Communist China’s investment in New Zealand is rising. Concentrated mostly in the dairy sector, many Chinese companies have purchased their counterparts in NZ. China’s top three dairy producers now have industrial plants in the country. Big Chinese firms such as Shanghai Pengxin Group, Haier, Shanghai Bright Dairy, Agria, Yashilli, Yili, and China Mengniu Dairy Co. have already secured all or the majority of the shares of many corporations in New Zealand. Chinese investors are also looking to the real estate market, with the recent purchase of the Hilton Queenstown signaling Chinese interest in top destination spots. Besides contributing to the growth of Auckland’s property bubble, Chinese yuans will also be used for a $550 million redevelopment plan for Gulf Harbour on the Whangaparaoa Peninsula. Combining dairy and real estate interests, Chinese buyers have been snatching up lots of dairy land throughout the islands. Some 70% of dairy lands in New Zealand have been purchased by foreign investors in the past five years.
Nonetheless, Chinese investment is still generally modest, accounting for a small percentage of the overall capital flow to NZ and less than half of Asian investment. According to Ross Kendall of the Reserve Bank of New Zealand, Chinese investments in New Zealand account for about 1% of New Zealand’s total foreign liabilities, whereas Australia represents more than a third of the stock of foreign investment in the country. This is partly due to the many regulations still restricting capital movements in China.
Regarding land acquisitions by foreigners, China is also well behind. In a report published by the professional services company KPGM, the two biggest land buyers in New Zealand are the UK and the USA, with China in 14th place, in terms of hectares purchased. The same report shows that only a third of Asian investment came from China, although it is expected that Chinese investments will increase significantly, above all in the dairy sector.
So China’s investment in New Zealand is not as aggressive as it is in Africa, for example, where the communist state invested $210 billion in 2014 and is expected to invest $400 billion by 2020.
However, the situation looks different when one considers trade links between the countries. China has recently become New Zealand’s biggest trade partner, displacing neighboring Australia, due in large part to a steady increase in Chinese demand. In 2008 New Zealand signed a Free Trade Agreement with China, making it the first and so far only member of the Organization for Economic Co-operation and Development to integrate economically in this way with the communist state. And the trade agreement is already shaking things up in the NZ dairy industry—Fonterra, a New Zealand dairy cooperative responsible for about 25%of the county’s exports, recently moved its production to China, selling milk and butter made in China to the Chinese.
In November 2014 President Xi Jinping visited New Zealand in a show of good faith as the two countries continue to expand their growing trade relationship. Winston Peters, leader of New Zealand First party, expressed his concern about his country’s growing dependence on Chinese goods, fearing that such extensive trade with China will eventually cripple New Zealand’s economic security and political independence.
Others have taken notice, too.
“The dairy industry is the jewel in the crown of the New Zealand economy,” notes Dr. Marc Lanteigne, a researcher who studies China-New Zealand trade relations, “and traditionally there’s been a great deal of reluctance to allow too much foreign ownership. How would China be in a position to influence the sector if they continue to invest here?” Dr. Lanteigne’s question remains ominously unanswered. And with a population 330 times as large as New Zealand’s and trillions of dollars worth of private wealth now being freed up by eased investment rules, China is poised to gain from its existing presence in New Zealand.
New Zealand’s oldest newspaper, the Otago Daily Times, editorialized in late 2014: “there are legitimate concerns about China’s political system, its lack of respect for human rights, and the levels of corruption in the country. New Zealanders do feel more comfortable [investing and trading] with fellow democracies.” As China takes the steps to build a long-term presence in New Zealand, the island nation will do well to remember and defend its Western, democratic values.