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Goff – China key trading opportunity for NZ

Hon Phil Goff
Minister of Trade

18 August 2006

Goff – China key trading opportunity for NZ

With a rapidly growing economy and a population becoming more and more affluent, China is an increasingly important market and trading partner for New Zealand, says Trade Minister Phil Goff.

Mr Goff was addressing the Doing Business with China seminar in Auckland today.

"China is already a significant economic partner for New Zealand and is growing in both absolute and relative importance.

"Globally China is now the world’s fourth largest economy – with a gdp of US$2.26 trillion. With growth rates averaging close to 10 percent, commentators predict that within the next 20 years or so China will overtake the United States as the world’s largest economy.

"So China is big and getting bigger.

"As a trading partner China is our fourth largest overall, and number three on the import side. Bilateral goods trade topped NZ$5 billion in 2005, up almost a third since 2003. Merchandise trade is currently running heavily in China’s favour, but looked at over a 10 year period New Zealand’s merchandise exports to China have roughly tripled to more than NZ$1.5 billion. And New Zealand earns close to another billion dollars a year from services exports – mainly education and tourism.

"China’s significance in the global economy and its significance as a trading partner underlines the importance for New Zealand of our negotiations for a free trade agreement (FTA) between the two countries.

"FTA negotiations were launched, by the Prime Minister and President Hu, in November 2004, following a Joint Feasibility Study undertaken by both governments to consider the potential benefits of an agreement.

"The Joint Study confirmed that a high quality FTA would be in the interests of both countries. Specifically for New Zealand modelling undertaken in conjunction with the Study predicted that such an FTA would increase New Zealand’s welfare, over a 20 year period, by around NZ$3 billion, with exports to China up by between NZ$260m and NZ$400m a year.

"China too stands to gain considerably with both significant gdp gains and increases in exports to New Zealand of between 5 and 11%.

"So the stakes in this process are high for both countries.

"But there is much more to doing business with China than the FTA negotiations and the successful conclusion of the negotiations will not of itself create the economic benefits that are predicted for New Zealand. For New Zealand to benefit depends on business people being able to take advantage of the opportunities that result from the negotiations, and more broadly on New Zealanders seizing the opportunities that exist in the Chinese marketplace.

"The international media is full of stories about the juggernaut of Chinese manufacturing. But just as China is growing rapidly in aggregate, so the structure of its economy is evolving – including on the consumption side.

"We all know that China is home to roughly a fifth of the world’s population – some 1.3 billion people. But perhaps less well known is that out of China’s transformation is emerging a growing group of 100 million or so sophisticated consumers. These people are well educated and have money to spend beyond the essentials of living and many of them are well up on the latest consumption trends around the globe. Behind this 100 million is a further group of 350 million consumers who are rapidly moving closer to achieving meaningful levels of discretionary income.

"These consumers offer huge opportunities, both directly and indirectly, for New Zealand suppliers of top line food and beverage products, wood products, agricultural technologies and many other goods and services, Mr Goff said.


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