There is legitimate concern around New Zealand about the state of the Chinese economy. Our farmers are concerned. Our economists are concerned. Our Reserve Bank Governor is concerned.
It’s also clear the Chinese Government is concerned. Stimulating post-Covid local consumption is proving challenging. Inflation and subdued demand in some of China’s largest export markets are also affecting its manufacturing and export sectors.
While no one can predict what will happen with China’s economy, recent policy announcements out of Beijing indicate the Chinese system is looking to quickly adjust its economic policy settings in response to emerging pressure points and challenges.
In many ways, policymaking in China is like sound mixing in a studio. The Government uses a wide array of powerful, sliding regulatory controls, which it can edge up or down to achieve the balance it’s seeking. Three early signs suggest that Chinese officials may be preparing to be more active in their use of these tools.
One, last month, is the strongest endorsement of the private sector by the Communist Party and Government we’ve seen in many years. This, and the resolution of recent investigations into substantial private tech companies, suggest a significant new encouragement of private sector activity.
The second is the State Council of China’s announcement last week of a 24-point direction for the enhancement of foreign investment. This includes making it easier for foreign companies to operate in China and also reflects a determined push towards openness and economic growth.
Third, we’re seeing increased interest from China to participate in regional free trade agreements such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Digital Economic Partnership Agreement (DEPA). This suggests China wants to use the opportunity to make changes to its trade and economic structures, as it did when it acceded to the World Trade Organisation.
Foreign governments, businesses and investors will be looking for concrete actions to back up these words, especially given increased controls in some areas recently. But the statements offer good insights into a major change in China’s economic regulators’ intent.
The world should be relieved about this. China is now the top trading partner for well over 120 countries. A weak and isolated Chinese economy is in no one’s interests, here in New Zealand or elsewhere.
That’s why efforts by China’s competitors to slow areas of China’s economy are unhelpful. The United States has imposed over US$300 billion in unilateral tariffs on China since President Trump’s election. There are signs that Europe is preparing to respond, predictably, to China’s emergence as the world’s largest automaker. China is also outside new regional initiatives such as the Indo-Pacific Economic Framework (IPEF), which New Zealand has joined.
Western developed countries must manage security concerns in some areas, but as we have seen with China itself, using economic measures to pursue security aims is risky. The entire world needs a connected, healthy and growing Chinese economy for economic security.
We should continue to take a sophisticated and even-handed approach to trade and economic engagement with China, expressing concern at its coercive behaviours but also those of others. We should also support China’s continued inclusion as an active part of the regional and global economy.
New Zealand has shown leadership in trade co-operation and integration for many years. We shouldn’t abandon that approach now.
- Alistair Crozier is executive director of the New Zealand China Council. The views expressed in the article are his own.