Is it in New Zealand's best interests?
Until recent times, New Zealand had a favoured relationship with China. This benefited our country economically during the global financial crisis and since.
China is our largest trading partner, our second largest source of tourists and Chinese investors have come to the aid of a number of struggling New Zealand businesses that potentially would have failed without their support. Some Chinese entities have also offered cutting edge technology to business in New Zealand, Huawei is a case in point.
There is a sense among business in New Zealand and indeed potential Chinese investors themselves that New Zealand is no longer as welcoming of Chinese investment as it has been. In my view that is not in New Zealand's best interests either in the short or long term.
China is an economic powerhouse. It has ambition to be the world's most successful economy. Its economic transformation over the past four decades has been remarkable — it has lifted 500 million of its people out of extreme poverty. That transformation has benefited New Zealand as the Chinese consumer has looked to acquire food products it can trust and experiences that New Zealand has to offer. China has also invested heavily in developing its ability to innovate including in technology.
Companies such as 2degrees and Spark have no doubt acquired Huawei's products because they have confidence in the technology they offer.
New Zealanders do need to appreciate that while we love our country and see it as special — the things we offer China can be acquired or enjoyed by them elsewhere. In my view, we should not take our largest trading partner for granted. Nor should we assume that others will fill the gap if China goes elsewhere.
In business, we typically seek to avoid getting offside with a major customer.
If we have differences we tend to try to deal with those with great care with a view to preserving the business relationship beyond the immediate issue. Politicians may well disagree with me but I'd argue that fundamentally the approach should not be much different when we have a divergence of views or concerns with a major trading partner.
I'm not suggesting that New Zealand should not raise legitimate concerns it has with China whether that be in respect of security issues, territorial issues or human rights. It is my understanding that over decades skilled New Zealand political leaders have done so and New Zealand has been respected for that.
New Zealand has made a number of decisions over the past year or so that China may well perceive as New Zealand sending a message that they are not welcome investors here. These include:
● changes to our foreign investment regime making it difficult for foreigners to buy residential property. While this applies to all foreigners (other than Australians), many perceive it to have been targeted at Chinese investors given the commentary made in the lead up to the 2017 election campaign;
● changes to the foreign investment regime that make it virtually impossible for foreigners to acquire farmland;
● banning Huawei from supplying mobile network kit to Spark for use in its 5G network on national security grounds.
There are many positive examples of Chinese investment in New Zealand. Some of these include Bright Dairy's investment in Synlait Milk when at the time New Zealand investors were not willing to stump up.
Today Synlait Milk has a market cap of $2 billion — is an innovative dairy processor, export earner, employs over 700 people and has given New Zealanders an opportunity to invest in our dairy industry outside owning farms.
Similarly, Shanghai Maling invested in Silver Fern Farms in 2016 at a time when the company was under significant financial pressure. Just last week it was announced that Yili had signed a conditional deal to acquire Westland for $588 million. Westland ran a competitive process and Yili made the most compelling offer to Westland and its farmers.
On each of these occasions New Zealand investors could have provided these New Zealand businesses the capital they needed to better secure their future but elected not to do so. So rather than being critical of investment from China — we should, in my view, respect their willingness to take a more long term view than other investors — including New Zealand investors.
Rumour has it that as a result of a variety of "signals" that China has received from New Zealand that New Zealand has lost its "favoured" status with China — a status earnt over decades by successive New Zealand governments being seen by China as playing with a "straight bat" and being open to building a long term relationship with a country that clearly had the determination to become a major economic superpower.
We have in Jacinda Ardern a very skilled politician and communicator. Let's hope she can apply those skills to get our relationship with China back on track. It's a relationship we need and one critically important to our economic security.
● Cathy Quinn is a senior corporate partner at MinterEllisonRuddWatts and a professional director.