David Mahon called on New Zealand to act in its own interests and do its best to avoid US-China strategic competition. Among the growing uncertainties, there are opportunities for us, he said | Instant News

By David Mahon *

Some commentators argue that China and the United States are heading to the edge of the cold war.

The US maneuvered rather blindly, placed tariffs on Chinese goods, embargoed on US technology companies supplying Chinese companies, restricted pension funds. The US government invested in Chinese stocks, tried to reduce the presence of US businesses in Hong Kong , and fired former presidential goods that crossed the line. tweet

But the United States and China are far from the cold war.

The US and the Soviet Union share a bit of economic interdependence, and while direct military conflict is largely avoided, parties often show ways and desires to destroy each other. China does not have conventional military means to combat the United States, but has the ballistic nuclear capability to engage in joint destruction. But China does not want commercial conflicts, and even military conflicts.

Within six months of the presidential election, the Republicans lit a fire of nationalism, wanting to divert blame to China for a health care system that was destroyed under the COVID-19 attack, tens of thousands of deaths could be avoided from the virus, soaring unemployment, and economic stumbling. Chinese nationalism and demonization will increase towards November and then tend to subside in external intensity, while continuing substantially, regardless of which party wins the election.

In dealing with the US war, China’s best strategy is without action. China does not always follow this strategy, but is well served when it has succeeded in not reacting. Not reacting will continue to benefit China over the next few years, perhaps giving the United States time to step back from the brink and see that its actions harm the US economy while not substantially damaging China. Beijing is carrying out many economic reforms that the US has wrongly accused. In March, Beijing issued permission to the US depressed asset manager, Oaktree, to buy and trade bank loans that were very problematic and mostly state-owned. Chinese banks are now open to foreign buyers, and foreign life insurance companies, futures, mutual fund companies and securities companies are free to take controlling shares in their Chinese partner companies.

Beijing now understands that Washington is determined to undermine and limit its economy in almost every way, and make previous threats to secede, not only from China but from old trading partners, allies and international forums. China and the world are watching the US withdraw, or destroy one international body after another, and place more than 30 countries under economic sanctions.

The kingdom usually fails from the inside long before they are overtaken from the outside. The American Empire, still very rich and powerful, was shaken internally. The democratic process is broken, the two political parties are prisoners of corporate interests, and that the main instrument of a transparent and functioning political system, the rule of law, has become an ideological jolt of partisan political interests as Republicans and Democrats struggle to pile up and force the Supreme Court. There is no schadenfreude in some places in China, the leadership considers American death as a risk to global economic stability and prosperity.

You are with us or against us

Smaller countries cannot always hope to walk the line between the US and China deftly, taking a neutral stance while relying on the understanding and trust of both parties. Neutrality confer a degree of political irrelevance to a country, something that is not able to have a geographically isolated New Zealand.

Most Asian economies, while relying on China, depend on the United States to maintain a balance of power in the region. Singapore, Malaysia and Indonesia have criticized China’s territorial claims at some point in recent years, but with the exception of Vietnam, avoiding damage to their relations with Beijing. One of their shared strengths is that they are not bound by the elite of the Western elite through the ‘Five Eyes’ intelligence sharing network.

Unless New Zealand is firm in measuring its participation in the Five Eyes club, it will erode the independence it has long been fighting for.

China’s policy in Canberra is only an echo from Washington. New Zealand needs to question whether it wants to be linked to an increasingly aggressive US foreign policy, losing a convincing strategy, and carelessly anti-Chinese. New Zealand’s choice at the end of May not to join other Five Eyes countries in condemning Hong Kong’s security law is a positive indication of Wellington’s determination not to take sides in the complicated situation that China sees as an internal problem.

If New Zealand fails to enter Huawei without justification when building a national 5G network, its relationship with China may be disrupted, including the possibility of China’s non-tariff trade barriers. The US still cannot show security or technical reasons for rejecting Huawei, something the United Kingdom concluded in January before bowing to pressure from Washington.

New Zealand’s interests would be better served backing away from the anti-Western Chinese herd and finding its own position, difficult to do when one of the coalition partners worked to bring New Zealand back to the 1970s, when in the cold war the real New Zealand supported many United States foreign policy position.

In the dispute between the US and China, New Zealand has so far succeeded in acting in the interests of its own economy, and in accordance with the principles of international law which it considers fair. New Zealand will not always do it right, and sometimes needs to criticize China’s actions. But for now New Zealand’s political integrity and economic relations with China appear to be in a reasonable balance.

Recovery and growth

The recovery of the Chinese economy has gathered momentum in recent months and will be the main engine of global recovery in the coming years. More than ever before, Chinese trading partners (who trade more with China than the United States) must pay attention to their shared wealth and economic stability, and are not affected by the anger of the United States which has no rudder.

China has the potential to provide important support for the global economy through the strength of its domestic demand. For eight years, consumption and service have been China’s main economic drivers, not domestic investment and exports. COVID-19 seems to have been restricted and controlled in China to the point that more than 100 million people travel to relax during a five-day vacation in the country. No surge in coronavirus infections has been reported. Car sales fell 79.1% YoY in February, but rose 4.5% in April, the first monthly increase in car sales growth since mid-2018. Smartphone shipments fell 54.7% YoY in February, then up 17.2% in April 6.5% higher than the previous April growth rate. Nominal retail sales grew 8%.

Opportunities for New Zealand

New Zealand has the opportunity to consolidate its position in the production and protein sectors in China. A number of industries can implement Zespri’s ‘free market cooperative model’, a collaboration that is not a formal cooperative like Fonterra, but an expression of unity and clear commercial goals of one sector. Zespri enjoys 98% support from New Zealand kiwifruit farmers. This model can be adapted to the meat, seafood, forestry and manuka sectors.

The New Zealand Government announced a NZD 50 billion fund to support economic recovery and reduce the suffering caused by COVID-19. It is wise to allocate NZD 10 billion to national ‘value’ funds that invest in good business, increase its scale to take on the global market, and thereby increase tax revenues and employment. This can be managed by the best strategic and strategic thinkers in the country, regardless of political affiliation (a true rival team), producing dividends to New Zealand taxpayers and the means of expansion itself as a permanent resource for a country that is often starving. domestic investment capital.

Such funds will soon attract the interest of global investors, both sovereign and private, seeking security, values ​​and transparency in New Zealand’s economy. The fund can not only see the primary sector but also innovative technology in fields such as food security, health care, computer games, and film and television. With more scale companies, New Zealand will be in a better position to build a strong commercial platform and build a brand, not only in China but in emerging markets such as Indonesia, India and Vietnam. There are more than 600 million consumers in ten ASEAN member countries alone.

New Zealand is well considered in China and respected for its tenacious history of independence. New Zealand’s free trade agreement with China has given it a unique advantage, helping it avoid the worst aspects of the Global Financial Crisis, because it can reduce the worst effects of the global economic downturn caused by COVID-19. All major economies will compete for Chinese customers to revive their beleaguered, debt-ridden economy, and New Zealand needs to approach China in new ways, with greater unity and well-considered commercial strategies and resources.

* David Mahon is the Chief Executive of Beijing Mahon China Investment Management Limited, which was founded in 1985.

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