New Zealand Seeks Trade Diversity With China as Hipkins Meets Xi

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(Bloomberg) — Having struggled to reduce its trade dependence on China, New Zealand is now trying to diversify at home.

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Prime Minister Chris Hipkins has kicked off a six-day visit to his country’s largest export market, seeking to boost demand for a wider range of goods and services beyond the traditional foods of milk, logs and lamb. He is scheduled to meet with President Xi Jinping and Premier Li Qiang while in Beijing, and will also attend a World Economic Forum event in Tianjin.

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Hipkins is leading a delegation of 29 that includes the Ministers of Commerce and Tourism as well as CEOs from New Zealand’s largest corporations such as Fonterra Co-operative Group and Air New Zealand. Companies from sectors hoping to win business in China such as game app developer PikPok and fitness designer Les Mills International were also represented.

“The formation of the delegation reflects our goal of diversifying the range of our export offering,” Hipkins said before the trip. “It is still important to export traditional commodities like dairy, meat and wood to China, but it is even more important that we put our support behind emerging sectors like gaming and health and wellness.”

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The following charts highlight the dominant role China plays in New Zealand’s economy, buying 28% of its NZ$21 billion ($13 billion) worth of merchandise exports annually.

China’s economic importance to New Zealand began to grow after the countries entered into a free trade agreement in 2008, the first country China signed with a developed country. It overtook Australia as New Zealand’s largest trading partner in late 2013, when both countries had about 19% of goods exports. Since then, Australia’s share has narrowed to 12%.

China’s economic expansion and increasing middle-class wealth increased demand for milk powder and building materials, which led to increased demand for New Zealand dairy and timber exports.

China is the largest single market for New Zealand’s forest products, purchasing more than 60% of annual shipments. It accounts for 40% of meat exports. While the value of dairy exports to China has declined recently amid a decline in global prices, it is still the largest buyer.

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Hipkins also wants to revive Chinese interest in New Zealand as a holiday and education destination as those sectors recover from closed borders during the pandemic.

Tourism once overtook dairy products as New Zealand’s largest export. The operators are hopeful that arrivals from China will return to the levels they reached in 2019. The CEOs of airport and tourism companies are also part of the delegation.

New Zealand is well aware of the dangers of over-reliance on China. When Australia upset China in 2020, Beijing retaliated by limiting imports from wine to coal to lobsters. But even as Wellington looks for new markets in Europe and Asia, China remains by far its biggest customer.

New Zealand is a member of the “Five Eyes” intelligence coalition that includes the United States, Australia, Canada and the United Kingdom. And while it generally takes a similar stance to its Western partners on China, it has attempted to tread a more subtle line, choosing at times not to sign Five Eyes statements critical of human rights abuses in China.

That balance was evident last week when Hipkins was asked if he agreed with US President Joe Biden’s description of Xi as a dictator.

“No, and what form of government China enjoys is a matter for the Chinese people,” Hipkins said.

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