Govt wants more investment between NZ and China

The government has used a contemporary China conference to push foreign investment, urging more businesses to invest in trading partners such as the Asian giant.

Finance minister Mr English told the seminar on China's ever-improving economic development model the two countries enjoy a warm and constructive relationship.

It also this year marks four years since the signing of a free trade agreement between China and New Zealand and 40 years since the start of diplomatic and trade relations.

However, he says all-important foreign direct investment between the countries remains small.

China is New Zealand’s 11^th largest investor, contributing $NZ1.8 billion last year, while New Zealand’s investment into China amounted to $789 million in the same period.

By comparison, New Zealand has $52 billion of direct investment from Australia and $11 billion from the US.

Mr English says foreign investment between the countries is crucial because New Zealand's economy and living standards depend on the ‘increasing prosperity of our trading partners.’

“The Government is doing its bit by investing overseas through the Super Fund and Kiwisaver, and we would like to see more New Zealand businesses follow this lead.

"We’ve seen some excellent recent examples of foreign investment into China. Fonterra has significant plans to increase the number of farms in China, at roughly $NZ50 million investment per farm.

"High-tech firm Rakon opened a $US35 million factory in Chengdu last year.”

Mr English says from 2002-11, New Zealand saved just over $4 billion a year, leaving a shortfall of $9 billion a year to fund investment – foreign investment helped bridge the gap.

He says it also has a number of other benefits:

• It is a source of capital to supplement New Zealand’s domestic savings.
• It drives the growth in wages, employment and output.
• It enables the transmission of technology, skills and know-how to New Zealand and for improving our connections to valuable international market.

New Zealand’s future growth depends on access to capital, knowledge and skills, and China’s size and growth potential means it will be the largest – and likely the fastest growing – market for New Zealand exports.

He reassured the conference foreign ownership can also lead to partnerships between New Zealand and foreign owners, or even the odd company which can return to local ownership, such as Z Energy’s purchase of Shell service stations.

And he warned of an increase in the cost of capital if New Zealand was unable to access foreign investment, restricting the ability for business growth, reducing employment opportunities and household incomes.

“The fears of foreign ownership are frequently overstated. While it is true that the returns from foreign financing contribute to New Zealand’s current account deficit, it’s also important to consider the bigger picture.

"The outcome for the economy is positive overall when foreign capital raises worker productivity and national income increases by more than the return on the investment.”

Mr English says while New Zealand welcomes foreign investment, a recent OECD survey rated the country among the most restrictive overseas investment regimes in the OECD.

He has urged New Zealand to take advantage of a growing Asia Pacific population, with increasing incomes.

“Our challenge is to assemble enough capital, people and market knowledge to take advantage of this opportunity. How we go about that will define our economic success in the next generation.”

The conference runs until tomorrow and considers China’s political economy, industrial structure and rural-urban mix as well as the country’s cultural, societal and institutional change.