealand is a small country that above all values its peace of mind and wealth, which could be threatened if the country sours its relations with China. The US, which dragged New Zealand into its struggle against China, did not provide any safeguards to protect New Zealand and did not offer to compensate its losses. It is no surprise that New Zealand is pulling out of this struggle.

Sofia Pale, Ph.D. of Historical Sciences, research associate with the Center for South-East Asia, Australia and Oceania at the Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

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