Political interference claims unlikely to derail NZ-China relations: Fitch

Friday 23rd November 2018

Political and economic ties between New Zealand and China will remain close despite concerns about alleged political interference by China, according to the macro research arm of Fitch Ratings.

“Although concerns have mounted since October over a political donation made to New Zealand’s opposition National Party by a Chinese businessman believed to possess close ties to the Communist Party of China, we expect New Zealand and China to maintain friendly relations over the longer term,” Fitch Solutions Macro Research says in a statement.

“We believe the New Zealand government will likely tighten laws concerning political donations in response,” it says.

“That said, the government is likely to prioritise maintaining close ties with China since China occupies a significant position in New Zealand’s trade and tourism sectors.”

Fitch Solutions cites Statistics New Zealand data showing China was New Zealand’s largest export destination with exports totalling $13.2 billion in the year ended September 23.1 percent of total exports and up from $2.2 billion in the year ended September 2008.

“In addition, two-way trade came in at an all-time high of $25.1 billion in the year ended September 2018 and we expect trade between the two countries to continue growing over the coming years due to increased consumption of dairy products by China’s growing middle class,” Fitch says.

Potential ratification of the Regional Comprehensive Economic Partnership free trade agreement, of which both China and New Zealand are members, should also increase trade.

Milk powder accounts for 41.3 percent of New Zealand’s exports to China with butter and dairy spreads accounting for another 5.3 percent. New Zealand supplies 90 percent of China’s milk powder imports.

Tourists from China are now the second highest source of visitor arrivals after Australia, rising to 499,000 people in 2018, 11.9 percent of total arrivals, compared with 105,000 eight years ago.

“In addition, China continues to be New Zealand’s largest education market with over 40,000 student visas granted to Chinese students in 2017."

Fitch says China has an interest in maintaining close ties with New Zealand because it has strategic importance to China for two key reasons.

“First, the New Zealand government is responsible for the foreign affairs and defence departments of three other territories in the South Pacific, the Cook Islands (if requested), Niue and Tokelau,” it says.

“This potentially would provide four votes for China at international organisations, which is important due to China’s growing South Pacific interests.

“Second, China possesses a long-term strategic agenda in Antarctica in conjunction with its larger goal of expanding its maritime interests and defence capabilities in the Asia-Pacific region and will require the co-operation of established Antarctic claimant states such as New Zealand as it seeks to continue engaging in minerals exploration and other research activities in the continent.”

New Zealand will likely tighten the regulation of political donations in the wake of the Jami-Lee Ross scandal, Fitch says.

Fears of Chinese interference were also raised during the 2017 controversy over National Party MP Jian Yang who was revealed to have worked 15 years for China’s military intelligence academies and had been a Communist Party member before moving to New Zealand.

Both incidents were covered extensively in the media and the government is likely to want to boost transparency and impartiality of the policy-making process.

“Such reforms would reduce political lobbying and prevent special interest groups from possessing undue influence over the New Zealand political landscape,” Fitch says.

“The strong denials of foreign influence in New Zealand politics in the aftermath of these incidents, including from Prime Minister Jacinda Ardern, suggests the government would likely opt to take a low-key approach in raising the matter with China, if it even chooses to do so. This suggests to us that New Zealand is prioritising its close and growing economic relationship with China."

Fitch Solutions says although it is part of the Fitch group, its comments don’t come from Fitch Ratings.

“Any comments or data included in the report are solely derived from Fitch Solutions … and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions.”

(BusinessDesk)

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