Late last year, China overtook Australia as New Zealand's top
individual trade partner. Business editor Dene Mackenzie
investigates the implications of the growing ties to China
and the relationship between New Zealand, Australia and
New Zealand's December trade statistics confirmed the
importance of China to this country's traders with exports to
China coming in two-thirds higher than a year ago.
The growth was driven by milk powder and pine logs.
BNZ economist Doug Steel says Chinese demand for New
Zealand's primary produce remains an important driver of New
Zealand's overall export and economic performance.
ASB chief economist Nick Tuffley agrees.
''While the economic ties between the New Zealand and
Australian economies will remain significant, we expect
China's economy will become more and more important to New
Zealand's trade and broader economic outlook in the future.''
The importance of China was compounded by it also being
Australia's top trade partner.
Accordingly, Chinese economic performance could touch the New
Zealand economy through several different channels, he said.
Although the goods New Zealand and Australia sent to China
were different, the export sectors on both sides of the
Tasman had both become increasingly dependent on Chinese
demand over recent years.
China had become New Zealand's most important dairy customer,
Mr Tuffley said.
In the year ended December 2013, China accounted for 32% of
all dairy exports and 46% of milk powder exports.
As with dairy, China was behind the surge in volume and value
for New Zealand forestry exports.
New Zealand's forestry exports to China last year were up
more than 50% on a year earlier.
Beyond dairy and forestry, China was also an important
destination for many other commodity exports.
In the year to December, China was New Zealand's largest
export destination, buying $10 billion of merchandise
exports, or 20.7% of total merchandise exports.
Statistics New Zealand figures showed Australia still held
second place on the export tables, buying $9.1 billion of
merchandise exports - or 19% of total exports.
The three top export categories to Australia in 2013 were oil
and fuel products (18% of exports), precious metals (9%) and
beverages and spirits (7%). Dairy exports accounted for 5% of
total exports to Australia.
On the other side of the trade ledger, New Zealand imported
$8.3 billion from China in the year to December. China was
New Zealand's top source of imports. About 17% of New
Zealand's exports were sourced from China.
Again, Australia held second place on the import tables with
13%, or $6.4 billion, of New Zealand's exports sourced from
across the Tasman.
New Zealand imported a diverse range of things from
Australia. The top three imports from Australia by category
were machinery and equipment (11% of total), vehicles (8%)
and pulp and paper (5%). Other key sources of imports were
the United States (9%) and Japan (6%).
Mr Tuffley said tourism was a key export earner for New
Zealand, second only to dairy.
In the visitor stakes, Australia topped the table but China
was becoming increasingly more important. About 45% of all
tourists arriving in New Zealand came from Australia. Chinese
tourists accounted for 8.4%.
But 10 years ago, Chinese tourists made up only 3% of the
annual tourism numbers.
''And as China's level of personal income grows, the tourist
potential for New Zealand should only get better.''
With China's increasingly important role, it was
understandable why there was a lot of interest in Chinese
growth prospects, Mr Tuffley said.
An unexpected drop in Chinese growth was a risk to global
growth prospects, as well as the New Zealand, and the
Australian, export sector outlook.
''We see the opportunities for trade between New Zealand and
China outweighing the risks.''
China's gross domestic product (GDP) grew by 7.7% last year,
slightly firmer than China's official 7.5% target for the
year and the latest official 2011-15 five-year growth target
Compared with developed economies which typically grew at
rates more like 2%, China's growth seemed rapid, he said.
But, actually, China's growth was slowing and last year was a
14-year low for Chinese growth. China grew at an average pace
of 11% a year between 2003-12.
''Slower growth in China is a mathematical certainty. As the
economy develops, it becomes physically more difficult to
sustain earlier rapid growth rates.
''But this slowing should not be seen as a threat to the New
Zealand. Rather, we should welcome China's growth easing to a
GDP growth of only 6.9% in 2014 would generate a similar
addition to global growth as those earlier 10% plus growth
rates, and a similar increase in commodity demand, Mr Tuffley
New Zealand needed to continue to broaden the Chinese trade
ties with the hope of replicating the phenomenal dairy story
in other New Zealand export industries.
Key NZ product exports
Year to December 31. 2013
• Dairy $4.6 billion 46% (of total)
• Wood, wood articles $1.9 billion 19%
• Meat, animals, animal products $1.3 billion
• Wool $400 million 5%
• Fish and other seafood $400 million 4%
• Cereals, flour, fruits and nuts $400 million 4%
Key Chinese product imports
• Boilers, machinery $1.5 billion 19%
• Electrical machinery and goods $1.4 billion
• Footwear, clothing and apparel $1.4 billion
• Furniture and other furnishings $400 million
• Copper, iron and steel products $300 million
• Plastic products $300 million 4%