Q+A: Rodney Jones interviewed by Jack Tame

Q+A: Rodney Jones interviewed by Jack Tame

Beijing-based New Zealand businessman claims worst NZ trade performance with China since “80s”

The tremendous growth rate in trade with China has eased off according to Beijing-based Wigram Capitol Advisors principal Rodney Jones.

“The last five years have been our worst trade performance with China since the early ‘80s,” he says.

Mr Jones would like to see a stronger focus from NZ on its relationship with China. “We don’t listen enough to what China says. We don’t read enough about what China says.”

When asked by Q+A interviewer Jack Tame how NZ could turn its trade performance around Mr Jones responded by saying, “this is where the TPP or the CPTPP matters.”

“Where we can grow going forward is known commodity exports. We all know we’re maxed out. Water was the big issue. We’re reaching limits. With China, our trade is all about commodities – meat, dairy, logs. With the rest of Asia, it’s about non-commodity exports.”

Q + A
Episode 36
RODNEY JONES
Interviewed by Jack Tame

JACK Good morning to Rodney Jones, Principal of Wigram Capital Advisors in Beijing. He’s back in New Zealand for a visit but keeping an eye on events in Vietnam and China this week. Tena koe. Good morning. First of all, let’s get your response. What do you make to the changes in the TPP, the CPTPP, as it is now?

RODNEY It’s good. It keeps the dream alive in the sense that we’d lost the US. China’s going in a different direction. How do we create an environment for trade in non-China and non-US Asia?

JACK How different is the proposed deal now, compared to the deal that was on the table, say, five days ago?

RODNEY Well, it’s taken out a lot of the provisions that the US wanted, and I suppose the question in four years’ time is does that make it harder for the US to come back in in a new administration?

JACK It’s anaemic compared to what it used to be.

RODNEY Yeah, but at least it’s alive. Yeah.

JACK What is the likelihood this is going to be signed?

RODNEY It now seems- I mean, Canada seemed about timing and Trudeau not wanting to cast a shadow on Trump at APEC. So it looks like we’ll get there in the end.

JACK Right. What is China’s response going to be to the ongoing negotiations?

RODNEY I think now we’ve seen China wants great power relations, and the US is acquiescing to that under Trump. So they see the main action in Beijing.

JACK Is China going to be looking at what is an emaciated deal, and is China going to be happy about it?

RODNEY Under Xi, China will shrug their shoulders. They’re not as different to the US in this regard.

JACK Okay. I want to talk about Xi in a little more depth. President Xi has effectively consolidated power, both as General Secretary and as China’s president. He’s described as the so-called paramount leader of China. What does that actually mean?

RODNEY It’s remarkable the last five year’s, the change in China. I mean, China has changed remarkably in the last five years. If you went back 10 years, we couldn’t have envisaged the China we have today. And Xi became the core. You know, a few years ago they talked about him as the core. He’s now been written into the constitution. But it’s more the way he’s elevated the party. And so it’s not just Xi who’s elevated. It’s the party, and that relationship between the party and the government. The party is the strongest it’s been since probably Mao’s time.

JACK What is the significance of that?

RODNEY It means it’s a different system now. It was always there beneath the surface, but it’s a transparently different system, where we have to deal with the Communist Party, where it’s the Chinese Communist Party that’s the most important institution in the country, rather than the government.

JACK Okay, but in terms of nuts and bolts, how different is it?

RODNEY So traditionally we think of the Premier, Wen Jiabao, Zhu Rongji, Zhao Ziyang in the ‘80s. Now Li Keqiang, it’s not clear what he does. The power is really with the General Secretary and the President Xi Jinping. That’s new. In the past, the President used to look after foreign policy, look after defence. The Premier looked after the economy. Now Xi has consolidated all that power under him.

JACK Xi has talked about an opening up – at least publically has talked about an opening up – of China, and we’ve heard that term of years now. But actually, that sort of rhetoric is at odds with his actions.

RODNEY Yeah, the key phrase in China since 1980 is reform and opening up. And New Zealand’s relationship with China was changed by reform and opening up. Now, Xi Jinping in his speech a couple of weeks ago said the age of reform and opening up is over. He declared it to be over. This is the new era of Chinese socialism. And so they’re quite upfront – reform and opening up is over. And New Zealand benefited enormously from reform and opening up. And the way what opening up means now has changed as well. Opening up used to mean the world coming to China, New Zealand going to China. Now opening up means China going to the world.

JACK And New Zealand has benefitted from opening up enormously.

RODNEY A remarkable story. Since 1982, the trade has grown at a tremendous rate, particularly in those years around the FTA. But the last five years have been our worst trade performance with China since the early ‘80s.

JACK Right. What do you put that down to in terms of economic policy?

RODNEY This is where the TPP or the CPTPP matters. Where we can grow going forward is known commodity exports. We all know we’re maxed out. Water was the big issue. We’re reaching limits. With China, our trade is all about commodities – meat, dairy, logs. With the rest of Asia, it’s about non-commodity exports.

JACK How do we broaden that?

RODNEY Things like the TPP, this is where we’re at a disadvantage with China, dealing in a bilateral way. This is why multilateral agreements are so important. Our exports to China are about 0.06% of Chinese GDP. Just tiny.

JACK We’re nothing.

RODNEY We’re nothing. And so it’s going to be really hard in this new age of great power relations. And we saw that display in the way that China managed Trump’s visit to Beijing. It’s going to be hard for us to cut strong bilateral deals.

JACK But what is it specifically about Xi that doesn’t allow for greater diversification of our exports?

RODNEY It’s his vision. We don’t listen enough to what China says. We don’t read enough about what China says. His vision, we struggle with analogues, but in some ways, it’s very French-like. It’s like France of the ‘50s and ‘60s. It’s very mercantilist. It’s China first. It’s not about opening up and allowing more access. It’s about building strong industries in China. It’s very status.

JACK Can you give us an example? We are, as you say, commodity focused. We send wood, we send meat, we send dairy, what should we be doing? Or is there simply no opportunity?

RODNEY No, we can’t do it, but it should be services. It should be companies like Xero selling Chinese-language accounting platforms in China. It should be companies like our company, my company, selling our services in China. We can’t sell services. And yet our universities produce students who in the end will work in services not commodities.

JACK Under Xi’s new vision, is there the space for that?

RODNEY No, that is closed. In a sense, that is closed off by the cyber security rules, the internal security rules. China is closing off, and we need to recognise that it’s closing off.

JACK What can we do about it?

RODNEY What we can do is what is happening on the weekend – keep the dream alive. East Asia rose through trade. China, we’ve got to remember in the rise of East Asia in the last 50 years has been a follower, not a leader. Leadership has come from elsewhere. We need to reinvigorate that.

JACK Through multilateral agreements?

RODNEY Through multilateral agreements.

JACK But what is a multilateral deal with the likes of the CPTPP worth to us compared to continued bilateral trade with China?

RODNEY The problem you’ve got with our bilateral trade with China is it’s almost neo-colonial. I’m a bit older than you. But in the ‘70s or ‘60s we used to send commodities – milk, dairy – to the UK, and we’d get kind of rubbish cars in return. It was the colonial trading pattern. Unfortunately, with China, our trading pattern is increasingly colonial. We send them raw commodities and we get goods back.

JACK I wanted to speak with you about a report from Professor Anne-Marie Brady that we are going to be discussing in a few minutes, identifying Chinese political influence in New Zealand. This sort of got drowned out in the noise of the election, particularly two New Zealand MPs potential links to the Chinese government. What did you make of the New Zealand response to those revelations?

RODNEY I think our response is just nuts, actually. It’s just nuts. Nothing has happened. I don't see how we can be so blasé on national security. Xi Jinping has laid out a very strong vision of China, of China’s role and the role of the Chinese Communist Party. We are talking about the Chinese Communist Party, not China. And so we need to be alert to the role that the Chinese Communist Party wants to play within our Chinese community and within our broader polity.

JACK What does that mean in terms of how we screen MPs, how we keep an eye on political donations?

RODNEY Once a member of the Communist Party, you are always a member of the Communist Party. It’s very hard to give that up. The only way you can give that up is to be detained for corruption or something in China. You cannot give it up.

JACK So what should the government have done?

RODNEY We should just have an agreement between both parties. We should have a bipartisan agreement between the major parties that a member of the Chinese Communist Party cannot be an MP. That someone who certainly worked for military intelligence cannot be an MP. That someone who is going to represent the interests of the Chinese Communist Party and not the interests of our Chinese community, our local community, should not be an MP.

JACK Okay. I will have responses from the MPs we are talking about when we speak with Professor Anne-Marie Brady in a few minutes. Just while we have you, Rodney, a couple of quick things I wanted to cover off very quickly. What has been the response in China to the ban on foreign house buyers in New Zealand?

RODNEY Well, this is one of the paradoxes. Technically it has been illegal to take money out to buy a house. That was illegal. Chinese liberalisation happens in an informal, ad hoc way. So you’re allowed to do it and they did it enormously. Trillions of dollars flowed out between 2014 and 2016. Trillions of dollars. But that wasn’t technically legal. So what they are doing now is enforcing the rules and it is very difficult to take money out and you can’t buy foreign property. So they’ve already put their own ban on buying foreign property.

JACK So they don’t care?

RODNEY They won’t care.

JACK All right. Thanks for your time. We really appreciate it.

ENDS

Please find attached the full transcript and the link to the interview

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