US President Donald Trump takes part in a welcoming ceremony with China's President Xi Jinping on November 9, 2017 in Beijing, China. Photo by Thomas Peter-Pool/Getty Images

As Beijing gives NZ a cool stare, do we have to choose between the US and China?

In the last week China has acted and sent a message it believes we have aligned too far to the west, argues Mike Rehu

With the concerns deepening of a cold war type conflict between the US and China, will New Zealand have to choose between the two powers? That question underpins much of this week’s speculation around China’s perceived frostiness to Jacinda Ardern’s government, as laid out in a front-page story in this morning’s NZ Herald that suggesting relations between China and New Zealand had “sunk to a new low” as the NZ prime minister’s visit is put on hold and a tourism venture postponed.

The clash between the two giants has already set alarm bells ringing in southeast Asia, a region which historically has always had to tiptoe on a fine line between global superpowers.

Late last year Singapore Prime Minister Lee Hsien Loong voiced his concerns that ASEAN would have to choose between the US and China and sure enough a month later the news came out that the island state’s non-oil exports fell 8.5% from a year earlier. The entrepôt saved its country on burgeoning global trade back in the 70s and some commentators are saying that isolationist policies by the giants could mean the country’s future is in jeopardy.

New Zealand also has long benefitted from the exponential growth in global trade, although we were slower to the party after our pipeline to the United Kingdom was plugged in the 70s.

In the last year New Zealand has had some awkward dances with the giant suitors for our affections. As Jacinda Ardern’s international profile grows after events like Davos she (and therefore Aotearoa) could become a target for the super-powers out of all proportion to its economic size.

The Huawei issue has become a huge slap in the face for China as the Five Eyes alliance, of which New Zealand is a member, moved on alleged Chinese interference.

I am not sure Jacinda Ardern will be too pleased with Helen Clark’s recent echo of the label “anti-Trump”, though we do see her constantly reinforcing the need for a multilateral trade system. To my knowledge she has never seized directly on the president’s policies and behaviour to demonise him, however tempting that may be.

And let’s face it, the US and China are hurting as well. Apple has lost almost half a trillion dollars of market value with waning sales, especially in China. Sino exports have reversed from 5% growth to 5% in the red between December 2018 and 2019.

And what’s the stand-off about ultimately? In my view the US feels threatened by losing its mantle as the supreme global power China begins to dominate among other emerging Asian economies which are blossoming in scale and becoming consumer economies in their own right. Cynics would say the posturing around trade is designed ultimately to bring some political pain to China through weakening its economy and in turn fomenting internal political angst. As long as most are growing wealthier in China there has been relatively little appetite for locals to examine their political system and the limits on their freedoms. Perhaps the only thing that will stop China’s march to the top is China itself.

One analyst predicted recently that by 2030 developing countries led by China and emerging Asia could account for more than half of global consumption, double their share from 2007. Capital flows and goods trade have fallen in the last decade and the growth factor has been data driven. E-commerce and other flows of information have re-shaped value chains from labour arbitrage and tapping new markets to concentration on technology. This has amplified the shift towards localised production of goods. Inter-regional trade is flourishing.

Where does all this leave New Zealand? We will never be a consumer economy. In fact we get a poor deal as locals with our produced goods. Export revenue should be subsidising local consumption – it happens everywhere in the world from technology in Japan to oil in the Middle East but it does seem to be the other way around in New Zealand. Anyone who shops for wine in the US will be perplexed how Kiwi products seem to be the same price or cheaper than we pay here. Can someone explain that one to me?

But the underlying message is: Asia is the future. The next decade will be one where we have to make decisions to secure our future as a country.

In my view if we make these decisions with legacy thinking we may be left as high and dry as we were in the 1970s after Britain’s decision to join the EC. Isn’t that ironic now with Brexit?

In the last week China has acted and sent a message it believes we have aligned too far to the west. We must address the perceived misbalance if we are to navigate through this stormy sea.

Mike Rehu spent 20 years in Asia working for Disney and Newscorp, US MNCs who dealt with the Chinese government for access to its market.

 


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