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PM:Address to Business Lunch , Beijing

Rt Hon Helen Clark Prime Minister

Address to Business Lunch at St Regis Hotel, Beijing, China 12.30 pm (local time)

Monday, 30 May 2005

Minister Sun, Madam Peng, Chairman Zhou, senior officials, ladies and gentlemen.

It is a pleasure to be in Beijing this week and to be able to reciprocate the visit made by President Hu Jintao to New Zealand in October 2003. New Zealand has also been pleased to host Chairman Wu Bangguo, Chairman of the National Peoples’ Congress in recent days, as we have been pleased to host many senior Chinese leaders over many years.

Over my five and a half years as Prime Minister, I have had regular discussions with China’s leaders, as have New Zealand Prime Ministers before me. Over more than thirty years and from small beginnings, the leaders of both our countries have built a strong and broadly based relationship which is valued by us both.

China has experienced enormous growth and development in modern times. Its story is one which will excite the interest and admiration of economic and political historians for the next hundred years and more. China’s economic transformation has been one of the most rapid and far reaching in human history.

While China has been modernising and developing, so has New Zealand. We have left behind our sleepy past to become an open and dynamic economy, experiencing among the fastest growth and the lowest unemployment in the developed world.

In 1984 the New Zealand government’s budget deficit stood at around eight per cent of GDP. Inflation was high, the agricultural export sectors were heavily subsidised, and there were high levels of protection for our manufacturing industries.

Change came fast as New Zealand slashed its subsidies and tariffs, and there was considerable pain caused to many for close to fifteen years.

In 1991, for example, after big cuts to social provision, unemployment rose to more than ten per cent. This was a great shock to a country which had not seen high unemployment since the great depression.

But on the ashes of the old economy, a more competitive economy began to take shape. And, since our Labour-led government came to office at the end of 1999, we have pursued proactive economic strategies designed to accelerate growth. For the past five years, New Zealand’s economy has grown at an annual average rate of 3.8 per cent. That’s ahead of the OECD average, and it is faster than the growth rates of our three largest trading partners, Australia, the United States, and Japan.

Our growth rate in 2004 was 4.8 per cent, up from 3.4 per cent the previous year. Unemployment sits at 3.9 per cent, the second lowest in the OECD. Our government runs a healthy budget surplus, and government net debt is projected to reach zero in 2006/7 - for the first time in New Zealand’s history. Inflation last year was 2.7 per cent.

New Zealand has achieved these results despite enjoying relatively few natural resource advantages, apart from our country’s ability to grow grass all year round! We are a long way from our principal markets. Our economy, while affluent, is small in absolute terms. China’s economy is currently 16 times larger than New Zealand’s, but its population is 325 times as large. That means that our GDP per capita is still twenty times that of China’s. That gives an indication of our relative standards of living.

Our small country is determined not to let size be a barrier to our ambition or a check on our aspirations. New Zealanders are smart and enterprising. We know our 21st century growth and prosperity must come through innovation, ingenuity, highly educated and skilled people, and through being willing to embrace the latest science and technology and using our creativity to move all our industry sectors up the value chain.

China takes a considerable interest in New Zealand’s world leading agricultural technology and research, in the dairy sector in particular where we are well known for scientific breakthroughs. For example, the first time anyone in the world managed to identify bovine genes, it was done by New Zealand researchers in a company called Livestock Improvement Corporation.

In China now there is also growing awareness of New Zealand’s innovation and expertise in areas as diverse as aircraft engine maintenance, information and communications technologies, film production, biotechnology, the design of baggage handling systems at China’s newest airports, medical research and applications, structural design using timber, and food technology. The list could go on. “New Zealand, new thinking” is at work, and at work in ways which is benefiting China, and will be of even greater benefit in future.

In New Zealand, we aim to create an environment in which innovation can flourish, and where new thinking and new ideas are encouraged. Chinese and other foreign investors will find opportunities in New Zealand which are supported by fresh thinking, a skilled workforce, and by a government committed to an open and dynamic economy.

Our government supports the drive for an innovative and entrepreneurial economy through carefully targeted policies, designed to lift the value of our goods and services and to attract investment. We make big investments in education and work-based training, and indeed have doubled the amount spent on industry training since 1999.

Investment in research and development has also been boosted. Government spending on science and research has increased by 56 per cent since 1999, with a good proportion of the increase going out to the private sector through grants and collaborative projects. Private sector research and development has also risen significantly over that period.

Business, industry, and regional initiatives are central to our growth strategy. Our economic development agency, New Zealand Trade and Enterprise, has programmes to build the capabilities of exporters, develop sector strategies in partnership with industries, and back regional growth strategies based around our regions’ comparative advantages.

Tourism, wood processing, international education, niche manufacturing, contemporary music, and the food and beverage sector have all been areas of focus. As well we have worked on sector strategies for biotechnology, information and communications technology, and the creative industries, because these are sectors whose growth has wide benefit across the economy. Information and communications technologies are vital to modern economies and societies. Advanced biotechnology helps lift the performance of our primary sectors at both the production and processing levels, and in the development of new businesses and sectors, especially in health treatments.

The creative sectors play a significant role in shaping New Zealand’s national identity, brand, and image, and in lifting the quality of the design and presentation of goods and services. Many of you will be familiar with New Zealand as the home of the world’s biggest ever movie production, “Lord of the Rings”. Not only were its three films shot in New Zealand, but also the plan for the series, the scriptwriting, the direction and production, the costume design, the extensive computer animation, and the special effects are all New Zealand contributions. New Zealand is also becoming known for its lively contemporary performing and visual arts, and for its leading edge fashion.

New Zealand now has extensive economic interests in China. In the past five years our exports to China have increased one hundred per cent. China is now our fourth largest export market, and our fourth largest trading partner overall with two way trade at over five billion New Zealand dollars.

The importance of exporting to our economy explains why we are one of the most active nations in the current WTO negotiations. Getting higher value goods and services out to world markets is critical for New Zealand’s ongoing prosperity – along with getting the best possible terms for access into those markets. A successful WTO round is our top trade policy priority. We look forward to working closely with the new head of the WTO, Pascal Lamy, on concluding a successful trade round.

We also have significant bilateral and regional free trade agreement negotiations underway, including the ground breaking FTA negotiation with China.

New Zealand’s first FTA was signed with Australia in 1983 and it remains one of the most open and comprehensive FTAs in the world. More recently we have signed FTAs with Singapore and Thailand, and are close to finalising a Trans-Pacific agreement between New Zealand, Chile, Singapore, and Brunei. We are also in FTA negotiations with ASEAN and with Malaysia.

New Zealand has taken a strategic decision to pursue strong economic links with China. China is on course to become the world’s second biggest economy by 2020. It is a growth engine for the world economy, and there can only be benefit for New Zealand in maximising its engagement with this huge economy

New Zealand was the first developed country to conclude a bilateral market access agreement with China for its entry to the WTO. We were the first developed country to recognise China’s status as a market economy. Now we are the first developed country to enter FTA negotiations with China. Perhaps we can also aim for a fourth first: to be the first developed country to conclude an FTA with China!

Prior to the agreement to begin formal FTA negotiations, a joint feasibility study on an FTA was done. It showed that there would be immediate gains for both countries from a far-reaching and comprehensive agreement which covered goods, services, and investment.

The feasibility study drew attention to New Zealand’s experience of agricultural reform. New Zealand removed agricultural subsidies and opened up its markets in the 1980s. Agriculture now contributes a greater share of our GDP than it did before the changes, up from fourteen per cent to sixteen per cent.

I emphasised earlier New Zealand’s agricultural technology expertise. Our leading agritech businesses are actively looking for more opportunities in China. Next week a delegation of 24 such New Zealand companies will be here to promote co-operation in dairy technology and milk production. A successful FTA negotiation will push this type of co-operation ahead even faster. Co-operation in agriculture between New Zealand and China will be a win for both sides.

For China, New Zealand offers a reliable supply of a wide range of high quality, advanced goods and services. We offer a partnership which draws on the high level of complementarity between our economies. We offer the prospect of China’s first FTA with a developed economy. New Zealand has a sound negotiating track record, and we work on the basis that long-term benefits from an FTA will be secured only if both countries gain.

Our FTA talks with China have now been through three rounds. Both sides have sensitive issues, which negotiators will have to work through. With leadership, good will, and commitment, these negotiations can succeed.

Meantime, New Zealand is gearing up to maximise the opportunities which would flow from greater access to China’s markets. There will be a succession of New Zealand ministers, officials, and business people visiting China in the coming months. Next week, New Zealand’s Trade Negotiations Minister, Jim Sutton, and China’s Commerce Minister, Bo Xilai, will chair the first meeting of our new Joint Ministerial Commission on trade and economic dialogue.

Our governmental and economic relationships are underpinned by many other links. The number of Chinese students in New Zealand last month currently holding visas and study permits was 23,665, and an increasing number of them are studying at the higher end of our education system. Educational exchanges build personal understanding and friendships which are long lasting. More young New Zealanders are also studying Chinese, and we encourage them to consider China as a foreign study destination.

We have seen a rapid rise in the number of Chinese tourists coming to New Zealand. There were 83,000 last year, and that could rise to more than 100,000 this year. The number of New Zealanders coming to China is also growing rapidly.

In addition, many migrants from China have settled in New Zealand, especially over the past fifteen years, and are making a big contribution to our country.

We also have many contacts in the arts. We exchange science delegations and conduct joint research projects. There are frequent contacts between our political leaders and our sister cities. Our sports people are looking forward to the magnificent spectacle which we know the 2008 Olympic Games will be.

As well, New Zealand has important and far reaching political and security interests in the Asia/Pacific region.

My government developed what’s called the “Seriously Asia” strategy two years ago, because we knew that New Zealand needed to take new initiatives to invigorate our dealings with the nations of Asia.

For me, Seriously Asia is about focusing New Zealand attention on the importance of strategic trends in Asia and on the opportunities in the region for New Zealand. It recognises that our future is intertwined with that of Asia. We are partners with China in this process.

Earlier this month I announced that our government had taken the decision that New Zealand would accede to the Treaty of Amity and Co-operation (TAC) with ASEAN.

Our decision to accede, and our decisions to negotiate FTAs with ASEAN and China, are for us part of a broader process of engagement with ASEAN, China, and the wider region. As new institutional arrangements emerge in the region, like the East Asia Summit scheduled for December, it is our desire to be part of them. New Zealand is determined to be a constructive participant in the economic and political structures being formed in Asia today.

Later this afternoon I will meet with President Hu Jintao and Premier Wen Jiabao. The message I will take into those meetings is that New Zealand is a committed and dynamic partner for China in its own growth and development, and that China also has a role to play in New Zealand’s growth and development. We are Asia Pacific neighbours, and we must work together and with our other neighbours to ensure peace and prosperity in our region.

For those here today who are already engaged in trade or investment with New Zealand, there is much that New Zealand has yet to offer you. Please stay engaged with us, as we wish to stay engaged with you. China and New Zealand have both embarked on paths of rapid growth and modernisation. We have a lot to offer each other.

Thank you.

ENDS

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