Hon Phil Goff
Minister of Foreign Affairs and Trade
Speech Notes

NEW ZEALAND’S ENGAGEMENT WITH CHINA

ADDRESS TO NEW ZEALAND/CHINA TRADE ASSOCIATION
AUCKLAND, 25 AUGUST 2000

Eleven years ago, I first visited China as Education Minister. My visit in June 1989 ended abruptly when troops were sent into Tiananmen Square to brutally suppress a student demonstration.

Eleven years before Tiananmen Square, Deng Xiaoping had set in motion the dramatic process of economic reform opening up China and moving it away from a centrally planned economy to a more market based system.

The release of the heavy handed political suppression of the Mao years, the social stress of rapid change and public anger over high inflation and official corruption fuelled public demands for political reform.

This morning I returned in a somewhat less spectacular fashion from my first official visit to China as Foreign Minister. The China I saw this time was a very different place in terms of its economy though political change has lagged.

A lasting consequence of the events of 1989 has been a pervasive view by the Chinese Communist Party that political reform and serious social instability go hand in hand. The experiences of post-Soviet Russia has entrenched that view even more strongly.

Political liberalisation over the last decade therefore has been cautious and restrained but the same cannot be said of economic reform.

China has undergone an economic transformation probably without parallel in world history. It has evolved from an internationally isolated, centrally planned communist state into one of the world’s fastest growing, outwardly orientated market driven economies.

My visit over the past four days took in Beijing, Hangzhou in Zhejiang province and Xi’an in Shaanxi province.

The transformation of Beijing was immediately obvious from its modern airport terminal, motorway system into the city and the high rise commercial and apartment buildings.

Hangzhou in the eastern seaboard, just south of Shanghai, bore little resemblance to a developing country. We passed through an area where the farmers’ houses exhibited an extravagance in design and construction that would make the nouveau riche in New Zealand blush. Even Xi’an in the less developed NorthWest showed off infrastructure development in highways, public structures and in apartment buildings for the successful elite.

All were testament to the economic progress of China.

China has averaged growth of over 7% per annum for twenty years and has attracted foreign exchange investment of US$455 billion. It has now the seventh largest economy in the world. In the next half-century it will compete to become the largest.

GDP growth of 8.2% and export growth of 8.3% in the first half of 2000 show how much it has recovered from the Asian financial crisis. My enthusiasm should perhaps be qualified by acknowledging that much of the growth has covered the easier yards -- breaking the communal mould to release some rural productivity, stimulating urban consumerism and exploiting wage competitiveness. Reform of the state-owned enterprises and financial sector reform have proven more challenging.

China’s entry into the WTO expected within the next six months will be a watershed. Its accession package of improved market access for goods and services and reform of its foreign trade regime will underpin its existing programme of economic reform and provide some certainty about its economic direction for the next few years.

Not all will be plain sailing, however, as the protracted negotiations over tariff quota administration for wool has shown.

Little progress has been made in wool over the three years since New Zealand became the first Western country to agree in principle to China’s accession to the WTO. The quota system has partly contributed to wool trade to China halving since 1996, with bureaucratic systems holding back New Zealand’s ability to export while individual firms in China without quota have been unable to acquire the wool they need. I raised this with both Premier Zhu Rongji and Foreign Minister Tang and talks will reopen on the issue in a fortnight.

Other new economic opportunities nevertheless have been opening up. Last year New Zealand (with Australia) became the first Western country to be designated as having Approved Destination Status. Since then visitors from China have increased dramatically, up 65% to a record of 28,000 for the year to May 2000.

If the relatively small number of agencies approved to organise tours to New Zealand can be increased, as we are pushing for, this increase can be expected to continue.

New Zealand’s provision of full-fee education services to Chinese students has increased in a similarly dramatic way. With the adoption of a more open student visa policy, from a quota of only 400 Chinese students two years ago, New Zealand has in the last twelve months to July 2000 received well over 6000 student visa applications. Around 75% of these are likely to be approved.

In Hangzhou on Wednesday, I opened an education promotion seminar attended by over 140 people. Good coverage of the event on television meant thousands of others living in Zhejiang would also have heard about opportunities for education in New Zealand. My message that New Zealand offered a full range of quality education opportunities, with living and tuition costs comparing favourably with other English speaking countries, was well received. New Zealand’s environment, its recreational opportunities, its stability and its friendliness are all selling points. Our ability to process student visas in a few weeks, compared to other countries which take several months, is also a huge advantage.

We have just increased our budget by over $3 million to promote generic New Zealand opportunities to overseas countries. With government working in partnership with educational institutions, we have the potential quite quickly to make international education that currently earns around $415 million annually in foreign exchange earnings, into a $1 billion industry.

But it is not just the dollars and the high skill employment opportunities this creates which are important.

Think how much easier it is dealing with business people or government officials who have been educated in New Zealand, and think how much more rapport there is instantly with someone who has a daughter or son studying in New Zealand.

The multiplier effects with parents visiting their children while they are studying in New Zealand and the ability for all parts of New Zealand to benefit economically from providing international education are also significant.

Many students, having qualified and gained work experience in New Zealand will apply to settle here. They will already have a good knowledge of New Zealand, will settle in and find employment readily and make a huge contribution to the growth and prosperity of our country. They will have language skills and links to their country of origin that will promote trading opportunities.

Many of the business people I met from Shanghai for example, were of Chinese origin had settled in New Zealand, and then returned to China to promote New Zealand based enterprises.

The way we engage with China has diversified in ways few would have forseen ten years ago. With diversification comes new opportunities, and new prospects for growth.

Let me give you an example of just how fast that is happening. You all have encounters with China delegations coming down here from the central government, provincial governments, SOEs, business group, educational, agricultural, sporting, cultural, scientific and other areas. Every such delegation adds another strand to the links between New Zealand and China. I asked how many such delegations there are. The answer surprised me. Not including the Approved Destination Status tourist groups, our Immigration offices in Beijing and Shanghai last month alone received visa applications for 127 delegations from China to come to New Zealand.

Having a strong bilateral political relationship with Chinese political leaders facilitates our economic relationship. It is also important for our engagement with China on wider bilateral and regional issues.

The importance of this relationship does not and should not, however preclude New Zealand from discussing with China issues on which we have a divergent viewpoint and quite different political values.

As the Chinese say, friends can discuss anything, and we did.

Human rights issues were on the table.

Chinese leaders pointed to progress that has been made to improve the economic and social wellbeing of their people.

It is true that since 1978 economic progress has lifted 200 million people out of poverty. It is also true that there has been some improvement in political rights. At the village level, democratic elections with a genuine choice have now taken place for 10 years. The next step will be to raise the level at which democratic elections take place to the counties and municipalities. Progress is however likely to be cautious and slow.

People today discuss political issues more freely, as I observed at a working lunch with academics, government officials and a senior member of the People’s Liberation Army.

But basic breaches of human rights continue in areas such as freedom of public expression, assembly and association. The continued imprisonment of some leaders of the 1989 Tiananmen demonstration, suppression of Falun Gong and limits on religious expression and involvement of national minorities in running their own affairs, such as in Tibet, are all matters of concern to New Zealanders.

I raised these issues. In response, I was invited by the Minister of Foreign Affairs to visit Tibet. I may take up that invitation next year.

A further issue of discussion was China’s relations with Taiwan. New Zealand has since 1972 accepted a ‘one China’ policy and will continue to do so. For China, adherence to that is regarded as absolutely fundamental in our relationship which we acknowledge. Nevertheless New Zealand has an important economic and cultural relationship with Taiwan which we want to expand and to which China does not object.

New Zealand will continue to promote constraint on the part of both China and Taiwan to avoid the differences between them becoming a flashpoint and cause of conflict not just between them but on a wider regional basis.

Why are Jim Sutton and I putting so much time into our relations with China? The message we both have, and which I know you understand well, is that China’s prosperity will contribute to our own prosperity – if we manage the relationship properly. As a government we have to ensure that our trade and diplomatic policies are such that they enable New Zealand business, educational institutions, and other sectors to take advantage of the opportunities China offers.

That requires some vision about where the next areas of growth will come from; it requires Ministers to engage regularly after their Chinese counterparts so that the relationship is sufficiently strong to accommodate our disagreements while taking advantage of the great majority of areas where we can, and will continue to see our trade and other links with China grow.

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