Economic Ties at Risk? New Zealand's Delicate Dance with China and the US

New Zealand's recently appointed Prime Minister, Chris Hipkins, has acknowledged the escalating tensions and reduced security in the Pacific region, attributing it to China's increasing assertiveness. According to a poll conducted by the Asia New Zealand Foundation, the security and trade ambitions of Beijing in the Pacific have raised concerns among many New Zealanders.

However, a more recent survey by the same foundation indicates a decline in the number of New Zealanders perceiving China as a threat, with only 37% considering it as such.

New Zealand has expressed apprehensions about China's actions in the Pacific, particularly focusing on a security agreement that allows Chinese naval ships to make port calls in the Solomon Islands. This development has raised concerns in Wellington, and together with Australia and the United States, New Zealand has voiced worries that a new security pact between Beijing and the Solomon Islands could potentially lead to the establishment of a Chinese military base in the region.

In a defense report, New Zealand has issued a warning about China's rising influence in the South Pacific, recognizing the potential threat it poses to regional stability. Given that the Pacific region has long been New Zealand's traditional sphere of influence, the country prioritizes strengthening its relations with the Pacific nations.

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The New Zealands-China Relations

The relationship between New Zealand and China holds significant importance as China is New Zealand's largest trading partner. The economic ties between the two nations are substantial and mutually beneficial, providing substantial opportunities for New Zealand's exporters and investors. China's vast population and growing middle class present immense potential for trade and investment for New Zealand. However, these economic ties with China have been somewhat complicated by New Zealand's security commitments to the United States.

It is noteworthy that New Zealand has two U.S. military bases, one of which is located at Harewood Airport in Christchurch, where, under the guise of the U.S. Antarctic Research Program, the military maintains a general-purpose naval depot, an Air Force Military Airlift Command Base, and a Naval Communications Unit.

China plays a crucial role in New Zealand's economic landscape, accounting for nearly 30% of the country's total exports of goods and services. Over the past five years, China has been responsible for more than 70% of New Zealand's export growth. The New Zealand-China Free Trade Agreement, signed in 2008, further solidifies the trading relationship between the two nations.

Economic Ties

In a recent visit to China, Prime Minister Chris Hipkins emphasized the significance of New Zealand's economic ties with the country, acknowledging the potential for addressing New Zealand's overheating economy. Economic data reveals rising prices at the fastest pace in over 31 years, with a 6.7% increase in the consumer price index (CPI) during the first quarter of 2023. Real GDP growth is projected to slow down, and private consumption is expected to weaken due to lower employment growth and rising mortgage-servicing costs.

As New Zealand navigates its relationships with China and the Pacific nations, it is vital for the country to maintain an independent approach and carefully manage its engagement with all stakeholders. The strategic competition in the Indo-Pacific region is on the rise, making it imperative for New Zealand to collaborate with like-minded partners to address global challenges. While New Zealand shares common interests and values with its partners, it may adopt diverse approaches to achieve shared outcomes.

In conclusion, New Zealand's Prime Minister Chris Hipkins acknowledges the changing dynamics in the Pacific region due to China's assertiveness, leading to concerns about security and trade ambitions. While New Zealand values its economic ties with China, it also recognizes the significance of its relations with the Pacific and emphasizes the need for prudent management and independent foreign policy decisions to navigate the evolving geopolitical landscape.