Harnessing the Potential: China’s Economy and China-New Zealand Relations

Remarks by HE Dr Wang Xiaolong at the 10th China Business Summit, 2024
2024-05-20 07:48

Photo by Vicky Lu

Rt Hon Christopher Luxon,

Hon Todd McClay, 

Leaders of the business community, 

Ladies and gentlemen, Dear Friends,

Kia ora!

It is a privilege and pleasure to address the China Business Summit again. And thank you, Simon and Fran, for your kind invitation. Over the years, the Summit has evolved to become a go-to platform for deepening China-New Zealand mutual understanding and advancing our bilateral relationship, a relationship that matters for both countries but stands at a critical juncture, on two accounts.

 First, we’ll soon celebrate the 10th anniversary of the establishment of the Comprehensive Strategic Partnership between us, yet another major milestone in our relationship.

Second, profound changes are taking place both in the international environment and in our respective countries. 

Such that today’s Summit carries even more significance for the two sides to chart the course for future cooperation. 

It’s no secret that practical economic and trade cooperation is an integral part of China-New Zealand relations. Given many of you present here today are participants, contributors or stakeholders in relation to what happens on that front, I’d like to start by sharing my observations on the state of China’s economy and what it means for the relationship. 

In the past 50-odd years since the establishment of our diplomatic ties, in particular the last decade, bilateral economic and trade cooperation has made significant and rapid progress: China has been New Zealand’s largest trading partner, largest export market and largest source of import for over ten years. Working together has delivered tangible benefits to the two countries and two peoples. In fact, the footprint for the evolution of our economic ties is closely correlated to the trajectory of China’s own reform and opening up, which has been a consistent and powerful source of expansion in our bilateral trade.

China has grown to become the second largest economy in the world, and by some measures, it is already the largest. Its economic transformation has nurtured an increasing number of middle-income earners, a maturing super-sized market, with rising appetites for quality products and services. 

China’s trade in goods has ranked first globally for seven years in a row. It is also the major trading partner for over 140 countries and regions including New Zealand.  

As for China’s economic outlook, intriguingly, there are now in some Anglo-Saxon media two diametrically opposing narratives. One says that China has already peaked as an economy, and some naysayers even come to the conclusion that China is on the brink of imminent collapse. The other says that the Chinese economy is so strong as to threaten flooding the rest of the world with its “overcapacity”. By common sense, these two opposing narratives cannot be right at the same time. Going deeper, they are, in fact, both wrong.

Let’s first unpack the so-called “peak China” theory. Indeed, the pace of the country’s economic growth has slowed somewhat in recent years, but the Chinese economy, defying both internal and external headwinds, managed to register a 5.2 percent year-on-year growth in 2023, faster than most other major economies. It is no small feat for a 30 trillion-dollar economy. And according to the latest data, the country’s GDP grew by 5.3% year-on-year in the first quarter of 2024, and from January to April this year, China’s foreign trade value registered a growth of 9.8% year-on-year, faster than widely anticipated. 

For many years, China has contributed more than 30 percent on average to world economic growth. Looking into the future, China will remain an important powerhouse driving global growth for many years to come. The IMF’s latest report forecasts that for the next five years, meaning through 2029, China will contribute at least 21% of global growth, bigger than all the G7 countries combined. 

More importantly, the Chinese economy is now undergoing profound transformation, focusing more on high quality development rather than high speed growth. This means we’ll actively and effectively promote higher-quality growth while increasing economic output in the coming years. What’s even more significant is that high-tech industry in China has grown exponentially, with new quality productive forces emerging at an accelerating pace. China’s total input in research and development, and investment in the high-tech sector have been growing at double-digit rates for several years running, enabling China to take the lead in the number of patent applications in increasing technology clusters. China’s high-speed railroad network continues to expand and upgrade. The country has also emerged as a global leader in 5G, aerospace, electric vehicles, lithium-ion batteries, photovoltaic products etc. Notably, a large part of the above has been achieved despite the constant technological blockade, embargo, and protectionist measures leveled against Chinese companies by the US-led efforts to erect ever higher walls around allegedly small yards that keep expanding. All of this, again, speaks volumes about the resilient and innovative nature of the Chinese economy, and the promising prospects for its long-term growth. 

Furthermore, China remains steadfast in promoting opening-up as its basic national policy, and is committed to building an open world economy as well as promoting economic globalization featuring inclusiveness and universal benefits. The Belt and Road Initiative is widely welcomed by the international community as a cooperation platform for China to enhance connectivity and share development opportunities with the rest of the world. With continuous upgrading in quantity and quality, BRI keeps injecting new impetus to the world economy and breaking new ground for global development, growing into a major platform for international economic cooperation. In that process, the geographical configuration of China’s foreign trade is being put on a more balanced, stable and sustainable footing, with a higher proportion of cooperation with the Global South and BRI partner countries.  

Second, the notion that there is massive overcapacity in China is at best misguided, which is nothing but another ploy to hold China back. The growth of emerging industries in China is fully consistent with supply and demand and the dynamics for comparative advantage. Our leading edges in some high-tech sectors are gained through years, and in some cases, decades of painstaking hard-work driven by performance and full-on market competition. 

Looking back, it was the Western industrial countries that preached to China in its early stages of development the virtues of an open market, free trade and sustainability. We took their advice seriously, and perhaps too seriously, and made the strategic choice of reform and opening up in line with our own national conditions and global market trends in the late 1970s and has since gone on to become a staunch supporter and above all, a faithful practitioner of an open world economy and economic globalization. China has fulfilled all its commitments and obligations under WTO and its FTAs with other countries and regions including New Zealand, delivering remarkable development for itself, and at the same time, contributing to global growth. Then, ironically, the very countries having lectured us in the first place have ditched their own sermons. It so turns out that the “fair competition”, “comparative advantage” or “free trade” they espouse is but a game that must be won by them and them alone, and is for everyone else to lose.  With what they have been doing, they are, in the words of the Swedish Prime Minister, destroying global trade, as they have castrated the rules-based Multilateral Trading System we all rely on and cast out of the window the same rule-books they have brandished and thrown at everyone else. And that also reveals the true colors of their much-trumpeted “rules-based international order”, which in actuality only means that I rule and I order, and that you are ruled and can only do what I order you to. 

Demand-wise, the world counts on the high-tech green industry as a major pathway to tackle climate change, as the green transition can only be achieved through technological progress and market mechanisms. In fact, according to the International Energy Agency, to realize carbon neutrality, the world will need 45 million New Energy Vehicles by 2030, 4.5 times that of the demand of 2022. When the global capacity is still far below the market demand, how could there be overcapacity?  Based on market principles, China has made steady progress in the new energy area, delivering global public goods such as photovoltaic products, wind farm facilities and EVs, which helps to enable not only China but also the broader international community to transition to a low-carbon economy at affordable cost.

Some people have argued that the strongest evidence of the so-called overcapacity is that China exports too much and accounts for an excessive amount of global market share. If that makes any sense, the US and the EU should have stood accused of overcapacity for decades since the airliners produced by them have a market share of over 90 percent. They would tell you that it is different as both Boeing and Air Bus meet a demand. But so do BYD and Xpeng. In fact, China’s new energy industry mainly meets the needs of the domestic market, exporting only 12.7 percent of Chinese-made EVs to other countries. If this amounts to overcapacity, then what about Germany, Japan and the US, who export 80, 50 and 25 percent respectively of their manufactured automobiles? By their standards, all this shouldn’t have taken place; there wouldn’t be much international trade between countries then, and the world would be much poorer for that reason.

Obviously, the so-called “China Overcapacity” narrative and the policy measures they are used to justify is yet another example of politicizing economic issues and weaponizing trade policies blatantly as a tool for what they claim to be fair competition. This largely explains why we reject the use of competition to define relations among countries, as in competitions, there will inevitably be winners and losers. Businesses can compete according to market rules and principles. And when a business loses in a competition, it may simply fold, in a process of constructive destruction. Contrastingly, no country would want to or afford to lose because countries simply cannot fold. That is why competitions between countries will easily degenerate into an all-out, no-holds-barred, escalating rivalry, confrontation or even conflict. This, I am afraid, is no good news for either the individual countries or the deeply interconnected global economy, in that it will distort trade, block innovation, undercut growth, and undermine our respective and common efforts to improve people’s livelihoods and tackle global challenges. And all this may come on top of these competitions being deeply and most probably dangerously destabilizing for regional and global peace and security.

Photo by Vicky Lu

Ladies and Gentlemen,

The economies of China and New Zealand are highly complementary. Our bilateral cooperation, on that basis, has come a long way. The success story has only been possible with the partnership responding to the evolving demand from both sides and fully leveraging comparative advantages for mutual benefits. China is willing to work with the New Zealand to consolidate this mutually beneficial relationship, generating more tangible results for our two peoples.

 To make this happen, we need to follow a two-pronged approach, or walk on two legs as we say in China: keep the momentum and aim even higher in the traditional sectors of our collaboration, such as goods and services trade; and at the same time, explore new growth areas aligned with our respective domestic development agenda, such as infrastructure, technology and innovation, green development, and stable and resilient supply chains. 

At present, China is vigorously pursuing an economic transition towards high-quality development by fostering new quality productive forces. Likewise, the New Zealand coalition government is prioritizing economic stabilization and recovery, lowering the cost of living, improving the environment for doing business, streamlining and upgrading the structure of the economy, and improving productivity. There is huge room for our two countries to continue to be mutually helpful partners to empower each other to achieve greater success based on our respective demands and comparative advantages.

 Indeed, robust economic cooperation has always been a strong pillar of the bilateral relationship. However, the thriving economic ties could not have grown in a vacuum; rather, it is intimately related to the sound development of our overall relations. It is fair to say that the leap in our economic and trade cooperation would not have been possible without the steady growth of our broader relationship. 

We are glad to note that the two have formed a positive loop of mutual support and mutual promotion thanks to efforts on both sides. With the conclusion and above all, the implementation of our now upgraded bilateral FTA, two-way trade between us has expanded exponentially. Notably, China has almost consistently registered deficits vis-a-vis New Zealand, but this has never diminished China’s willingness to grow our trade with New Zealand. In this connection, China has, time and again, demonstrated that it honours its words and is committed to progressively opening up our market for win-win outcomes. By contrast, certain countries claim to be New Zealand’s friends with shared values, but nonetheless either refuse outright to open their markets to New Zealand or choose to eat their own words when it suits them. As far as China is concerned, when we make a promise, we shall deliver. More importantly, we never turn our back on our friends that work with us in good faith.   

China and New Zealand are divergent in history, culture, social system and development stage. It is only natural that we have differences on certain issues. The challenge is to manage these differences through constructive dialogues, without allowing these differences to define, let alone disrupt the development of the bilateral relations. 

It is true that the world around us is undergoing some profound and complex changes with upending upheavals and even turmoils. Yet no matter how the international landscape evolves, China remains committed to supporting true multilateralism, resolving disputes through peaceful means, and upholding the international system with the UN at its core and the international order based on international law to promote world peace and stability. Meanwhile, we will remain steadfast in safeguarding our own sovereignty, security and development interests, as all countries would do.

In recent years, there has been a saying that China has become increasingly “aggressive” in regional and international affairs. However, a closer look at China’s posture will tell you that in most cases, the way we have conducted ourselves has largely been responsive or even defensive, preferring to resolve the disputes peacefully, in the face of attempts to encroach on our sovereignty, territorial integrity and other key legitimate interests or in face of naked provocations. Not all other countries would respond the same way under similar circumstances. It should not be a surprise that some may opt to bomb their way out, just as they have done repeatedly in their own and recent world history. 

Currently, there are voices both in and outside New Zealand framing the so-called “China Threat Theory,” attempting to persuade New Zealand to perceive China as a threat. But the truth is, there are neither historical grievances nor fundamental conflicts in interest between our two countries. The fact that our commonality far outweighs our differences remains unchanged; the complementarity of our interests remains unchanged; the enormous room for cooperation between our two sides remains unchanged. China is not a threat to New Zealand. Rather, China represents for New Zealand an opportunity and a mutually beneficial partner. The more complex the global situation is, and the more noise we hear, the more courage and wisdom we will need to manage our differences constructively. More than ever, we need dialogues rather than “megaphone diplomacy”. We must not close our eyes and minds to realities and give space to groundless accusations, which would erode the precious trust we have built up to underpin the healthy development of bilateral relations and particularly the mutually beneficial cooperation that is valued by both countries.

In this connection, I would also like to touch on the recent debate here in New Zealand on AUKUS, given its relevance to the mutual trust between China and New Zealand. China does have serious concerns on AUKUS, as it has serious implications for the international nuclear nonproliferation regime and efforts to keep the region nuclear-free. It also threatens to start a regional arms race and lead to escalating tensions.

You may have noticed that top US diplomats have stated that the purpose of AUKUS is to preserve US primacy, and they have openly linked AUKUS nuclear submarines with the situation in the Taiwan Strait. This confirms that AUKUS is a nuclear-based military-nature alliance clearly and unabashedly designed to maintain US hegemony and contain other countries’ development. Joining such an alliance will not make any country more secure or make the Asia-Pacific region more stable. The sole purpose of its “second pillar” is to serve and support nuclear-related military cooperation under the “first pillar”, rather than being an innocent platform for technology sharing. Many people in New Zealand and beyond believe that joining such an alliance in whatever form is taking sides. 

China has always respected the sovereignty of other countries, which naturally includes the making of their foreign policies. However, it is one thing for a country to develop relationships with countries that are not alike or even don’t like each other; it is quite another to join a military alliance openly targeting other countries. From the painful lessons of human history, military alliances are better at winning wars than keeping the peace. By binding others or even entire regions to the war chariot of countries seeking hegemony, military alliances tend to exacerbate confrontation, and trigger, escalate, and expand conflicts, rather than the contrary. Counting on military alliances to maintain peace is a poisoned chalice, about which we should not harbour any illusions.

Not long ago, I went to attend the ANZAC Day Memorial Service in Wellington, which was unfortunately canceled due to bad weather. The towering monument stands as silent testimony to the scourge of war, reminding us of the lessons we should learn from history. Over 10,000 New Zealand soldiers were killed or wounded in World War II. For China, the number of casualties encompassing both military and civilian deaths and injuries in the same war is a staggering 35 million. Having emerged from the conflagrations of wars, the Chinese people cherish most keenly the value of peace. Though history is sometimes sobering to revisit, it must never be forgotten.

Coming back to AUKUS, at the end of the day, it will be a call for New Zealand to make. We hope and trust that New Zealand will eventually make its decision taking fully into account its own long-term fundamental interests as well as the imperative to promote the healthy and stable development of our bilateral relations and to preserve the hard-won peace in the region and the world.  

Ladies and Gentlemen,

This year marks the 10th anniversary of the establishment of the Comprehensive Strategic Partnership between our two countries, which offers us a significant opportunity to take stock of what has been achieved and look ahead at future steps we could take together. On our part, the commitment to developing the relationship is firm and clear, and we want to continue to see New Zealand as a good friend and an important partner.

For China, the cooperation with New Zealand has no forbidden areas and our friendship has no limits. As it takes two to tango, the future of our bilateral relations depends on efforts from both sides. On the basis of mutual respect and accommodation, focusing on cooperation and benefiting the people, we look forward to working together with New Zealand to take our Comprehensive Strategic Partnership to the next level, to better benefit the two countries, particularly the two peoples, and make positive contribution to regional and global peace, stability and prosperity.

Thank you!