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Q+A: Rodney Jones interviewed by Corin Dann

Rodney Jones interviewed by Corin Dann

Kiwi in Beijing says New Zealand needs a rethink on doing business with China

Beijing-based economist Rodney Jones told Corin Dann on TVNZ’s Q+A programme that China was changing and New Zealand’s approach with the global super power was no longer the right one.

Mr Jones is a Principal of Wigram Capital Advisors, an Asian-based macro advisory firm that provides economic analysis and advice to leading global investment funds on developments in Asia.

China recently changed legislation to allow Premier Xi Jinping to remain president indefinitely, and Mr Jones said this would make dealing with Beijing tougher for other countries.

“The issue is how we respond, and we’re not doing a very good job of responding, because we’ve been looking through the rear view mirror. We’ve been looking at our successes, and we did remarkably well for 30 years. But we’ve got to think about a different China going forward, and that means we have to reorganise the way we do things.”

Q + A
Episode 3
RODNEY JONES
Interviewed by CORIN DANN

CORIN Welcome back, and good morning to Rodney Jones, principal of Wigram Capital Advisors in Beijing. Great to have you back on the show, Rodney.

RODNEY Thank you. Good to be back.

CORIN Give us a sense for what’s going on. The ground in China at the moment — we’ve got this two-term limit scrapped. Xi’s getting his grip on things. Should we be worried?

RODNEY We have to understand what’s going on. So we’ve got the National People’s Congress this week. It ends tomorrow. They’ve changed the constitution. Normally, these are pretty quiet events. This one’s been tumultuous. We’ve got the end of the two-term limit. This means President Xi can be there for life. I saw one article today suggesting he may retire in 2032 or 2037. So complete change. We’ve got a new vice president, Wang Qishan, who is over the previous retirement age. So the old norms have been thrown overboard.

CORIN All right, so let’s assume Xi’s strengthened his grip. He’s got more power. He was pushing through corruption — anti-corruption measures, and he was supposed to reform the economy. Is he doing either of those things?

RODNEY Well, there’s some good stuff happening. The Family Planning Commission has gone. No one’s commented on that, but the Family Planning Commission, that was a really brutal organisation for the ordinary person, has gone. The NDRC, which is the State Planning Commission, the old State Planning Commission is de-powered.

CORIN So he’s modernising.

RODNEY So he’s modernising, and his vice premier, Liu He, is a very capable technocrat.

CORIN But what does it mean for—? Okay, so New Zealand’s looking at upgrading its free-trade deal with China. We’ve still got $26 billion in two-way trade. Is he likely to get pushier with us?

RODNEY That’s what we have to find out. We don’t know how foreign policy will be. At the moment, they’re very orientated on the US. We’ve got the Trump tariffs — may be announced as soon as this week. We don’t know what that will look like. But he’s clearly being assertive. We’ve been talking over the last few years on the show. Over the last five years, this is the direction we’ve been heading.

CORIN The Trump tariffs — so, this is the talk of $60 billion in tariffs that might get targeted at China. That would be a massive escalation, wouldn’t it?

RODNEY Yeah, absolutely.

CORIN Trade war?

RODNEY It depends how China responds. But to be fair to the US, the US is very open. They’ve sponsored the global trading system. Their tariffs are low. China’s tariffs are high. We want China to open up, but they’re not, under Xi. But a trade war is not the way to get there.

CORIN Just before we move on to New Zealand — would that affect — that tariff issue, the trade-war issue — will that affect, do you think, our free-trade agreement negotiations in the upgrade?

RODNEY Well, I think it’s hard work anyway. We’re trying to make water run—
CORIN It seems to have gone off the boil.

RODNEY It’s gone off the boil. We’re making water run uphill. That’s not where China is. Under Xi, it’s personal, authoritarian. It’s his personal leadership. China’s looking in. It’s going to be harder work for countries dealing with China.

CORIN Upshot is it’s tougher for New Zealand going forward from there, isn’t it?

RODNEY It’s absolutely tougher.

CORIN Well, let’s talk about China’s influence here, because yourself and some others, Anne-Marie Brady, have raised some concerns about China’s sort of influence in New Zealand. Are you worried about that?

RODNEY Yes, because I think China is what it is. And while it’s a surprise that Xi has gone for lifetime rule and personal rule, that was the direction we’re heading. So China is what it is. It’s a global power. It’s asserting itself. It’s rising. This is what we have to live with. This is our future. The issue is how we respond, and we’re not doing a very good job of responding, because we’ve been looking through the rear-view mirror, we’ve been looking at our successes, and we did remarkably well for 30 years. But we’ve got to think about a different China going forward, and that means we have to reorganise the way we do things.

CORIN Do we stand up to them?

RODNEY No, it’s not about that; it’s about what we do at home. So, for instance, take out New Zealand-Chinese community. They’re five percent of the population. They’re under-represented in parliament. China’s going to be competing with us at home and in the Pacific. We have to rise to that competition. And that’s part of promoting New Zealand-Chinese into parliament, having more MPs, and our political parties have managed that in a way to focus on China. It’s been about China. It’s been about having MPs who can raise money and open doors in Beijing, and that’s not going to fly. We have to strengthen ourselves to deal with a highly competitive China.

CORIN But is that Chinese population in New Zealand — are they nervous about China watching them?

RODNEY Yeah, it’s difficult because things are monitored, and you’re not sure— it’s not a free society, and that impacts here. But there’s voices in the community here. We’ve got so many strands of the Chinese community here, from families that have been here 150 years from Vietnam and Malaysia and recent arrivals from China.

CORIN So how does New Zealand navigate that without coming across as anti-Chinese, as xenophobic?

RODNEY That’s why we have to promote our Chinese community.

CORIN Get them more involved.

RODNEY Get them more involved and have independent voices. The political parties have to deal with this. You don’t need to raise money because that money will tend to come from CCP-related organisations, and you don’t have to open doors in Beijing.

CORIN And do you think our political parties have failed so far in that regard?

RODNEY The political parties are our biggest problem right now. Look at the presidents going off to Beijing — both presidents, from Labour and National — and singing the praises of Xi Jinping. That’s completely inappropriate. This was a few months back. That’s what we need to change. We need to recognise China for what it is, understand it and change ourselves.

CORIN Does that mean following Australia, which has taken a more aggressive line? It’s looked at crackdowns on political funding. Or is that too far?

RODNEY Yeah, I think we need electoral law reform. We do need electoral law reform and funding. We need to be more transparent. In Australia, the debate would be in a tone that would make New Zealanders uncomfortable. It’s we don’t want to follow the US and Australia on this debate, but we want to do it our way, and that’s more inclusive, but dealing with the issues.

CORIN What do you make of Winston Peters as Foreign Minister? Has that changed things? His rhetoric — I mean, frankly, it is difficult to understand at times. But his rhetoric seems to be, even if it’s targeted at a New Zealand First audience, perhaps, a bit more anti-China.

RODNEY I wouldn’t say it’s anti-China. It’s about just creating a little bit of distance. We don’t know the direction China’s going to go. We don’t need to be friends with China; we have to be partners.

CORIN So when he signalled that he wasn’t so keen on the Belt and Road Forum, which was one of the first— a significant thing that we signed up to, which China would have liked. How would they react to that?

RODNEY Well, they’re not going to like that, but there’s things we’re going to have to do that they don’t like. We’re going to have to have a more robust relationship going forward. Belt and Road — it’s very hard to see how it makes sense from a New Zealand perspective. It makes sense in Central Asia and South Asia. That’s the focus of the strategy. In the Pacific, we’ve got competitive issues there.

CORIN We’re Western nation signing up to their thing, though, isn’t it? That’s the deal, isn’t it?

RODNEY Yeah, well, that used to be the deal. That used to be the deal. It has to change going forward.

CORIN On that note, this week, Fonterra will give its interim results, and they’re going to have to deal with the Beingmate issue, which is the infant formula company that own about 20%. The share prices have fallen. They’re looking at a big write-down — hundreds of millions of dollars, potentially. You’re in China. How big a problem is that?

RODNEY That’s a huge problem. We talked about it on the show. At the time, I said it was reckless. This is what we’re doing wrong. We do these big trips to China. It’s fantastic, it’s ra-ra-ra — the boards, the company, the prime minister. It looks easy; it’s very straightforward, and it’s not at all. And, living there, that deal made no sense at all at the time.

CORIN But it’s skin in the game. They had to get some skin in the game, didn’t they? Because they’re making $3 billion in exports of raw milk powder.

RODNEY Yeah, but you can’t rush in and do a joint deal like that where you have no control, no management. It never made sense. It never, from day one, made sense. And it was a bricks and mortar when things were going online. So it was an old economy-type investment, where they had no control, no unknown character. That’s exactly the sort of thing we’re doing wrong. We’re rushing and impulsive.

CORIN So what do we do in future, then? So for a future company that’s looking to get into China.

RODNEY It’s hard work. I mean, we have an office in China. Operating in China is hard work, and it’s always going to be hard work. And we just have to be realistic, whereas we’ve had a bit too much kind of hype and ra-ra-ra.

CORIN $26 billion in two-way trade, though.

RODNEY It’s been fantastic, but it’s slowing, but it’s slowing. You look at our ranking — I mean, we were number one for a long time in terms of exports to China. We’re now, in the last three to four years, number nine. So we’re slipping down the rankings. So, as you say, you look through the rear-view mirror — we did an amazing job. We’re going to be dealing with a different China going forward.

CORIN Fascinating stuff. Rodney Jones, thank you very much, as always. We appreciate it.







END


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