Its economy is struggling - at least in relative terms - and that is a headwind for local exporters.
Chinese GDP grew by 5.2 per cent last year, according to official statistics.
But that figure - while low by the standards of the past 20 years - still flatters an economy where consumer and investor confidence was hit hard by the pandemic and has not returned.
Chinese consumers are feeling cautious. They are saving not spending. Traditional investments like property and shares have slumped in the past year as companies have struggled with high debt and cash flow issues.
Property giant Evergrande is the most high-profile failure. Once China’s largest real estate developer, the firm went into liquidation last month, owing about US$300 billion to creditors.
Meanwhile, the Financial Times reports the benchmark MSCI China stock index is down more than 60 per cent from its peak in early 2021, reflecting a loss of more than US$1.9 trillion in market capitalisation over that period.
This week, Beijing stepped in to try to stem the losses, with the China Securities Regulatory Commission vowing to restrict short-selling and prevent “abnormal market fluctuations.”
In New Zealand, much of the focus for discussion of China relations continues to be on geopolitical tensions and its relationship with Taiwan and the US.
But the economic risk is more pressing.
In 2022, New Zealand businesses exported $21.4 billion worth of goods and services to mainland China, according to New Zealand Trade and Enterprise. China is New Zealand’s largest trading partner and largest total export market.
We are already feeling the fallout of the Chinese economic slowdown through lower tourism numbers and lower export commodity prices.
One bright spot in recent weeks has been a bounce-back in dairy prices, which suggests that for many Chinese consumers, dairy products are now a staple rather than a luxury item.
But long term, it is clear we can no longer bank on the kind of rapid growth out of China we experienced in the wake of the free trade deal in 2008.
Some commentators fear China’s economy is on a similar path to that of Japan, where a phase of rapid growth was followed by a long period of stagnation and deflation.
Low birth rates and cautious consumers threaten China’s ambitions for continued economic expansion.
On that basis, the Year of the Dragon couldn’t be more well-timed. It could be the circuit-breaker China needs to regain its confidence.
That would be good news for New Zealand.
