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Murray McCully

6 April, 2012

Speech to China Foreign Affairs University, Beijing

Vice President Qin

Ambassadors

Distinguished guests

Ladies and Gentlemen

This year is a milestone year in which we celebrate 40 years of diplomatic relations between New Zealand and China.

I want to take this opportunity to reflect on this journey – from modest beginnings, to what is now far and away one of New Zealand’s most important relationships.

Let me be upfront and say that you could not get two more different countries in the world.

Population size is the most obvious point of difference: 1.3 billion people versus 4.3 million.

Culturally we are a young multicultural nation, whereas the Chinese civilisation is an ancient one. 

Geographically, we are located at the bottom of the Pacific Ocean, while China is known as the Middle Kingdom.

We are a developed country; China is still developing, albeit at an almost unbelievable pace.

I could go on.

It is a testament to the commitment of those on both sides who have worked over the past 40 years to make our bilateral relationship a successful one.

When our two governments established diplomatic relations in 1972, there was very little interaction between our countries.

Neither side could have foreseen the staggering changes that would take place in New Zealand, in China, and in the world.

The Four Firsts

New Zealand’s approach to China has been a consistent one over the years.

We welcome a peaceful and prosperous China, and a China that is engaged and integrated in the global community.

China’s growth benefits us all.

Accordingly, New Zealand has worked hard over the years to work more closely with China.

We are extremely proud of our ‘four firsts’ with China.

We were the first developed country to support China’s accession to the WTO. 

We were the first developed country to recognise China as a market economy. 

And we were the first developed country to begin and conclude a Free Trade Agreement with China, back in 2008. 

This Agreement remains a centre-piece of the relationship.

Today New Zealand remains the only developed country to have an FTA with China.

Our bilateral trade has grown rapidly, to reach $13.3 billion New Zealand dollars.

Our total trade in all of 1972 is the equivalent of six hours’ worth of trade today. 

We are on track to meet the goal set by Prime Minister John Key and Premier Wen Jiabao in 2010 to double two-way trade to $20 billion New Zealand dollars by 2015.

China Strategy

But political relationships, like personal ones, need refreshing from time to time if they are to keep growing. 

The New Zealand Government believes that there is still much more that we can do with China.

In February, to mark the Chinese Year of the Dragon, Prime Minister John Key launched a strategy for the New Zealand Government’s engagement with China.

The China Strategy is fundamentally about ways in which a small country can best progress its interests with a large partner like China.

When we discussed how we could advance the relationship as we approached this important milestone of the 40th anniversary, there was a sense that successful as we may have been in the past, there was still a slightly ad hoc manner about the way in which New Zealand approached the relationship.

More than possibly any other country, China expects to develop relationships that span the breadth and depth of culture, sport and science as well as business and trade.

The Strategy focuses on New Zealand’s value proposition for China and sets out a clear direction for whole-of-government effort over a five year period.

Knowing each other better is an important aspect of the Strategy, so we are looking to strengthen our interpersonal links.

This is something on which the Chinese government places a high priority, and we support that.

In our 40th anniversary year a number of New Zealand Ministers and the Prime Minister will visit China to mark the occasion and to further broaden the high-level engagement between our two countries.

And we look forward to reciprocal visits from China during this important commemorative year.

We are also in the process of establishing a New Zealand China Council to strengthen domestic knowledge of China in New Zealand.

Former Foreign Minister and former Commonwealth Secretary General Sir Don McKinnon has been appointed to lead the formation of the Council.

The Council will bring together business and political leaders as well as academics and cultural leaders with connections to China across many facets of our relationship.

The Council will lead Partnership Forum events with both high-level New Zealand and Chinese involvement.

The first of these should be launched later this year to mark the 40th anniversary.

Under the Strategy, we are looking to create the conditions for growth in trade in goods and services.

There is substantial interest in the New Zealand business community in the opportunities which China presents.

A roadshow currently travelling to New Zealand’s major commercial and smaller regional centres to inform business about the China Strategy is attracting good interest.

The statistics tell a similar story.

China is our second largest bilateral trading partner, our second largest export destination taking 12.34% of our total exports and our largest source of imports.

In 2011 alone our exports totalled $5.98 billion, a 22% increase over 2010.

New Zealand is the largest exporter of dairy products to China.

It is also our largest wool market. Our seafood, fruit, meat and timber exports are all significant.

But it is not just about selling goods.

The growth in the relationship is reflected in other ways.

There are now three Confucius Institutes and a national network of China Contemporary Research Centres in New Zealand.

Our own Asia NZ Foundation also works to build understanding and ties with China and other Asian countries.

Economic benefits flow from these increased contacts.

China is a booming tourism market for New Zealand with over 150,000 visitors in the year to February.

It is our largest source of international students with 21,258 enrolled in 2010.

So we are doing very well. Our challenge will be to diversify our export base and provide Chinese consumers with higher value and more sophisticated products and services.

It might be hard to believe, but the largest TV foreign documentary maker in China is a company, Natural History New Zealand, based in the southern city of Dunedin.

Our wine sector sees significant potential and there are opportunities in agribusiness, aviation, marine, food processing, information and communications technologies and natural products which draw on our natural advantages in agricultural production and education and innovation excellence.

This brings me to another important strand of the China Strategy: to grow our high quality science and technology collaboration.

New Zealand science is world class and China provides attractive commercialisation possibilities.

Lanzatech, a private New Zealand-based research company, is working with Chinese partners on two plants in China to convert waste gas into fuel.

And we want to increase two way investment.

Current levels are very low and we believe there is room for an increase to match our growing trade relationship.

There are already excellent examples of Chinese investment in New Zealand: Bright Dairy in Synlait; Agria and New Hope in PGG Wrightson; and Haier in Fisher and Paykel Appliances.

These investments provide jobs, much needed capital and marketing distribution channels.

Lifting the level of New Zealand investment in China is another priority.

We need to build on the successes of companies like Fonterra, Rakon and Nuplex, all of which have invested in their own, or joint venture, operations in China.

Ties that bind us

Looking more broadly now at New Zealand’s position in the world, for much of our history our geography has been a strategic disadvantage – isolated from the markets for our goods, predominantly in Europe.

Now, in the Asia Pacific Century, our location has turned to our advantage: on the rim of the region that will be the centre of economic growth for the foreseeable future.

And New Zealand’s relationship with China has a key part to play in our greater engagement in the wider region.

New Zealand is a country with much at stake in what goes on in the Asia-Pacific region.

Our livelihoods hinge on regional stability and prosperity.

Nine out of our top ten export markets are in the region.

Because of this, New Zealand engages fully in the various bodies that shape the region’s architecture.

We are active members of APEC, the East Asia Summit, ASEAN Regional Forum and ASEAN Defence Ministers’ Forum. 

These mechanisms may seem like talk-shops to the outsider, but they are important channels for a diverse set of countries to increase understanding and find ways of resolving regional problems.

Integrating the region more closely so that we all have a stake in each others’ welfare is a key aspect of regional diplomacy. 

As a result, we are seeing a noodle bowl of economic partnerships and arrangements. 

By common agreement, ASEAN is central to this process.

Like China, New Zealand has an FTA with ASEAN.

Our long-term ambition is the creation of a free trade region in the Asia Pacific.

We know China shares this goal too.

There are a range of ideas about how to get there, such as ASEAN+3, an FTA with ASEAN, China, Korea and Japan. 

There’s ASEAN+6, which adds us, Australia and India into the mix.

It will not surprise you to hear that we have a preference for ASEAN+6 – the version that includes New Zealand.

We know that ASEAN also has a vision for a Regional Comprehensive Economic Partnership.

You may have heard a lot of discussion recently about the Trans-Pacific Partnership or TPP.

New Zealand and Singapore were the founding members of TPP which is aimed at establishing an FTA for the Asia-Pacific by starting with the smallest countries first.

It became P3 and then P4. Now there are nine countries actively conducting negotiations. Still others have expressed an interest in joining. 

The TPP is a very ambitious arrangement but it is open to any country willing and able to meet its high standards.

Some might say it will be impossible for countries like China to meet those standards. 

But it was also said that China could not have a high quality FTA with a developed country either – and between us we have proven that statement incorrect.

Engagement in the Pacific

When New Zealand speaks of the Asia-Pacific, it is the South Pacific which looms large in our minds.

It is, after all, our neighbourhood.

Almost 7% of New Zealand’s population identify themselves as being Pacific Islanders.

There are more Niueans and Cook Islanders in New Zealand than there are in their home countries.

Naturally, the South Pacific features prominently in our foreign policy.

Over half of our aid programme is committed in the Pacific region.

Around a fifth of our Embassies are located in Pacific Island countries.

As China’s international footprint has grown, so has its presence in the Pacific.

Significantly, there are now more diplomats from China in the Pacific than New Zealand and Australia combined – notwithstanding the reality that six Pacific Island countries do not have diplomatic relations with China. 

Certainly, the Pacific has abundant resources, such as fisheries and minerals. 

But there is extreme and pervasive poverty in pockets of the Pacific.

It is also one of the most donor-assisted regions in the world. 

The results to date have been disappointing.

At the Pacific Islands Forum hosted by New Zealand in 2011, there was a strong emphasis on ways in which Forum members and their partners could work harder and smarter together to reverse the negative trends in the region.

We know that China, as a dialogue partner of the Forum, is committed to this process.

New Zealand welcomes greater Chinese engagement in the region.

We cannot solve the Pacific’s problems on our own. 

We can maximise our efforts if we work together more closely.

We have a deep knowledge and familiarity with the issues.

China has much to offer in terms of your own resources and development experience. 

I am already on record as stating that New Zealand’s ambition is to add another ‘first’ in its relationship with China: cooperation with China in a development project in the Pacific.

This is something being actively discussed, and something I know our Pacific neighbours will welcome.

I’d like to come back to a point I made earlier: New Zealand’s size.

It’s been said that New Zealand is a small country with big ideas.

We have been front-footed on issues ranging from climate change, to trade liberalisation, to nuclear disarmament.

We are an independent, multicultural country, based in the Asia Pacific, with a long and active tradition of cooperation in the region. 

We have strong ties with both the West and East.

We have a shared future in the region. 

For us the relationship with China is central both to our trade and economic future and to our engagement within the wider region.

We see the close ties that have developed between China and New Zealand as good for both countries and good for the region.

We look forward to the next 40 years of diplomatic relations.