Fran O'Sullivan: Plenty of potential in China relationship

The visit of Li Keqiang (with wife Cheng Hong) was a masterful exercise in soft power. Photo / AP

Auckland has a major transport problem. No news there, but it was brought home when Chinese Premier Li Keqiang's motorcade had the highway to Auckland International Airport to itself.

Note that the same courtesy is also extended to our Prime Minister on official visits to China - this is not a racist comment. But with prospective domestic travellers having to turn back because Wellington Airport was fog-bound, the case for an alternative route, via rail, from the CBD to the airport looks appealing.

A CBD-Airport rail route is "on the plan". But - like Prime Minister Bill English's proposal to lift the superannuation qualifying age in 20 years' time - the rail plan is so far into the distance that it borders on the meaningless.

Would it be so terrible to invite Chinese firms to join a New Zealand consortium to build the project within five years rather than yet again postponing the building of a vital piece of infrastructure? Or even to use soft loans - although to be frank, money is relatively cheap these days for a nation that enjoys NZ's rating.

After all, the Government effectively does that with its "Investor Plus" migrant scheme, where the predominantly Chinese investors put $10 million into government bonds for three years, acquire permanent residency after token stays in this country, then take their money out again.

Li enjoyed a sultry evening on the Waitemata Harbour last Tuesday evening, while businesspeople continued to debate just what New Zealand can expect in the next chapter of relations with China.

The atmospherics during official visits are important. The Li trip was a masterful exercise in soft power.

The Premier genuinely enjoyed an earlier gala luncheon and broke into perfect English to propose some unscripted toasts. And in marked contrast to Li's earlier visit as Vice-Premier, both NZ and Chinese business leaders were clearly much closer. There is no longer the sense of "foreignness" which permeated prior luncheons. New Zealanders and Chinese shared the same tables, many already knew each other, and they conversed relatively easily.

But there was a serious point to the exercise.

It was not simply about announcing a start date for negotiations towards an upgrade of the China New Zealand free trade agreement; nor the agreement that New Zealand will participate in China's One Belt One Road (OBOR) exercise.

The detail on OBOR has yet to be publicly released, but some interpreted this new "first" as signalling that China was seeking to take over building New Zealand's infrastructure. This was quickly shot down by the Prime Minister, who has his own eye on the political optics in an election year.

What is on offer from the US$1 trillion initiative is the potential for New Zealand firms to take part in the massive infrastructure build which will occur as a new Silk Road is built to link Asia, the Middle East, Africa and Europe. NZ Trade and Enterprise was quick off the mark with a seminar on Wednesday to alert NZ businesses to the opportunity and also shared more detail in a closed session.

Would it be so terrible to invite Chinese firms to join a New Zealand consortium to build the [airport rail link] within five years?

There is no doubt that China's senior leaders are enjoying the opportunity to fill the global leadership vacuum when it comes to ensuring free trade and open markets.

The top level talks between English and Li resulted in the usual barrage of government press releases. There were several useful market openings, including chilled beef and a commitment to increase flights between the two countries to 70 a week in two steps.

But when it comes to the FTA upgrade, the devil is in the detail - as NZ exporters who have frequently had to combat non-tariff barriers in the Chinese market can attest.

It is important that measures to deal with such barriers in a more speedy fashion are to the fore in the expected upgrade. And that officials do learn how to combat those barriers in China and elsewhere.

The sources of tension around the FTA upgrade will be considerable.

As the Lowy Institute reports, in Australia, acquisitions of land and property are causing growing public unease, as are infrastructure proposals. A majority of Australians are opposed to foreign purchases of farmland. And the Federal Government was concerned when a Chinese firm with military connections was allowed to take over management of the port of Darwin.

New Zealand is not immune from these tensions.

Yet knowing this, the Northland Regional Council was secretly proceeding with a memorandum of understanding (MOU) with China Railway - which the Government professed to know nothing about - to build infrastructure in Northland.

"A MOU outlining a proposed, high-level strategic relationship between the council and China Railway - effectively a 'handshake on paper' - is currently under development," the council's CEO says. "The council's role includes advocating for infrastructural improvement in Northland and attracting investment and associated job creation into the region."

The problem is that by failing to lay the groundwork publicly, the council has provided a fertile environment for political mischief making.

At the last election, a proposal from Shanghai Pengxin to acquire the iconic Lochinver station in the central North Island was also leaked. It became so politically toxic that it was ultimately rejected. But if more skilfully presented as a joint venture with local partners, it could have got over the line.

The danger is that if these deals are not carefully calibrated with national interest considerations taken into account, they will not happen.