13.03.2019 Author: Sofia Pale

The Deadlock between China and the West is taking its Toll on New Zealand’s Economy


Throughout 2018, the trade war mounted between China and the US. This is part of a larger standoff between China and the English-speaking world led by America, which is not only putting obvious economic interests at stake, but is also creating security issues and questioning who should possess global leadership in technology. The states who are getting involved in this dispute on the US side will suffer significant losses due to the disruption of long-established economic relations with China. One of these states is New Zealand.

New Zealand has traditionally been seen as an important player in the Anglosphere and a close partner of the United States. The two countries are engaged in close economic, political and military cooperation, which dates back to the Second World War. In 1951, along with the United States and Australia, New Zealand signed the ANZUS Security Treaty, created to oppose communist insurgencies in South-East Asia and the USSR which was supporting these movements. Later, New Zealand–United States relations began to deteriorate due to widespread protests against the Vietnam War in New Zealand, and also because New Zealand refused to host nuclear weapons on its territory. Then a new period began, relations started to thaw, and in 2012, New Zealand and the US signed the Washington Declaration, which was also aimed at strengthening the countries’ defense relations.

Apart from this, New Zealand is party to the Five Eyes Alliance (FVEY) along with the United States, Britain, Australia and Canada, which involves active cooperation between the intelligence services from the five countries.

However, despite such long-standing close cooperation with America and other Western countries, China has become increasingly influential in New Zealand in recent years. In 2008, the New Zealand–China Free Trade Agreement was signed. Since then, China has become one of the biggest investors in New Zealand’s economy, and the bilateral trade turnover exceeded $27 billion in 2018. Moreover, the Chinese diaspora in New Zealand has grown to 4% of the population, securing third place after Europeans and indigenous New Zealanders–the Maori. One of the most important sources of revenue in New Zealand is tourism: each year, the country is visited by about 2.5 million tourists from different countries. As is currently the case in other most popular tourist destinations, Chinese citizens account for a significant amount of this revenue.

Chinese tourist traffic flowing into New Zealand has reached such great volumes that it has morphed into a separate revenue item in New Zealand. Within the period from March 2017 to March 2018 alone, Chinese tourists left $1.7 billion in New Zealand. In order to further develop this area of economic cooperation, Chinese authorities and New Zealand’s Prime Minister Jacinda Ardern agreed to declare 2019 “The China-New Zealand Year of Tourism”. The project promised to exponentially reinforce an already intense influx of Chinese tourists, attract new investments from Chinese companies in New Zealand, and take New Zealand’s resorts to a new level of world fame. Preparations for the campaign took place throughout 2018. But at the same time, China’s economic and political stalemate with the United States and the other Five Eyes was gaining momentum.

America has long feared to being forced to surrender its title to China, as “the largest economy in the world”. Us President Donald Trump began to push for a review of Chinese-American trade relations. In Trump’s opinion, the current state of affairs not only poses a threat to America’s global economic leadership, but it also threatens security on US soil, since the import of Chinese goods to America significantly exceeds American exports to China, and Chinese companies have got the American domestic market figured out and are already displacing American companies, including IT. Trump began to fight the majority of competitors from China by increasing import duties on Chinese products coming into the United States. But he went further and decided to completely deny Chinese information and telecommunications giants Huawei and ZTE any access to the US market, claiming that they pose a threat to US national security.

Shortly before Trump assumed office, in November 2016, the American media announced that the largest Chinese manufacturers of mobile and internet technology–Huawei and ZTE–are installing spyware on their smartphones, collecting data about their users and sending it to China. These two companies ship their telecom equipment all over the world, which is not only used by private users, but also by large government and corporate organizations in many different countries.

In spring 2018, a ban was placed on the sale of Huawei and ZTE products, directed at the largest American retail chains, in addition to banning their use on the territory of US military bases. Subsequently, the US government banned American government agencies from purchasing Huawei and ZTE equipment. Finally, in December 2018, Canadian authorities detained CFO Meng Wanzhou at the request of the United States–the daughter of Huawei’s founder. Wanzhou has been accused of violating the anti-Iranian sanctions imposed by the United States. Washington also appealed to US partner nations to stop working with Huawei, otherwise, according to U.S. Secretary of State Mike Pompeo, this could compromise relations between the US and its allies.

The US is seen as the leader of the Western world, and the fact that Western countries are cracking down on Huawei is usually linked with the exacerbation of Chinese-American trade relations which began precisely when Trump came to power. However, it is important to remember that the Anglosphere’s struggle to cope with its reliance on Chinese technology was already an issue long before Trump was elected. For instance, Australia banned its companies from using Huawei telecom equipment in its high-speed National Broadband Network (NBN) back in 2012.

It would appear that the current trade war between China and the United States has gotten tangled up in a more significant rivalry between two different civilizations, between China and the Western world. The massive attack on Huawei is taking place right now, just when humanity is on the verge of making a large-scale transition from fourth generation wireless communication (4G) to 5G mobile communication and internet. The companies and countries whose technologies will be most in demand during this transition will become world leaders in technology for many years to come. For hundreds of years, the West has become grown used to leadership, and even given all of its current development, China was used to copying Western technology. However, we are now in a situation where Chinese telecom companies, primarily Huawei, have the potential to become the most popular in the world, they could seize the key global markets and begin setting new international standards for internet and mobile communications, overtaking and replacing their Western competitors. Apart from this, the use of Chinese equipment in US telecom networks actually puts America in a position where it is dependent on China to a certain extent, which would also provide China with a lot of scope for intelligence activities. Thus, although China’s main rival is the United States, US partners in the Five Eyes Alliance do not want to grant China access to their 5G networks either, and are not hesitant to support Washington’s war against Huawei and ZTE. New Zealand is no exception. Whether or not the country shares its partners’ fears of Chinese intelligence is neither here nor there; New Zealand has no other choice than to follow suit and align itself with the Five Eyes.

In November 2018, New Zealand’s Government Communications Security Bureau (GCSB) said that using Huawei technologies in the New Zealand 5G broadband network–which a local company called Spark is working on–poses a threat to the New Zealand’s national security. As a result, Spark has been banned from purchasing or using equipment from Huawei. In December of the same year, the GCSB published a report, claiming that New Zealand had been repeatedly subjected to hacking, allegedly involving Chinese hackers.

The Chinese took offence at these actions, which had an adverse effect that soon became visible in China-New Zealand relations. China has begun to make things more complicated for New Zealand’s companies operating on Chinese territory, and has been reducing the number of exchange of students sent to and from New Zealand, etc. New Zealand’s Prime Minister Jacinda Ardern also had to cancel her visit to Beijing. The visit was planned for the beginning of 2019, but the Chinese have put the invitation on hold, citing “clashes in their schedules.” Given that this trip was to be Jacinda Ardern’s first official visit to China as the new Prime Minister of New Zealand, such an affront could cast a shadow over relations between the two countries for years to come.

In January 2019, the Chinese government issued a recommendation for employees at China’s large state-owned companies, telling them to avoid trips to countries that are Five Eye Contributors, including New Zealand. If the trip is unavoidable, China recommends that its citizens coordinate all their actions with the authorities and take extra security precautions to protect information, for example by using special electronic media, etc.

The beginning of the previously mentioned “The China-New Zealand Year of Tourism” was also postponed indefinitely by the Chinese; it was supposed to have been marked by a ceremony in New Zealand’s capital Wellington in February 2019 (shortly after the Chinese New Year). According to media reports, the influx of Chinese tourists into New Zealand has already begun to decline. Although not so long ago, experts had predicted that the revenue New Zealand would derive from Chinese visitors will exceed $2 billion by 2023 thanks to the “Year of Tourism”.

According to the media, China is also looking at other ways it can impact on New Zealand’s economy, while simultaneously demanding explanations for the actions taken against Huawei. At the same time, politicians and journalists in New Zealand are increasingly voicing their belief that New Zealand’s policy makers should accept that China is now in a strong position globally, one which affects New Zealand, and that working together with the Celestial Empire is currently in New Zealand’s best interests.

However, relations with the United States and the Five Eyes Alliance still mean a lot to New Zealand. New Zealand is a small country that belongs to the Anglosphere, so these relations help prevent the country from being swallowed up by the vast expanses of the Asia-Pacific. It appears that the progression of China-New Zealand relations depends on how Beijing’s relations with Washington unfold, and this will become clearer at the end of March 2019, following Donald Trump’s next meeting with his Chinese counterpart Xi Jinping, which could potentially see a new Sino-American trade agreement being signed.

Sofia Pale, Ph.D. of Historical Sciences, research associate with the Center for South-East Asia, Australia and Oceania at the Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

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