Politics

What does China’s Belt and Road mean for NZ?

China's trillion-dollar 'Belt and Road Initiative' is still in its early stages, but one expert says New Zealand shouldn't take too long to work out how we can benefit from the project. Sam Sachdeva reports.

Chinese investment is always a touchy subject in New Zealand politics - and that goes double in an election year.

It's no surprise then that ears were pricked during Premier Le Keqiang's visit earlier this year by the signing of a memorandum of agreement between New Zealand and China which could lead to millions more dollars flowing in through a Chinese strategy to lead on the world stage.

Yet while the Belt and Road Initiative has been around for several years, it is in many ways still a mystery.

Stephen Jacobi, executive director of the NZ China Council, has just returned from a trip to China to get a better appreciation of what the Belt and Road Initiative may mean for New Zealand.

The initiative was first pitched by Chinese President Xi Jinping during a 2013 visit to Kazakhstan as a way of improving transport links, trade ties and personal connections through a number of projects along ancient trade routes.

Since then, a number of infrastructure projects have been developed across Asia and elsewhere, with overall spending for the initiative possibly running into the trillions.

Paul Clark, a professor of Chinese at Auckland University and associate director of the New Zealand Contemporary China Research Centre, says Belt and Road is “very much part of the Chinese government’s rhetoric” as it looks to grow its economy.

“It has great promise I think in providing an outlet for Chinese industry and construction in particular to engage with Central Asian and other countries to use up surplus supply of construction people, workers and equipment and so forth.”

Widening belt

While the possibility of Chinese-funded road and rail has dominated much of the discussion in New Zealand, Jacobi says “the real play” in our corner of the world is less about infrastructure and more about connecting up with China through including the flow of goods, services and people.

“I’ve even heard reference to the Digital Silk Road, the vision is expanding ... there’s a bit of talk in China about Belt and Road being a new way to manage globalisation instead of the old ways, which have been done off the back of trade liberalisation in particular.”

Ongoing talks with China over an upgrade to the bilateral free trade agreement are “part and parcel” of Belt and Road, he says, giving New Zealand the chance to pitch improved terms as something of benefit to China as well as us.

“Just New Zealand asking for better access for our dairy products because we think that is useful for our exporters, it’s not as convincing as advancing it in terms of an overarching concept of Chinese leadership that’s bought into at the highest level.

“Maybe it’s opportunistic, but I also think there’s a bigger picture - if we can build a more secure, sustainable supply chain for dairy products between New Zealand, China and other areas of Belt and Road, you’re looking at something bigger than just getting the safeguards removed on our dairy trade to China.”

Clark believes New Zealand could also serve as “a bridge” into the South Pacific, where China is already working on a number of infrastructure projects.

While existing development projects may be relabelled under the Belt and Road badge as an initial “cosmetic” move, he says China could work with New Zealand on more significant changes.

“It could be that One Belt One Road is used as a means by which China might wish to extend its presence in the South Pacific, and that’s something that New Zealand needs to be aware of and respond to in assisting both sides perhaps, or all sides, in making sure there are good outcomes.”

Hidden hooks?

There are a number of obstacles to be cleared before any lofty targets can be reached.

One issue to be navigated is making sense of China’s motivations and understanding whether there are any hooks attached.

New Zealand was quick to sign an agreement, but other allies have not been so keen; notably, Australia refrained from putting pen to paper, apparently wanting to assess individual projects based on its national interests.

Clark says that may be in part due to the country’s closer ties to the United States, and the resulting pressure it comes under to be wary about China’s influence.

“I think of Australia as an American ally, and I think it’s Australia’s concerns to please Washington DC perhaps that makes it more cautious with these Chinese initiatives.”

He believes Belt and Road is in part about Beijing building a “counterweight” to Washington, but argues New Zealand is more than capable of looking after itself.

“We know, I hope, where our interests lie and will draw lines when they’re needed, but joining an effort like this seems to be I think a legitimate part of our engagement with China and our engagement with the rest of the Asia-Pacific region.”

Packaging up a pitch

With Belt and Road in some ways presenting a blank slate for countries to pitch their proposals, Jacobi says New Zealand has some thinking to do “about the way we package all of this up and present it to the Chinese”.

“We really do have a problem at the moment that it’s very clear to see what New Zealand can get out of the relationship with China, but it’s less clear to see what the Chinese can get out of it.”

While Australia hasn’t signed a formal agreement, he says its businesses seem to have been faster out of the blocks in recognising Belt and Road’s potential, with a number of Chinese-funded projects already underway.

Jacobi says New Zealand shouldn’t let too much time go by before it develops more concrete ideas for what Belt and Road could achieve in New Zealand.

“We’ve really got to move from a very conceptual phase to talking about more definite projects: I can see scope for some projects that exist at the national level between New Zealand and China on bigger picture economic cooperation-type matters, and I can see scope for more discrete projects with individual provinces.”

The NZ China Council is working on research about what Belt and Road means for New Zealand as “a smaller, more distant neighbour”, including what types of projects may work here.

The work is intended to give the public, businesses and policymakers a better idea about what we can hope to achieve, and what must happen first.

Government getting to grips

The Government itself is still getting to grips with what Belt and Road means.

In a statement, Foreign Affairs Minister Gerry Brownlee said Kiwi officials were still working with their Chinese counterparts on a detailed work plan, to be completed within the next 18 months as part of the memorandum of agreement.

"As a government, we are refining how we will engage with the initiative, and I will continue to lead that coordination process."

Brownlee said New Zealand's approach to Belt and Road would "be consistent with our track record as an advocate for open, rules-based trading systems".

"New Zealand’s engagement on China’s Belt and Road initiative is starting from a good base. Our relationship with China is built on a constructive, pragmatic approach in areas that align with our mutual interests."

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