
New Zealand’s China trade vulnerabilities, and how to deal with them, are a lesson to other small economies
- Rather than decouple from a large, fast-growing economy, a new report recommends that New Zealand should fight for open markets, trust its export businesses and use a ‘China and’ diversification strategy
In an excellent report prepared by John Ballingall, of Sense Partners for the New Zealand-China Council, the answer seems clear: all small economies (such as New Zealand) are, by definition, vulnerable, and there are certainly some New Zealand export sectors that are heavily reliant on the China market.
But if you have a large and fast-growing economy that wants to buy your stuff, you are foolish to forgo the opportunities – especially when the other potentially large markets remain stubbornly closed to your products.
Ballingall recommends that the government’s role should be to fight broadly for open markets, trust exporters to manage the risks, and diversify on the basis of a “China and” strategy.
It is a menu of insights and recommendations that many economies should take note of, because it is not just New Zealand that is potentially vulnerable.

As Rachel Maidment, executive director of the New Zealand-China Council commented: “We can’t simply pick and choose who will open their markets to our exports, but working to reduce trade barriers and improve certainty in other markets could lead to a ‘China-and’ set of opportunities.”
Painful colonial memories underscore New Zealand’s concerns about vulnerability and diversification. Many still feel sharply Britain’s “betrayal” as it fought to enter the European Union and cast New Zealand’s butter, cheese and lamb exporters to the winds.
For much of the century up to 1970, Britain accounted for 70-90 per cent of New Zealand’s exports, and the economic shock when Britain turned to Europe was profound.

“How much should New Zealand be trading with a huge, fast-growing market that wants what we produce and export,” Ballingall asks rhetorically, wondering if an exporter is more diversified if it sells to France, Spain and Italy rather than three large Chinese provinces.
So many forget that China is not comparable to any other single country, except perhaps the United States. They forget that many of its 27 provinces have larger populations and bigger gross domestic products than most economies worldwide.
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Ballingall notes in the report that China’s per capita GDP has risen at about 7.6 per cent a year for two decades – from US$768 in 2000 to US$1,971 in 2010 and US$9,349 in 2018 – and that there is still a lot of powerful growth ahead, given that the average GDP per capita of the world’s “developed” economies is around US$44,000. Who would we sell to instead, he asks.
Ballingall is refreshingly realistic about export diversification, noting that New Zealand still faces significant trade barriers in other key markets such as the US, the European Union and India.
“Alternative large markets do not yet offer the same degree of market access and income growth as China,” he said, adding: “Large countries have always used, and always will use, trade impeding measures as part of their diplomatic arsenal.”

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Ballingall is clear about the permanent inevitability of New Zealand’s vulnerability – a vulnerability shared by all small economies: New Zealand has to “accept the risks and rewards associated with having an independent voice on the world stage as a small player”.
The strategic response is clear: leave it to businesses to decide how much risk to take. “It seems unlikely that New Zealand firms are unaware of the risks of focusing heavily (or solely) on the Chinese market. And if they weren’t aware before Covid-19, they will be now.”
Beyond that, the job is to remind businesses that they will always be vulnerable. And, with that in mind, Ballingall would strongly endorse the views of Rachel Taulelei, CEO of Kono, a family-owned Maori food and drink producer in New Zealand’s South Island.
She argues that New Zealand’s export success rests on six core Maori principles: rangatiratanga (excellence in all we do); manaakitanga (we rise by lifting others); whanaungatanga (together we are more); kaitiakitanga (our duty, our heritage, our legacy); hihiritanga (doing things better, doing better things,) and; pono (we do as we say).
There are many other economies that have much to gain from undertaking a study such as Ballingall’s. They would gain too, from adopting Kono’s Maori business principles – if they could pronounce the words, that is.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view
