The corruption of New Zealand politics

Who knows whether Jami-Lee Ross’s allegation around the handling, and disclosure, of a donation to the National Party from one Yikun Zhang are correct or not.  One hopes time, and evidence, will tell.   Frankly, one hopes Ross is wrong, or overstating things.  But at least one observer notes that Jami-Lee Ross has previously been actively involved in such fundraising.

Him again…..the former PLA intelligence official, Chinese Communist Party member, and National MP, who admits he misrepresented his past to immigration/citizenship officials, but who is stoutly defended by successive National Party leaders, and whose prime role in the National Party appears to be (highly effectively it is reported) tapping the ethnic Chinese community for donations.

It seems highly likely, to the point of being almost certain that there was at least one such substantial donation from Yikun Zhang.  After all, the man’s wife told Stuff that Simon Bridges had been to their house for dinner, while from the same story we learn

A receptionist at KCC said Zhang could not be emailed as he did not speak English.

We can assume Bridges didn’t go for dinner for the sake of the witty repartee, stimulating conversation, or on account of a personal friendship.  It is a far cry from the days  – not that many decades ago –  when party leaders and senior ministers stayed well clear of party fundraising, to avoid giving the impression of opportunities for influence.

Incidentally, I’d been under the impression that immigration to New Zealand had long involved some English language tests.

In case one wonders if the receptionist was telling a convenient tale, there is an OIA request  – to the Southland District Council of all places –  available on line about Yikun Zhang and one of his legal advisers.  The Mayor had made Yikun Zhang some sort of semi-official Businss Adviser.   Among the June 2018 OIA responses, the mayor is reported this way

The Mayor wishes to acknowledge the work of Yikun Zhang and Ping Chen and he has no emails that relate to any business matters that can be released as discussions occur between Ping Chen and the Mayor as Mr Zhang gains confidence in English. To date communication has been verbal and translated either on conference call or Wee Chat.

Very little, or no, English.

The Mayor and his wife seem to have benefited considerably from the largesse of Yikun Zhang

The Southland District has received no gifts from either party, and the Mayor has received two bottles of wine prior to a dinner (2016) in Auckland, a sponsored trip to China (2017) for he and his partner to attend business and local government introductions in Beijing and Guangzhou and return again.

The Council was obviously a bit defensive about the Mayor’s ties to Yikun Zhang and the OIA response twice highlights Yikun Zhang’s national political connections

There is an informal relationship to see how things progress. Both  [Yikun Zhang and Ping Chen] are well known in central government and both have close links to high level Ministers and MPs.

Perhaps Simon Bridges was one those “high level Ministers”, but whether he was or not we can safely assume that OIA response is referring primarily to National Party ministers, since this relationship with the Southland District Council developed over the last few years.  And as the Stuff story notes (complete with photos)

In July National Party deputy leader Paula Bennett posted photos on her Facebook page of her and Jami-Lee Ross sitting at the same table as Zhang for the opening of the Chao Shan General Association’s new function centre.

What else is there about Yikun Zhang?

Well, we know that the current government –  Labour/New Zealand First coalition –  gave him an honour in this year’s Queen’s Birthday honours –  for various things including, apparently advancing the People’s Republic of China Belt and Road Initiative (the “maritime Silk Road” bit).   There is a photo of him with the Governor-General receiving the award.  Presumably, given his inability to speak English, the conversation was rather limited.  A Cabinet minister praised him

“Mr Yikun Zhang, has been made a Member of the New Zealand Order of Merit, for services to New Zealand-China relations and the Chinese community. Mr Zhang has facilitated economic and trade conferences and Expos between New Zealand and China and is an effective and tireless community organiser.

Various other commentators have highlighted some of Yikun Zhang’s other activities.  Thus, it appears that Yikun Zhang is actively involved in various United Front organisations, used by Beijing to influence ethnic Chinese in other countries, and influence politics and society in those countries.

Rather like, as Anne-Marie Brady has pointed out, Labour MP Raymond Huo.

It is a little hard to believe that someone who established himself here, clearly has considerable resources at his disposal, but can’t even be bothered learning English (he isn’t some struggling 80 year old on a parent visa, say), has the interests of New Zealand primarily at heart, when liaising with or donating to, political parties.  Do you really not  have to know even conversational English nowadays to become a citizen?  Perhaps when he returns to Auckland someone could ask him, through a translator, about whether he has anything negative to say about the brutal regime whose diplomats he hangs out with, and whose foreign policy initiatives he seems to have helped advance?

And, of course, if this particular case puts the spotlight on National, it was Labour/New Zealand First who awarded the man’s honour, and when Labour was last in government there was the infamous case of the award of citizenship to a donor, against the strong recommendation of officials.  And, look, the minister involved is a Cabinet minister today.

National seems to have been particularly effective at tapping the ethnic Chinese donor “market” in recent years.  They were in government.  One can only imagine how the Labour fundraisers are now looking at the possibilities, and that any such approaches are likely to fall on receptive ears.  Is Labour willing to resist the temptation?  Probably not judging by the willingness of the party hierarchy to praise the CCP and Xi Jinping.  Oh, and there was the large donation to Phil Goff’s mayoral campaign from the mainland.

A few months ago, I reported this from a (Chatham House rules) seminar I was invited to

There was clear unease, from people in a good position to know, about the role of large donations to political parties from ethnic minority populations –  often from cultures without the political tradition here (in theory, if not always observed in practice in recent decades) that donations are not about purchasing influence.  One person observed that we had very much the same issues Australia was grappling with (although our formal laws are tighter than the Australian ones).  Of ethnic Chinese donations in particular, the description “truckloads” was used, with a sense that the situation is almost “inherently unhealthy”.   With membership numbers in political parties dropping, and political campaigning getting no less expensive, this ethnic contribution (and associated influence seeking) issue led several participants to note that they had come round to favouring serious consideration of state funding of political parties.   I remain sceptical of that approach –  especially the risk of locking in the position of the established parties, or locking out parties the establishment doesn’t like – but it was sobering to hear.

What is the issue?  It isn’t that New Zealand citizens, of whatever ethnic background, shouldn’t be able to donate to political parties.  The concern in the PRC context is that (a) the donors themselves are often dependent (their own businesses) on continued access to the PRC, and often have families back there exposed to the (not very) tender mercies of the party-State, (b) the extent of PRC Embassy and related United Front organisation influence on the local ethnic Chinese community, and (c) the not-unrelated risk of the flow of donations drying up should the recipient party ever do or say anything upsetting to Beijing.  The PRC regime is of a character, and determination, not like the home countries of most of our other migrants.

Yikun Zhang himself seems almost peripheral to Jami-Lee Ross’s concerns/allegations, as reported so far. But I hope that the incidential disclosure of his name, and apparent close relations with the National Party (in particular) will help to spark a more honest conversation about the flow of Chinese money to political parties, in the context of a more realistic assessment of the nature of the regime, its methods, its interest.  And, on the other hand, a renewed demand for a much greater degree of integrity –  a willingness to say no, just occasionally, to stand for the values the underpinned our political system for a long time –  among our politicians and political processes.   It wasn’t that hard, in the end, to get rid of Jami-Lee Ross.  What about Jian Yang?

Sadly, we can expect more silence, more complicity, and not just from the National Party, but from every single one of our parties and their leaders.

UPDATE: Part of a thread on Yikun Zhang and the United Front/CCP connections.

Interest rates: US and New Zealand

There is a bit of a story afoot that, somehow, the days of low interest rates are almost over.  There was even an editorial to that effect in the Herald yesterday, which seemed to hanker for higher interest rates here (without, for example, linking that preference to any good things –  much faster productivity growth –  that might make rather higher interest rates a welcome complement to greater economic success).

The idea that interest rates will soon be rising has been something of a constant (across much of the world) this decade.  Like the stopped clock, that line will no doubt eventually be proved correct.  But so far this decade, it seems to have been right (about policy rates) mostly when either:

  • there is some sort of crisis, in which domestic authorities are fighting a lower exchange rate (eg Turkey and Argentina), or
  • temporarily, when over-enthusiastic central banks misjudge inflationary pressures (eg New Zealand (twice) and a couple of other countries (eg Sweden and the ECB), or
  • on the back of massive, unsustainable, late-cycle fiscal stimulus (the US at present).

The Federal Reserve has now raised its short-term interest rate target quite considerably.  Then again, the US 10 year bond rate –  3.16 per cent as I type – is barely above the levels it reached at the end of 2013, five years ago.   And here is a chart that decomposes a 10 year yield into two parts, and using a 5 year yield, calculates the implied second half of that 10 year bond: a five year implied rate in five years time.

US 5x5

That rate has edged up a little recently, but is still a long way below where it was five years ago.   Markets recognise that short rates have risen, but seem to have no greater confidence that they are going to stay very high for very long.

What about New Zealand?  Here is much the same chart for New Zealand, drawn from the data on the Reserve Bank website.

NZ 5x5

No sign of any rebound at all.    The series isn’t at its (2016) low but –  as has been the case all decade –  each peak is lower than the one before.  Five years ago when the markets and the Reserve Bank were convinced the OCR was going up a long way, this implied forward rate was in excess of 5 per cent.  Yesterday it was 3.27 per cent.

Both charts so far have been of nominal interest rates?  What about real, inflation-indexed yields?   The New Zealand government now has a variety of maturities on issue, and this is how the yields have performed since the start of 2014.

IIBs oct 18

There is some volatility in the series, but the trend is pretty clearly downwards, even if one focuses just on the last 18 months or so.   With the passage of time each specific maturity has a shorter remaining time to run (in 2014 the 2025 maturity was an 11 year bond, and now it is just under a 7 year bond), but even adjusting for that the trend is still downwards.

Here is a chart showing the implied five year forward real rates from those indexed bond maturities.

implied forwards NZ IIBs

The continued downward trend evident in the previous chart isn’t so clear in this one.  But there is no sign of any trend rise in real long-term New Zealand yields at all.   And if we take the very longest of these series –  the grey line, which represents and implied five year real rate roughly 20 years from now (and which thus shouldn’t be much influenced by very short-term expectations of the OCR or the state of the economy) the implied forward yield has dropped by around a full percentage point in little more than a year.  Those are big moves for a very long-term security.

What about the US?  Here is the yield on a US government 20 year inflation-indexed bond, calculated as a constant maturity (ie always 20 years ahead, not fixed maturity dates as in my first NZ indexed bond chart above).

constant maturity 20 year iib

And here is the implied yield on a 10 year US indexed bond 10 years ahead (using the 10 and 20 year constant maturity series).

US 10 year implied

There is some sign of these very long-term implied US yields rising.  But even they aren’t setting new highs, or even surprising local highs of just the last few years.  Even with all that new government debt being taken on now, and projected into the future.

Perhaps the end of low interest rates really is nigh.  But there isn’t much sign of it in market prices at present –  none at all in New Zealand where, if anything, long-term and implied forward rates have just been keeping on falling.

Personally, my hunch is that yields (nominal and real) over the next decade could average lower –  not higher-  than those at present.   Mostly because when the next serious recession comes –  and there are plenty of things which could cause or compound it –  most advanced countries (and many emerging ones now) will have little capability, and perhaps even little willingness for some time, to do what it might take to get economies back on a firmer footing.   Look at how long it took last time round, even though going into that serious recession almost all countries had much more policy capacity –  and perhaps even political cohesion – at their disposal.

Later this morning, we’ll have the CPI data which may, at the margin, colour expectations about the near-term outlook.  But whatever those details, they want materially alter the picture of medium-term vulnerability, here and abroad.