NZ ‘shouldn’t miss Belt and Road bandwagon’
Concerns about Chinese investment in New Zealand are never far from the surface, but one Chinese bank operating here says we have much to gain - and could even benefit from stepping up our ties to a major Chinese initiative. Sam Sachdeva reports.
With trade between China and New Zealand tripling since the two countries signed a free trade agreement in 2008, it’s no surprise that Chinese banks have seen merit in setting up shop here.
The China Construction Bank, Bank of China, and Industrial and Commercial Bank of China have all been operating here for some time - but what are they bringing to the table?
Wee Li Cheong, the deputy director of Bank of China New Zealand, says the strong relationship between the New Zealand and Chinese governments is one reason for the Chinese banks setting up here.
“My personal view is it could be a strategic reason, the growing reputation of New Zealand from the tourism sector, from agriculture, and also because New Zealand has a longstanding bilateral relationship with China, the signing of the FTA in 2008 and I think banks are leveraging on that as well.”
Wee Li says the bank’s main focus is on commercial activity, with trade finance and foreign exchange services among its areas of expertise.
Most of the companies on the bank’s loan books are local rather than foreign, with the bank running “matchmaking” sessions to link up Chinese investors with Kiwi companies looking to do business in China, including those in agribusiness and e-commerce.
“What we’ve done is we’ve brought a lot of New Zealand companies for them to explore the market, so I think that is very beneficial to those who have attended and we’re seeing results.”
New Zealand has no problem with the quality of the goods it produces, he says: instead, the main issue is navigating the language, cultural and finance barriers that come with entering the Chinese market.
"It could be because they need to go through various applications for import approvals, there are certain barriers for certain products, so I think there is still a challenge [in China], but it is what it is and we are trying to overcome some of those challenges [through the matchmaking sessions].”
Migration and mortgages
While the bank’s focus is on commercial activities, it does have some involvement in other areas.
Last year, it signed a deal with Immigration New Zealand to streamline the application for wealthy Chinese wanting to study, visit or invest here, which Wee Li says is about attracting “high-quality candidates” to New Zealand.
“We are sourcing clients that we know, that we have information on, we know their details, these are good-quality clients that are going to fulfil the requirements.”
The Chinese government has recently tightened rules on Chinese companies investing in foreign assets in an effort to strengthen the domestic economy, but Wee Li says that is not a total barrier to investment in New Zealand.
“Regardless of whether there are restrictions or further restrictions or liberalisation of the repatriation of funds, if you have a feasible company, a feasible product and you have a genuine Chinese investor, I think there shouldn’t be any issues with the investment.”
With New Zealand banks last year cracking down on lending to foreign home buyers, some suggested the Chinese banks could step into the breach.
However, Wee Li says consumer banking is still “a very small portion” of the bank’s business.
“If someone from China applies for the immigration channel, the pathway, obviously they would be keen to secure a house, so we do provide that convenience, but having said that, these are our private banking clients from China, so we know their source of income, we know their history, and we do have high standards of credit checks for any one of our clients who wants to purchase a house.”
Belt and Road booster
One of the Bank of China’s main priorities at present, and where Wee Li thinks New Zealand can significantly benefit, is China’s Belt and Road Initiative.
The Bank of China is a promoter of the trillion-dollar project, launched by Chinese President Xi Jinping in 2013 with the goal of revitalising ancient trade routes such as the Silk Road.
So far, much of the focus has been on infrastructure projects in developing countries, but Wee Li says it is not simply about bricks and mortar, covering everything from culture to science.
“It’s kept as flexible as possible so it could integrate, because every country has different challenges and opportunities, but when it comes to implementation it’s very much based on the project itself.”
Two major turning points for New Zealand came first in 2015, when the Chinese government released an action plan which included a route towards the South Pacific, and then earlier this year when more than 100 countries attended a Belt and Road Forum hosted by Xi, rapidly expanding its scope.
As a Belt and Road promoter, the Bank of China set up a US$100 billion fund in 2015 to finance projects for three years.
$30 billion has already been handed out, with more still in the pipeline, and Wee Li says a number of new funding avenues have opened up since Belt and Road was launched.
In the early days, the bulk of the funding came from the Chinese “policy banks”, set up to finance trade development and state-invested projects with long-term loans for developing countries.
“We need to hurry up before we miss the bandwagon.”
As the project matured, private sector involvement has increased, including the establishment of a Green Silk Road private equity fund to support environmentally friendly projects.
Deutsche Bank, Germany’s largest bank, has signed a deal with the China Development Bank to provide up to $3b towards Belt and Road projects, while the Hong Kong Stock Exchange has relaxed some of its listing rules for companies linked to the initiative.
The Asian Infrastructure Investment Bank, set up in 2015 to back infrastructure projects in the Asia-Pacific, has also completed nine transactions in developing countries and, at a recent meeting Wee Li attended, expressed an interest into developed countries.
He says that could be valuable for New Zealand, the first Western developed country to join the AIIB.
However, Wee Li says everyone he has spoken to in New Zealand agrees the country has been slow to act on the possibilities Belt and Road offers.
As he puts it: “We need to hurry up before we miss the bandwagon.”
“Policy wise, we shouldn't sacrifice, but at the time we need to have more robust discussions, more think tanks, a working committee to set up with various departments to look at what is the potential in terms of Belt and Road and how both nations can benefit.”
While the two governments signed a cooperation agreement when Chinese Premier Li Keqiang visited in March this year, Wee Li says other countries - largely developing economies - have been quicker to identify how Belt and Road can help them on infrastructure projects or in other areas.
In New Zealand’s case, he believes Belt and Road’s emphasis on art and films could benefit the country’s movie industry, while our tourism sector could also be a winner, with Chinese tourists spending over $1.5b last year.
With rising tourist numbers creating a bottleneck in terms of infrastructure, working with China could be one way to ease the pressures.
“We [NZ] lack the resources, we lack the infrastructure - that’s plain and simple. I have no doubt that the New Zealand government or New Zealand companies can do some of these large infrastructure works... I think the question is, how quick can we move? And the Chinese government, especially under the Belt and Road can offer that [infrastructure] solution because they can get things done quickly with good quality, they can get the funding in place. The question is what sort of model should we have?”