2003 - 2012 - NZCTA 50 over 50

Free Trade Boom

2003 - 2012

This decade is kindly sponsored by Comvita Ltd

On 7 April 2008 New Zealand became the first developed country to sign a Free Trade Agreement (FTA) with China.

Trade Overview

By the end of this decade the PRC was New Zealand’s second largest export market, the largest source of imports and second only to Australia as the country’s overall trade partner. Merchandise trade between the two countries totaled $82 billion, an increase of more than 331% over the previous 10 years.

The trade surplus, which was heavily in China’s favour over the full period, reduced significantly following the FTA. It finished up 11% in the 2012 June year after reaching 45 percent during the mid-point of the decade.¹

New Zealand Exports

Exports for the 10 year period 2003-2012 amounted to $29.5 billion FOB. Steady but relatively small growth took place in the early years of the decade followed by significant increases each year after the FTA came into effect.²

During the four years following the signing of the FTA exports tripled. This was in large part due to dairy exports doubling in value year on year in the 2008-2011 period. Other major export increases post the FTA included those in Kiwifruit and Infant Formula. New Zealand’s wood trade expanded throughout the decade as a result of a surge in log exports and China’s place as an outlet for these expanded after Russia imposed an import tax in 2008.

The main export items during this decade were similar to the previous ten years – Dairy $8.6 billion; Wood $4.9 billion; Wool $2.9 billion; Pulp $1.5 billion; Fish and Crustaceans $1.3 billion; Hides & Skins $1.1 billion; Meat & Offal $1.1 billion; Casings $1 billion; Tallow $830 million; and Infant Formula $460 million.³

Dairy at almost 30% of the total replaced wool as the leading export commodity. It was followed by Wood at 16% and Wool at 7%. The top ten items (above) accounted for 80% of total exports (down from 85% in the previous decade).

Kiwifruit sales achieved a spectacular leap in sales value over the period, rising 2000% from $4.3 million in 2003 to $93.9 million in 2012.⁴

Imports from China

Imports from China totaled $52.5 billion for the period. Growth was more modest than that of NZ exports at 15% overall. But the total value was significantly more than for NZ exports with an increase of more than 330% over the previous ten years.⁵

The ten largest items were Electronics $9.1 billion; Machinery $9 billion; Apparel $8.4 billion; Furniture $2.5 billion; Toys, Games & Sporting Equipment $2.1 billion; Footwear $1.8 billion; Iron & Steel $1.8 billion; Plastics $1.7 billion; Textiles $1.2 billion; and Vehicles $810 million.⁶

These top ten items accounted for 73% of merchandise imports over the period.

New Zealand Goods Exports to China and Imports from China 2003-2012

A trio of “Firsts”; the FTA; and Strategy for Growth

The burgeoning trade relationship between the two nations was signaled during this decade by three occasions on which New Zealand proceeded with moves that represented the first time a foreign developed country had agreed them in dealings with China since the establishment of Communist Party rule in 1949. It became the first of these to:

• Recognize China’s status as a market economy – April 2004

• Enter into Free Trade Agreement negotiations with China – November 2004

• Sign a Free Trade Agreement (FTA) with China – October 2008

The FTA was the single most significant event in the relationship since the establishment of diplomatic relations in 1972. Signing took place in Beijing on 7 April 2008 and the agreement came into force on 1 October that year.

Despite the rapid growth in trade that followed signing of the FTA, investment by China into New Zealand remained relatively small at about $2 billion by the end of 2012. Arguably, the most well publicised and controversial investment by China in New Zealand during this decade was the purchase of Crafar Farms by Shanghai Pengxin.⁷

Telecommunications company Huawei established an office in Auckland in 2005 and partnered with NZ’s 2degrees to build a nationwide mobile network. Chinese seed and agricultural research company Agria Corp made an initial investment into PGG Wrightson in 2009 and then gained majority ownership in 2011 when joined by Chengdu based New Hope Group. Bright Foods became a 51% shareholder in Synlait in November 2010 and Haier Group, China’s leading appliance manufacturer based in Qingdao, purchased Fisher & Paykel Appliances in 2012.⁸

New Zealand companies looked to develop business in China through manufacturing operations, joint ventures or WOFE’s. Among them were Skellerup with a footwear factory established in Jiangsu province in 2003; a Hayes International Roller Door manufacturing plant; the acquisition of a resin manufacturer Foshan Veeya Chemical Company based in Guangdong by resin producer Nuplex in 2004; the establishment by BioVittoria Ltd (led by Dr Garth Smith) in 2004 of a joint venture with Guilin GFS Monk Fruit Corp to develop a natural sweetener derived from monk fruit; and a Tait Communications base in Beijing to support the company’s growth in China.

In late 2006, Qingdao Teknatool Manufacturing Company by Teknatool International Ltd NZ; Commtest Instruments opened a representative office in Beijing in 2007; Actronic Technologies (a mobile scales manufacturer) and Petronic Electronics (fire alarm systems) both established WOFEs along with Vista Global (suppliers of software to the cinema industry) in Shanghai and clean technology firm Lanzatech established a joint venture with Bao Steel in 2011 and other partnerships with five global Fortune 500 companies in China.⁹

Goodwill between the two countries was tested in 2008 when an issue arose of contaminated milk entering the Chinese infant formula market. It was sourced to a contaminant added to milk collected from small farmers in China and subsequently supplied to a dairy company, San Lu, in which Fonterra had a significant shareholding. The two countries cooperated to resolve it. Fonterra began new investments into developing local dairy farms in northern China.

Architects Warren and Mahoney, who designed both the New Zealand pavilion at Shanghai Expo 2010 and NZ Central in Shanghai established an office in that city. GPS manufacturer Rakon set up a joint venture with Guangdong based Timekeeper in Chengdu in 2011, while Richina in 2004 made its third investment in China through taking a majority shareholding in Shanghai Leather, its joint venture partner in a Shanghai tannery.¹⁰

While not all of these ventures were successful in the long term, the growing diversity of investments and forays into China was indicative of a deepening long term trade relationship. A decade earlier few observers would have predicted that New Zealand manufacturers of footwear, metal doors, lathes, chemicals, weighing scales and fire alarms, as well as businesses involved in clean technology, cinema software, architecture and IT, would be so active in China. Companies in the technology and manufacturing sectors that were also involved in the market included Orion Health, BECA Engineering, Glidepath and Gallagher Security. A China-New Zealand Film Co-Production Agreement was signed in 2010.

Food and beverage suppliers also became extremely active during the decade. Wine exports grew from $3million in 2008 to $17 million in 2011 (Babich and Villa Maria were among major suppliers), Petfood manufacturers (including Ziwipeak) began to see sales opportunities and Pure New Zealand Greenshell Mussels was established in China through a unique collaboration between Sanford, Sealord, KONO, Pacifica and NZ Greenshell. The shellfish was sold under the Pure brand.

Agreement by Prime Minister John Key and Premier Wen Jiabao that bilateral trade between the two countries should be doubled to $20 billion by 2015, resulted in NZ launching a “NZ Inc China Strategy” in 2011.¹¹ It was designed to promote a whole of government approach to New Zealand’s relationship with China and provide more effective co-operation between the public and private sectors.¹²

The New Zealand China Council was set up in 2012 as part of this strategy and in earlier, other New Zealand Government-led initiatives, NZTE established a business facility – New Zealand Central – in Shanghai. This opened in 2009 and a China Beachheads programme was launched the same year.

New Zealand participated at Shanghai Expo 2010. This involved a major investment of $30 million with the Kiwi Pavilion attracting some 4.5 million visitors. Five Ministerial led missions – in Seafood & Meat (F&B), Technology, Maori Business, Education and Aviation – visited China during the Expo and the Prime Minister led a delegation of NZ sponsors of the Pavilion.¹³

The opening of direct air links was a significant boost for trade and tourism development. Air NZ started flights to Shanghai in 2006 and to Beijing in 2008 and China Southern Airlines began flights from Guangzhou to Auckland in April 2011. Tourism NZ opened an office in Shanghai in the early 2000’s and tourism growth soared through the decade. In 2003 tourist arrivals from China were estimated at 65,000 but by 2012 they reached almost 200,000. For the seven years (2006-2012) in which statistics are available the value of tourists from China totaled $2.3 billion. The figure for the 2012 year was $530 million.¹⁴

The decade proved challenging for New Zealand’s international education sector. While students from China were recorded as having an export value of $472 million¹⁵ and Education NZ established a presence in the market in 2011, the numbers attracted to the country declined. Approximately 56,000 Chinese students were at NZ educational facilities in 2003 but by the end of the 10-year period the figure was down to 24,000.¹⁶

A combination of factors were cited for the fall.

Despite the decline in numbers (of students entering New Zealand), education related travel over the ten year period in value terms was significant. For the seven years (2006-2012) when statistics are available for this decade, education related travel from China totaled $3.3 billion.¹⁷

Summary of the Decade

The signing of Free Trade Agreement presented a strong face to the burgeoning trade relationship between the two countries. But focus on this element tended to detract from a reality that bilateral dealings between the two had by the end of this decade moved on from a “developing” relationship to a mature and broad-based two-way connection. Trade disputes over products and services that arose, were dealt with and business moved on. Acceptance in the previous decade by New Zealand importers of the value of China’s low-cost electronics, apparel and household/consumable products was evident.

This was enhanced within New Zealand by the rise throughout the country of the Warehouse chain of mass consumer presentation stores with low pricing a feature of its retail offerings. Strong growth was also apparent in Chinese supply of machinery and materials to New Zealand industries and manufacturers. It became clear that a complementary factor had entered the trading relationship which promised further expansion. A dominance of dairy produce in the export trade hinted at a developing long-term trend.

Recollections and Impressions of the fourth ten years

More thoughts on this decade are included in “Reflections on the Commercial Relationship 1973-2022” section – a collation of memories and experiences from various contributors who led or were involved in the trading relationship between New Zealand China over the last 50 years.

Click here

FTA

For details on the New Zealand – China Free Trade Agreement signed in 2008 and the FTA Upgrade concluded in 2022

Click here

Featured Organisations

Read more on some of the organisations who were involved in the New Zealand- China business relationship during this decade below.

Notes:

1 Data collated from Statistics New Zealand available at https://infoshare.stats.govt.nz/ViewTable.aspx?pxID=1cc53f2f-eb28-4052-9d0c-aa5bda75ad52 and https://infoshare.stats.govt.nz/ViewTable.aspx?pxID=60482d74-712d-45a7-80ed-627a2c5bd77a

2 Statistics New Zealand available at https://infoshare.stats.govt.nz/ViewTable.aspx?pxID=1cc53f2f-eb28-4052-9d0c-aa5bda75ad52

3 Statistics New Zealand available at https://infoshare.stats.govt.nz/TradeVariables.aspx?DataType=TIM and then retrieved from Exports individual HS Code headings table

4 Statistics New Zealand available at https://infoshare.stats.govt.nz/ViewTable.aspx?pxID=5a1cc389-27dd-4886-a141-83692208f4b6

5 Statistics New Zealand available at https://infoshare.stats.govt.nz/ViewTable.aspx?pxID=60482d74-712d-45a7-80ed-627a2c5bd77a

6 Statistics New Zealand available at https://infoshare.stats.govt.nz/TradeVariables.aspx?DataType=TIM and then retrieved from Imports individual HS Code headings table

7 Alan Young, A major turning point from The Investment Conundrum Chapter in 40 Years On : New Zealand-China Relationships edited by Chris Elder (Victoria University Press 2013) pages 60-61

8 Ibid

9 From meetings, interviews and engagements with the companies listed, in Shanghai over 2007-2010 – J Shepherd, NZTE, Trade Commissioner in Shanghai

10 Ibid

11 Statistics New Zealand available at https://infoshare.stats.govt.nz/TradeVariables.aspx?DataType=TIM

12 Opening Doors to China, New Zealand’s 2015 Vision (Copyright New Zealand Trade and Enterprise (NZTE) and Ministry of ForeIgn Affairs (MFAT) 2012) page 1 and 15

13 See the impressions from Phillip Gibson – New Zealand Commissioner General for the 2010 Shanghai World Expo in the “Reflections on the Commercial Relationship 1973-2022” section

14 Statistics New Zealandhttps://cdn.livechat-files.com/api/file/lc/att-old/6093951/54f2876f38d1a6c65dc37fa3179d56bd/int-trade-in-services-by-country-yr-end-jun-2006-2013.xlsx

15 Ibid

16 From Tony Alexander and Charles Finny – Education and Education NZ in The Trade and Economic Relationship Chapter from 40 Years On : New Zealand-China Relationships edited by Chris Elder (Victoria University Press 2013) pages 38-40

17 Statistics New Zealand https://cdn.livechat-files.com/api/file/lc/att-old/6093951/54f2876f38d1a6c65dc37fa3179d56bd/int-trade-in-services-by-country-yr-end-jun-2006-2013.xlsx