With Chinese New Year celebrations underway around the country, its unfortunate that the suggestion New Zealand's diplomatic relationship with Beijing has soured is dominating headlines.

But we just can't afford to ignore the risk that it has.

Even if you buy the Government's line, that the story is being politicised and overplayed, New Zealand's ability to chart a path between US and Chinese interests, against a back drop of trade wars and tech wars, is a pressing issue.

We need a national conversation about where we are going on foreign policy because the global environment is changing.


Unlike housing, or tax, or cannabis law reform it hasn't been widely debated - until now.

Hopefully the choice isn't as stark as an "all or nothing call" between the US and China.

New Zealand has done a good job of maintaining an independent diplomatic stance since 1984 when we made the nuclear-free call.

The stakes were high then and are again now.

Beijing-based New Zealand businessman David Mahon says we have a problem.

He says the Chinese leadership is unhappy with what – rightly or wrongly – they perceive as a change of stance in our relationship.

He says we need to act urgently to mend bridges in Beijing or we'll start to see a response which could include tougher regulatory scrutiny, causing serious issues for our exporters.

Other Kiwi experts on China - like Rodney Jones of Wigram Capital (Also Beijing-based for many years) - argue that it is time to reset out our relationship with China - given its shift towards a more authoritarian regime.


He believes we should be pulling back from our "special friend" status to a more business-like relationship – along the lines of Australia's.

The pair differ on some fundamental issues – not least the state of the Chinese economy – but they agree, in theory, on the need to retain an independent foreign policy with our own interests at heart.

Is there a policy reset going on?

The Prime Minister has said no. But Winston Peters appears to have sent signals along those lines in a US speech on Asia Pacific policy.

Regardless, New Zealand's difficult position has been brought to a head by the global stand-off over Chinese telco Huawei and the building of the next generation (5G) mobile network here and around the world.

News that New Zealand was "banning" Huawei from participation came as surprise to everyone, released as it was in a stock market announcement by a disgruntled Spark.

In fact the Government says it is not a ban, and not nationality issue. It says it is a technological issue and there may be a way forward for Huawei.

But Mahon says, in context of recent pressure the US has put on allies globally, the perception in Beijing is that we have fallen into line.

We really can't afford to pick a side between our major trading partner and our traditional political ally.

What is the way forward?

That should depend on what New Zealanders choose - ideally with all the facts on the table.

We could try and ride this out, acting as if it is business as usual.

That's been the Government's preferred option so far.

That would likely leave Beijing dissatisfied and would effectively reset the relationship.

We would be relinquishing the notion that New Zealand had "favoured nation" status in China.

It might mean more regulatory hassles and hold ups on exports. It might impact tourist numbers.

To what extent I don't know – I'm not sure anyone does.

From personal perspective I couldn't care less who builds our phone network and do think the US is both commercially and politically motivated to suppress Huawei.

That's part of the big game.

I have more concern about the authoritarian direction the Chinese system is heading in, with censorship, social control and with its human rights approach in regions like Xin Jiang province.

But these value judgements are personal and applying them to trade policy gets complicated very quickly.

Where do we draw lines?

I love that freedom of speech is enshrined in the US constitution but find the fact that nearly 10 per cent of young black men are incarcerated disturbing and disappointing.

The NZ Trade and Enterprise website proudly notes growth in our trade with Saudi Arabia – our 20th largest trading partner.

I don't have space to list all the human rights issues I have with that regime. We trade with many other countries with starkly different values to ours.

New Zealand needs to be able to make statements on human rights that reflect our national values.

We need to be able to do that assertively. But we are better placed to do that from an independent diplomatic position.

With a bit of luck US/China tensions may get better not worse. We may see some form of resolution to the trade stand-off in the next week or so and that would help our cause.

Regardless, we need to do some fresh work on maintaining the diplomatic position that we have carved out across past 35 years.

We need to think deeply and talk about how we want to be perceived internationally.

Then we need our leaders to get their messaging and timing right.