Balancing China trade ‘key challenge’
China is speeding up efforts to source more imports from stable autocratic regimes and reduce its trade dependency on democratic countries such as Australia, says global risk consultancy Verisk Maplecroft.
Joseph Parkes, a Singaporebased analyst at the British firm, told Stuff that China’s trade with New Zealand was ‘‘less at risk’’ from the policy which was more focused on oil and minerals imports.
‘‘Beijing’s primary concern is sourcing strategically important commodities from potentially unfriendly countries.
‘‘The New Zealand Government’s quiet approach to managing potential areas of bilateral friction has further minimised the risk that Beijing will seek to reduce exposure to New Zealand’s exports,’’ he said.
But Parkes said exporters could face ‘‘targeted disruption’’ in the event that the bilateral relationship between Beijing and Wellington markedly deteriorated.
‘‘The aim of such action would be to demonstrate the economic costs of falling out with Beijing,’’ he said.
Crippling tariffs imposed on imports of Australian wine last year appear to illustrate the threat.
China firmed up a ban on imports of coal from Australia in December, though there are reports of some deliveries still being made.
‘‘As Australia has experienced, trade restrictions can be implemented with little warning and sustained indefinitely, causing significant disruption to affected sectors,’’ Parkes said.
The New Zealand Government’s ‘‘quieter handling of China’’ had been a point of friction with its Five Eyes allies over the past three years, he said.
‘‘Balancing a robust defence of New Zealand’s economic and security interests vis a vis China, without inflaming tensions with Beijing or alienating key allies, will be the key foreign policy challenge for the second-term Ardern Government.’’
A report published last week by Verisk Maplecroft said Australia was the ‘‘chief outlier’’ among China’s trade partners as it was a ‘‘close United States ally, yet still a major supplier of strategic resources’’.
‘‘We believe Beijing has identified its dependence on Australian resources as one of the areas most in need of diversification,’’ the report said.
China was trying to increase imports of scrap steel to reduce reliance on Australian iron ore, it said.
Otago University research economist Murat Ungor said earlier this month that he believed Beijing still viewed New Zealand as a partner, noting their landmark 2008 free trade agreement and New Zealand’s support for China being a part of global trade.
But the country should not be putting all its eggs in one basket, he said.
Ungor has forecast New Zealand diplomats will seek to strengthen bilateral trade relations and education links with Vietnam and fast-growing Bangladesh during Apec talks this year.
Both countries had taken on some production of goods such as textiles that had been displaced from China as it moved into other industries, he said. ‘‘They are the new ‘tigers’.’’
The diversification push might not prevent exporters from benefiting from Chinese tariffs on Australian wine, he said.
‘‘You can always have new trade partners without losing your good relationship with the existing ones.’’
Verisk Maplecroft’s report indicated China’s trade ‘‘pivot’’ was not the only heightened risk for exporters around the globe.
Covid could also have a profound impact, it suggested.
‘‘With growth stagnating and many government balance sheets in disarray, the knock-on impacts of rising levels of debt and less flexibility on social spending will have far-reaching consequences,’’ it said.
It modelled the prospects for political stability in 130 countries over the next two years and described the outlook as bleak.
‘‘Almost three-quarters of these countries – ranging from much of the developed world to leading emerging markets, such as India, Brazil and Saudi Arabia – are likely to experience more instability by 2023,’’ it said.
At best, that would ‘‘gum up policymaking’’ and make the investment environment less predictable, it said.
‘‘At worst, instability could disrupt all but the most resilient firms, force governments into default, and block crucial trade and commodity flows.’’
‘‘The New Zealand Government’s quiet approach to managing potential areas of bilateral friction has further minimised the risk that Beijing will seek to reduce exposure to New Zealand’s exports.’’
Joseph Parkes
Verisk Maplecroft analyst