The Chinese Navy could benefit from the NZ ferries deal. Photo / 123RF
New Zealand’s new Cook Strait ferries will be built by a Chinese state-owned shipbuilder identified by analysts as being embedded in the country’s military network.
It is the type of deal critics have previously warned could indirectly fund China’s military expansion, and follows New Zealand’s spy agency raising concerns of Chinese espionage targeting our critical infrastructure.
Rail Minister Winston Peters told reporters that the military links were not a concern after he announced on Tuesday that the Government had secured a shipbuilder for new Interislander ferries.
Guangzhou Shipyard International (GSI) has been picked as the shipyard to build two new 200m-long ferries, complete with road and rail decks, and room for 1500 passengers each.
Speaking to the media on Tuesday, Peters said GSI was a “very internationally leading shipping company”.
GSI describes itself as a “national-level military enterprise”. Under parent company China State Shipbuilding Corporation (CSSC), it is largely state-owned but partially publicly listed on the Hong Kong and Shanghai stock exchanges.
The shipyard, one of the largest in southern China, operates directly under the Chinese Government and builds both commercial and naval vessels.
A specialist maritime publication reported this month that GSI is constructing at least five new special-purpose advanced warships, which appear specifically designed for amphibious assault.
The Centre for Strategic and International Studies (CSIS), a Washington DC-based bipartisan research institute focusing on political, economic and security issues, has raised the alarm about the military ties to the shipbuilder.
A CSIS study published in March said CSSC has intentionally blurred the lines between its commercial and military operations and uses its extensive commercial network to support the state’s naval modernisation.
The report warned that international customers of the shipbuilder are ultimately supporting China’s defence industrial ecosystem by subsidising military operations.
The report analysed all of China’s 307 shipyards, putting them into four tiers that reflect their integration with China’s military industrial ecosystem.
GSI, where New Zealand has signed up to buy new ferries from, was the highest risk at tier one, alongside 11 other yards.
“By purchasing vessels from these yards, foreign firms have funnelled billions of dollars of revenue into entities that are central to China’s naval modernisation,” the report said.
“Commercial revenues effectively subsidise China’s naval expansion,” it said.
Asked on Tuesday whether there were strategic concerns regarding GSI’s military links, Peters said, “Oh, surprise, surprise, surprise, this is China we’re talking about.”
Peters said the military links were not a concern, raising the fact that Air New Zealand flies Boeing planes, also built in the same facilities as military aircraft.
He said every component of the ferries would be inspected before they arrive in the country.
“I come with some brilliant news for you guys, and all you can see is the downside. Get a bit positive: the great news is I inherited a disaster and I’m going to fix it with a great team,” Peters told reporters.
The announcement of a deal with GSI comes months after New Zealand’s spy agency raised concerns over Chinese interference in its most recent security threat environment assessment.
The New Zealand Security Intelligence Service (NZSIS) found that China was the most active force undertaking foreign interference on our shores.
There is undoubtedly undetected espionage activity happening within New Zealand, harming our national interests, the report said.
“The NZSIS has had some success disrupting this activity, but foreign states continue to target New Zealand’s critical organisations, infrastructure and technology to steal sensitive information.”
It highlighted telecommunication networks, water services, ports, emergency services, and financial services as at-risk critical infrastructure.
“Access or control could be gained, for example, by creating physical or remote entry points to key assets for later exploitation, creating supply chain dependencies, or compromising significant and sensitive data sets,” the NZSIS said.
In response to questions from the Herald, a spokesman for the NZSIS and Government Communications Security Bureau (GCSB) said national security considerations are part of the government procurement process.
“The intelligence agencies support these processes as required.”
Meanwhile, alleged potential Chinese espionage within the maritime sector has recently become a topic of contention, with the United States Government accusing China of significant cybersecurity and national security risks on port infrastructure.
In 2023, the Wall Street Journal reported the FBI had discovered unauthorised intelligence collection devices on cranes at the Port of Baltimore, built by Shanghai Zhenhua Heavy Industries (ZPMC), a Chinese state-owned engineering company linked to the CSSC.
That led to a joint investigation by the Congressional House Committee on Homeland Security, and the Select Committee on the Chinese Communist Party, which highlighted a number of concerns.
“The evidence gathered during our joint investigation indicates that ZPMC could, if desired, serve as a Trojan horse capable of helping the CCP and the PRC military exploit and manipulate US maritime equipment and technology at their request. This vulnerability in our critical infrastructure has the potential to affect Americans from coast to coast,” the probe found.
It suggested China could use backdoor technology to gain remote access to the cranes and gather information.
Early this year, the Trump administration announced plans to tackle China’s grip on the global maritime industry, in an attempt to bolster American shipbuilding.
In late 2020, US entities were banned by a presidential executive order from owning shares in companies linked to China’s military. The list of companies included CSSC.
Ethan Manera is a Wellington-based journalist covering Wellington issues, local politics and business in the capital. He can be emailed at ethan.manera@nzme.co.nz.