China and NZ relations at their best, says official

Street scene in Shanghai, China. June 2014. Photo / Mark Mitchell

China's relationship with New Zealand is the best it has been since the two countries established diplomatic relations more than four decades ago even though tensions can arise over Chinese investment in land here, according to a key Chinese Embassy official.

"I think the relationship is probably the best ever - ever since our two countries established diplomatic relations back in 1972," Zhang Fan, the economic and commercial counseller at the Chinese Embassy in New Zealand, told BusinessDesk at the New Zealand Tourism Investment Summit in Auckland yesterday.

Zhang has been handling the commercial relationship between the two countries since he joined the Chinese Ministry of Commerce on the New Zealand desk in 1994. He has been in his current role since early 2013, which covered the period of Fonterra Cooperative Group's botulism scare, the blocking of meat exports at the Chinese border, and allegations of steel dumping in Australia.

"I have been handling the commercial relationship between China and New Zealand for over two decades," Zhang said. "I can see this relationship is certainly still very promising and full of potential, but certainly you can't say there are no challenges in our relationship. Sometimes we just have different views on different issues, but that's quite natural. We can't just have the same view on all issues."

He noted that the countries are different in size, historic background and social system and both governments treated the relationship "very cautiously".

"To New Zealand, the relationship with China is one of the very important bilateral relationship," he said. "At the same time, although New Zealand is a small country, and China is a big country, we handle this relationship also very cautiously because for China, New Zealand is a friendly country. We do not harbour any hard feelings to the people of New Zealand, and also actually at the moment, a lot of Chinese people have a very good idea about this country. Certainly, we do not create tension between the two countries."

The embassy would advocate on behalf of Chinese companies to the New Zealand government if it was asked to do so, because this was part of its job, he said. However, it would not request any special treatment, just that conditions for Chinese investors were the same as for investors from other countries.

Milk New Zealand, the local unit of Chinese investor Pengxin, feels it was treated unfairly when it was knocked back last year by the government from buying Lochinver farm on the grounds the transaction failed the test of providing a substantial benefit to New Zealand.

Zhang described the so-called counterfactual test at the heart of the dispute as an "innovative" concept, but said he wasn't a legal expert and didn't want to comment further on the merits of the case, preferring to "let bygones be bygones".

As a small country, New Zealand was often "very sensitive" about foreign ownership, he said, noting that investors from other countries had also had their plans rejected but the Pengxin case had appeared to receive more prominence.

"I do not forsee any tension in our overall relationship just because of some of the individual cases in our bilateral commercial relationship," he said. "We do not want some individual cases to interfere with our overall relationship. We want to keep it at the technical level instead of blow it into an all-over full-scale tension between the two countries.

"Overall I think apart from this investment into agriculture, especially into the farms, for other Chinese investment into New Zealand, personally I do not observe any obstacles," he said, noting that Chinese dairy giants Yashili and Yili had invested in manufacturing in New Zealand.

"Probably land is the most crucial and the sensitive part of the whole story," he said.

Still, Zhang suggested land investment could continue to remain a challenging area.

"Certainly we can't prevent Chinese companies from purchasing land here in the future, because China is a market economy, the government cannot instruct a company you can do this or you can do that, or you cannot do this," he said.

This could create tensions in the bilateral relationship if a Chinese company sought to buy a large piece of land, he said, referencing the bid by Chinese buyers for the Kidman cattle empire in Australia, which the government there has blocked on the back of national interest and security concerns.

He said China wasn't seeking any changes to the regulatory framework, but sought to be treated the same as investors from other countries "otherwise I think that's discrimination".