Joining the dots to China trade

Trade and investment are increasingly linked in today’s global supply chain. It is inconceivable that this vast expansion of China-NZ trade links would not be accompanied by a major expansion of Chinese investment in New Zealand and vice versa. If you look at the stock of foreign investment in New Zealand it is Australia, Britain and the US that dominate. Why? Because these countries have been our major economic partners. This will change in line with the radical shifts in New Zealand trading partners. It needs to change.

It won’t just be China. Get ready for significant investments from India and Indonesia. This will happen. I was delighted that this week the New Zealand Venture Investment Fund and Taiwan’s National Development Fund signed an arrangement to established strategic cooperation on joint investments in venture capital funds. They will collect up to US$170 million and invest in start-up companies in both countries, with a particular focus on the green, biotech and creative sectors. That is a fantastic development and if we can succeed in completing an Economic Cooperation Agreement with Chinese Taipei, this will complement trade liberalisation in exactly the way we would want.

Why do we welcome foreign investment? Because it helps New Zealand – end of story. 

The Prime Minister quoted a recent study concluding that overseas investment in New Zealand lifted national income by about $5billion between 1996 and 2006. That is an estimate of the return to New Zealand from overseas – crucially over and above the cost of paying interest and dividends on that investment.

China is going to be the most important economy in the world and the only argument is whether it is in 10, 15 or 20 years. That is not much more than a blip in New Zealand’s history, let alone China’s.

We have the foundation stones in place: an excellent political relationship and a comprehensive FTA that is now well into its work. 

We added in 2009 a comprehensive FTA with the separate customs territory of Hong Kong. I hope we will add a similar agreement to the third and separate WTO customs territory of Chinese Taipei – known outside trade policy circles as Taiwan.

This negotiation, known as the ECA or Economic Cooperation Agreement, is being conducted strictly within the framework of our long-standing One China policy. Taiwan is a significant part of the greater Chinese economy with massive investment and trading links with the mainland.
If we can achieve this – and I am confident we can – New Zealand will be the only country, other than China itself, to have a trading platform that puts the three dots in the Chinese economic triangle together. That will be some strategic achievement for a country of our size.