Eyes determinedly shut

After a series of posts late last year, I haven’t written much recently about the New Zealand economic and political relationship with the People’s Republic of China.  It isn’t that I’ve lost interest, or become somehow less convinced of the importance of the issues. It remains, for example, a disgrace that unrepentant former PRC intelligence officer Jian Yang  –  who now acknowledges misrepresenting his past on official documents –  sits in our Parliament, protected by his own party and not subject to any critical scrutiny from the new Prime Minister or her party.  All parties seem determined to look the other way.  Businesses trading with the party-State no doubt quietly cheer them on.  Don’t ever rock the boat, don’t ever display any self-respect, seems to be the watchword.  Deals need doing, bottom lines enriching.

I’ve been busy with other things, but yesterday was the “China Business Summit 2018” in Auckland, operating under the logo “Eyes Wide Open”.    The Prime Minister and the Minister for Trade and Export Growth both gave what were billed as keynote speeches.  I want to focus on the Prime Minister’s speech, but couldn’t go past David Parker’s risible description of

“China’s leadership on issues like…trade liberalisation have the potential to add momentum to collective efforts in the region”.

No serious observer –  no one with other than an obsequious political agenda –  could regard the PRC as a leader in the cause of trade liberalisation.  The PRC lags badly, mostly to the detriment of their own citizens. That is so whether it is tariffs under consideration, or non-tariff barriers, and it is as true of the letter of law as well as the way laws are actually applied (recalling that the PRC is not exactly known for the priority placed on the rule of law.  As the Chief Justice of the PRC regularly reminds people, in the PRC the law is at the service of the Party.

Curiously enough, even Stephen Jacobi –  executive director of and spokesman for the (largely) taxpayer-funded advocacy group the New Zealand China Council seems to agree.  He is reported in another article this morning again stressing how difficult it will be to get the upgrade to the New Zealand/China preferential (“free’) trade agreement unless New Zealand gets more actively on board with the PRC geopolitical initiative, the Belt and Road.    Because, let’s be clear, the PRC’s barriers to international trade are a great deal higher than those New Zealand still has in place.  For them, deals (“FTAs”) are primarily about politics, not about some rules-based international order –  which may from time to time be useful to them, but only instrumentally.

But what of the Prime Minister’s speech?

There is lots of gush, and little reality.

We will look to cooperate with China to promote regional stability and development

How, one wonders, do we see the PRC promoting regional stability –  that isn’t just the quiescence of the indebted, the intimidated, or the bought – in  flagrant aggression in the South China Sea, standoffs with India, in the repeated threats to prosperous and democratic Taiwan, in the intimidating patrols around the Senkaku Islands, in loading up developing countries with debt, in the threats to democracy in places like Cambodia or the Maldives?

She moves on to note that

The Belt and Road Initiative is a priority for China.  New Zealand is considering areas we want to engage in the initiative, and other areas where we will be interested observers.

In fairness, that is hardly a ringing endorsement –  and perhaps less than her audience would have liked –  but recall what our government (previous one) has already signed up to in the Memorandum of Arrangement.  I wrote about that a few months ago.  You might recall that the two governments agreed.

BRI 3
I think the ball is in the PRC’s court when it comes to avoiding threats to regional peace.  By pretending otherwise, New Zealand governments simply give cover to the PRC agenda.

Of course, there is worse in the agreement, with talk of us both promoting the “fusion of civilisations”

BRI 2

As I noted in the earlier post

I’m quite sure I – and most New Zealanders –  have  little interest in pushing forward “coordinated economic…and cultural development” with a state that can’t deliver anything like first world living standards for its own people (while Taiwan, Singapore, South Korea etc do) and whose idea of cultural development appears to involve the deliberate suppression of culture in Xinjiang, the persecution of religion (Christian, Muslim, Falun Gong or whatever), the denial of freedom of expression (let alone the vote) and which has only recently backed away from compelling abortions.  And that is just their activities inside China.    “Fusion among civilisations” doesn’t sound overly attractive either –  most of us cherish our own, and value and respect the good in others, without wanting any sort of fusion,and loss of distinctiveness.  But perhaps Simon Bridges [who signed the agreement for the previous government]  saw things differently?

Perhaps one day the Prime Minister could tell us, straightforwardly, whether this stuff –  an agreement the New Zealand government is party to – reflects her values?

In her speech yesterday there was a whole section headed “New Zealand Values”

This brings me back to something that this government has placed front and centre of its agenda – our values

But what might those values be?  She goes on to tell us (or at least I think she does –  the language is a bit garbled).

This is why my government is placing such an emphasis on our core values, like on environmental and climate change issues. 

So that was no mention of:

  • democracy,
  • rule of law, domestically and internationally,
  • freedom of speech,
  • freedom of religion,
  • standing by countries that share similar values, when they are threatened.

or anything of the sort.  Just climate change and the environment (although are those “values” or just issues?) –  where, conveniently, her rhetoric and the PRC seem to, for now, align.

Then she moves to the standard fallback line of one New Zealand minister or Prime Minister after another.

Naturally, there are areas where we do not see eye to eye with China. 

We will just never, ever, come out and clearly and state what those differences are.  Instead, she trivialises the (unspoken) differences

This is normal and to be expected with any country, especially where we have different histories and different political systems.

It is as if she treats the PRC as a normal country, rather than one of the biggest abusers of domestic human rights and most aggressive external powers anywhere.  It is today’s Soviet Union, except probably with more evidence of an active external aggressive agenda.   Our Prime Ministers a generation or two back didn’t trivialise the difference between the Soviet Union and the West in the way that John Key did, and Jacinda Ardern does.  Then again, I’m pretty sure we didn’t have party presidents (Haworth and Goodfellow) issuing congratulary statements on the occasion of meetings of the Soviet Communist Party.

But there weren’t big business interests –  private and government (think universities) –  with dollars at stake then.

Of course, the Prime Minister tries to cover herself with talk of

New Zealand and China can and do discuss issues where we have different perspectives.  We can do this because we have a strong and a mature relationship – a relationship built on mutual respect; and a relationship that is resilient enough for us to raise differences of view, in a respectful way.   This is a sign of the strength and maturity of our relationship.

But it is just words when our leaders –  accountable to the citizenry, not to Fonterra, Zespri or university vice-chancellors –  will never utter a word of concern in public.   Maybe they do occasionally raise issues in private –  and the PRC authorities politely ignore them – but even that argument was undercut by the Deputy Prime Minister in comments yesterday

The foreign minister was asked whether China’s influence in New Zealand, Australia and the Pacific would be on the agenda during his trip.

“I’m in a job called foreign affairs, and diplomacy is rather important. You’ll know I’m naturally a tactful person, and I won’t be raising those issues in the way you put them.”

These aren’t values they stand for, just dollars.

The Prime Minister can talk in generalities all she likes

Our reputation as a leader on environmental issues; as a fair player internationally; as a defender of the international rules-based system, a system which privileges state sovereignty and dispute settlement on the basis of diplomacy and dialogue, is fundamental to who we are as a nation and as a society.

But specifics are what count.  Anyone can give POLSCI 101 talks, but when she won’t (say) stand up and call unacceptable China’s illegal creation of new artificial islands in the South China Sea, its illegal assertion of sovereignty, and the militarisation of those new “islands” –  to reference just her talk of “a system which privileges state sovereignty and dispute settlement on the basis of diplomacy and dialogue” –  it is hard to take her seriously on the values score.  When she won’t call out Jian Yang’s position, or the way in which PRC-affiliated entities have gained effective control of Chinese language media in New Zealand, or the way several universities and many of our schools are taking PRC money on PRC terms, it is hard to take her seriously when she talks of values, even as it directly affects New Zealand.   [UPDATE: This very morning she managed to openly criticise actions of two other countries.]

But probably the big-business entities putting pressure on the government to do whatever it takes to get the “FTA” upgrade –  unconcerned about values, but very interested in bottom lines –  will be happy with her.

It all seems a lot more Neville Chamberlain than Michael Joseph Savage (whose government was quite critical of the appeasement of Nazi Germany).  But however deluded Chamberlain was, nobody supposed his stance was just about the money.

And, since most of you come here for the economics, I was struck by an account I saw of the appearance last week by the Governor of the Reserve Bank at Parliament’s Finance and Expenditure Committee, where he was asked about China.  Astonishingly, the Governor reportedly claimed that the Chinese economic story was well-understood –  I think most of those close to it would argue that anyone who thinks they really understand it is only revealing how much they don’t know – but then he want on to make what is simply a factually inaccurate statement.  He claimed, so it is reported, that China was in some “miraculous” period where it was moving into “first world economic wealth”.

Productivity is the foundation of prosperity.  The cohort of countries near the very top of the OECD league tables (several northern European ones and the US) have real GDP per hour worked, in PPP terms, of around US$70 an hour.   Here –  from the Conference Board database – are the 2017 numbers for the various first world Asian economies, and for the PRC.

Real GDP per hour worked (USD, PPP)
Singapore 64
Hong Kong 54
Taiwan 51
Japan 46
South Korea 37
(PR of) China 14

Even underperforming New Zealand manages US$42 an hour.  Other countries matching the PRC productivity numbers include such denizens of the first world as Indonesia, Ecuador, and Peru.

It sounds as if the Governor has been buying the hype.  But I suppose his political masters won’t be unhappy: flattery and never ever uttering a sceptical word are among their watchwords.

 

 

A double standard…or not

There has been plenty of criticism of the Labour-New Zealand First government for their failure to act meaningfully in support of the United Kingdom and other traditional western friends and allies, responding to the poisoning in Salisbury of the Skripals.  I’d agree with the critics.  Even Ireland –  not in NATO, Five Eyes or other military/intelligence alliances –  expelled a Russian diplomat in response.  But not New Zealand.   Add in that refusal to act to the Minister of Foreign Affairs’ attempts to minimise Russian responsibility for the downing of MH17 or to suggest Russian hadn’t been attempting to meddle in the US 2016 election, and it must be increasingly difficult for our friends and allies to take us seriously as either.

I don’t suppose Russia is much direct threat to New Zealand –  though cyber threats aren’t restricted by physical proximity.  But that shouldn’t really be the point.     Countries simply shouldn’t be able to get away with killing (or in this case, so far, attempting to kill) people going about their lawful business in other countries without some response.     And the provision of support in times of need is what friends and allies do –  in fact, it is one of test of friendship.  Kicking out diplomats (for a few months) is a feeble enough response, longer on symbolism than substance.  But the New Zealand government wasn’t even willing to get onside with the symbolic response.    Instead, we find our ourselves in the company of Greece – a country with very close historical and contemporary political, cultural and religious ties to Russia.

With enough determination even a country –  Russia – whose real GDP (in purchasing power parity terms) is only a third of that of just the biggest four west European economies combined, and about 20 per cent of that of just the United States, can wreak a lot of havoc if it chooses, especially to its smaller and weaker neighbours.  But it is still a country in relative decline.

So there is Russia and then there is the People’s Republic of China.  I’ve recently been reading the book Henry Kissinger wrote a few years about China, including US relations with the People’s Republic in recent decades.  It was a useful reminder that when the PRC and the United States opened up to each other almost 50 years ago now it was, from both sides’ perspectives, substantially about dealing with the greatest geopolitical threat of that era –  the Soviet Union, which had armies (and nukes) perceived to threaten western Europe, and armies massed on the northern borders of China.

Here was the relative economic capacities (real GDP in purchasing power parity terms) of the three countries in 1970.

econ resources 1970

Of course, the PRC had enormously more people than either of the other countries (and, as Kissinger reports, Mao had often talked of China’s ability to absorb losses of a few hundred million people in a nuclear attack).   Add in, on one side, the rest of NATO and, on the other side, the rest of the Warsaw Pact, and the western economic capacity was far far greater than that of the Soviet Union.    But states like the USSR could still pose a threat, by devoting a far larger proportion of their resources to military purposes.  Pre-war Germany was, after all, materially poorer than Britain and France (and respective empires) combined, and even a bit poorer than just the Soviet Union.  Real GDP in Japan in 1940 was about a quarter of that of the United States.  Japan and Germany lost –  they were both poorer, and had fewer people than the countries they took on – but it tooks years and enormous sacrifices to beat them.

What of the situation now?   This chart shows the ratio of PRC to US total real GDP, again in purchasing power parity terms, from 1980 (when the IMF database starts) through to forecasts for 2022.

econ resources us vs china

In PPP terms, the size of the PRC economy exceeded that of the US a few years ago.  Even if you think China might have some rocky times ahead –  the overhang of all the internal debt – it seems highly unlikely that the PRC economy will ever again be as small as that of the US.  On IMF numbers, in 2022 total GDP in China will be roughly equal to that of the US, Japan and Germany combined.   Of course, material living standards in the PRC are much lower than those in the United States, but on the IMF projections by 2022 real GDP per capita in China is forecast to be about a third of that in the United States.  Soviet Union real GDP per capita in 1970 was about a third of that in the United States then.

There is plenty of talk from the PRC of its “peaceful rise” or “peaceful development”.  But even if we set Tibet to one side, this is the regime that has fought three aggressive wars (Korea, India, and Vietnam), which has used military action to seize islands and reefs in the South China Seas and which to this day has never ruled out the military conquest of its neighbour –  the now prosperous democracy of Taiwan.   If anything, the rhetoric around Taiwan has only been stepped up in recent years.  In defiance of international law, the regime has created artificial islands from rocks and reefs, and continues to expand its military capability on those “islands”.  The regime menaces Japan around the Senkaku Islands, and only last year there was the Doklam standoff with India.  If you are worried about Russian support for separatists in eastern Ukraine –  as most rightly are –  there is plenty enough to match it in the aggression of the PRC.  The PRC bullies and bribes regional goverments to gets its way (eg here) . And yet rarely a word is openly uttered by most Western governments, including our own.

And if Russia’s latest offence – egregious enough –  was attempting to murder a couple more Russian citizens in Britain, what of the People’s Republic?  There was a fascinating, and pretty disconcerting, article in Foreign Policy only a few days ago headed “The Disappeared” about the (alleged) activities of the PRC regime in kidnapping or otherwise coercing people who have left China –  who may even be citizens of other countries (and the PRC doesn’t legally recognise dual citizenship) –  to return.    There is even a suggestion, from a former Chinese diplomat who defected to the West a decade or so ago, that such activities may have occurred in New Zealand.

One of the first cases to spark debate dates to 2005, when Chen Yonglin, a Chinese diplomat who had defected to Australia, accused security forces of having drugged and kidnapped Lan Meng, the son of a former deputy mayor of Xiamen, five years earlier. Lan was allegedly drugged by Chinese security forces and transported from Australia back to China on a state-owned shipping vessel.

Chen, who was assigned to China’s consulate in Sydney at the time of his defection, claimed that Chinese officials abducted Lan in order to force his father, Lan Fu, to return to China from Australia to face criminal corruption charges. (Lan Fu returned to China in 2000 and is now serving a lifelong prison sentence.) Australian officials have contested Chen’s claims, and the alleged victim, like numerous others, apparently denied the story to Australian federal police.

But Chen remains adamant. Reached by phone in Australia, he confirms his account of Lan Meng’s rendition, citing numerous conversations about such abductions with Chinese military, intelligence, and diplomatic officials during his tenure at the Chinese Ministry of Foreign Affairs. He says while in office, he heard of at least one other Chinese-sponsored seizure in Australia, as well as one in New Zealand. Chinese operatives also performed similar kidnappings in Vanuatu and Fiji during this period, he says. (Chen says the New Zealand case involved a woman named Xie Li, who was kidnapped in Auckland in 2004 and returned to China via a state-owned shipping vessel.)

It would be interesting to know what the New Zealand government’s position is on this claim.  (Probably wishing it had never been aired, lest they be put on the spot.)

Along similar lines is a new article in The Economist, which cites that way the PRC regime uses threats to families back in China to coerce silence or return from dissidents abroad –  again, often citizens of other countries.   It reminds us again of the case of the Swedish citizen Gui Minhai

In countries with closer ties to China, agents have occasionally dispensed with such pressures in favour of more resolute action. Wang Dan, a leader of the Tiananmen Square protests of 1989, says that he and other exiled dissidents have long avoided Cambodia, Thailand and other countries seen as friendly to China for fear of being detained by Chinese agents. The case of Gui Minhai, a Swede who had renounced his Chinese citizenship, suggests they are right to do so. He was kidnapped by Chinese officials in Thailand in 2015 and taken to the mainland. In a seemingly forced confession broadcast on Chinese television, he admitted to a driving offence over a decade earlier.

It all seems as least as lawless as Russia, quite probably more so.   And yet in some parody of good government and the rule of law, a PRC senior official now heads Interpol.

We could go on, and focus on the PRC theft and dubious acquisition of all manner of intellectual property.

Or, then again, we could simply look at New Zealand itself, where the PRC is generally accepted as having exerted its energies here –  among New Zealand citizens of Chinese descent –  to get effective control of almost all the Chinese language media here (and something similar in Australia), and many religous and cultural bodies patronised by New Zealanders of Chinese descent.  Or we could look at the Labour Party MP who was adopting slogans from Xi Jinping for Labour’s campaign among the New Zealand Chinese community.   Or the National Pary MP, formerly a member of PRC military intelligence establishment, member of the Chinese Communist Party (which controls the PRC government), who closely associates with the PRC Embassy in New Zealand, and who has never once in his political career been heard to utter a criticism of the regime’s activities –  whether here, abroad, or back in China itself.    Who admits he lied about his background –  at the direction of the PRC regime –  when he came to New Zealand.  Perhaps the regime exercises leverage over him by threats to his family back in China.  If so, he clearly doesn’t have the capacity to operate as a member of Parliament in the interests of all New Zealanders. And if not, why can’t he bring himself to utter a word of criticism of such a noxious regime? (More generally, why won’t he front the English language media –  the bits not until PRC/CCP control –  at all?).

I wrote a post a few months ago, when the Jian Yang affair first broke about how it would have been inconceivable to have had a former KGB/GRU official in our Parliament in the 1970s –  at very least, not one who wasn’t a trenchant critic of the USSR he had left behind.  But I could bring that up to date.  Imagine if there was a former GRU officer in the House of Commons, or our Parliament, today.  It is inconceivable.  And yet that is the equivalent situation we face with Jian Yang as a New Zealand MP today –  something that no politicial figure will express any serious concern about, or that the National Party will do anything about.

Oh, and one of the responses to renewed Russian aggression in recent years has been to put on ice negotiations for a preferential trade agreement with Russia.  That suspension seemed prudent and appropriate –  both in managing relations with our friends in Europe, and on the substance of the case and the nature of the regime.  And yet our government –  and its predecessor –  seem quite unbothered about a preferential trade agreement with the PRC, or –  more pointedly –  about continuing to negotiate right now for an upgrade to that agreement.

I’m disappointed that our government has refused to join the Western (symbolic) response to the apparent near-certainty of Russian government responsibility for the Salisbury attack.  But in the scheme of things, the complaisance, the silence, the desire to do deals with the PRC –  the refusal to confront even a situation like the Jian Yang one domestically – concerns me, and should concern New Zealanders, considerably more.  If there is a serious double-standard at work in those who criticise the government about the Russia response, while never raising even a murmur about the PRC, perhaps there isn’t one in the government at all.  They seem simply supine all round.

There was a column in The Australian the other day from a former deputy head of the Australian Department of Defence (and now head of a think-tank) in which he observed

Sadly, New Zealand’s failure to join other democracies in expelling Russian spies and Wellington’s kowtowing to Beijing shows that this is one old ally that already has given up the fight for Western values.

One hopes that is a premature conclusion, but there doesn’t seem to be much evidence for the other side at present.  And it isn’t just a matter of values, or friendship, but of interests.  If the Soviet Union was the biggest geopolitical threat in 1970, it is hard not to conclude that the People’s Republic of China –  bigger and relatively richer than the Soviet Union ever was –  holds that title today.  Toadying served no country’s long-term interests in the 1930s, or during the Cold War.  It doesn’t today either.  Selling your birthright for a mess of potage wasn’t a great strategy for Esau, nor should it be for any one else with a modicum of self-respect.

What do we want with the Belt and Road?

Readers will recall that the New Zealand China Council was set up by the government a few years ago, and is largely funded by the government, to promote

deeper, stronger and more resilient links between New Zealand and China

The Council includes the heads of government departments/agencies (MFAT and NZTE), and includes plenty of people –  including retired politicians – with strong business links to the People’s Republic of China.    A significant part of what they do –  see their Annual Report – is a “communications and advocacy programme”, designed –  it seems – to help ensure that as far as possible New Zealanders see things their way, and don’t create trouble around either the character of the regime (and the party that controls it), or that regime’s activities at home, abroad, and in New Zealand itself.   There are, after all, deals to be done, political donations to be solicited, friends to be protected, and so on.

Stephen Jacobi is the executive director of the Council, and its public face.  In the last few weeks I’ve written about a speech Jacobi gave recently in which he attempted –  without much depth or rigour –  to bat away concerns about PRC activities and risks, and also about a rather economics-lite press release he had put out attempting (Trump-like) to make much of the current trade surplus with the People’s Republic of China.

This week Jacobi was out with another speech, this one on Investing in Belt and Road – A New Zealand Perspective.  “Belt and Road Initiative” (or BRI) is the most recent label (previously “One Belt, One Road”) on a somewhat ill-defined but expanding PRC programme, partly about improved infrastructure (initially in and around central Asia) and partly –  some argue mainly – about extending PRC geopolitical interests in ways that display scant regard for recipient countries’ debt burdens, social or environmental standards, transparency and so on. A few weeks ago, a Bloomberg story reported that Xi Jinping had just added the Arctic and Latin America to the areas (now almost the entire world) supposedly cover by the Belt and Road initiative

BRI graphic

Or as a recent New Yorker story put it

“Across Asia, there is wariness of China’s intentions. Under the Belt and Road Initiative it has loaned so much money to its neighbours that critics liken the debt to a form of imperialism.  When Sri Lanka couldn’t repay loans on a deepwater port, China took majority ownership of the project”

I’ve also linked previously to a recent report on the potential debt risks associated with the BRI programme.

Last week’s speech isn’t, of course, the first time Jacobi has been talking about the BRI.  In a Newsroom article last year he was quoted this way

Jacobi says “the real play” in our corner of the world is less about infrastructure and more about connecting up with China through including the flow of goods, services and people.

“I’ve even heard reference to the Digital Silk Road, the vision is expanding … there’s a bit of talk in China about Belt and Road being a new way to manage globalisation instead of the old ways, which have been done off the back of trade liberalisation in particular.”

But it wasn’t very clear, at all, what it meant for New Zealand

Jacobi says New Zealand shouldn’t let too much time go by before it develops more concrete ideas for what Belt and Road could achieve in New Zealand.

“We’ve really got to move from a very conceptual phase to talking about more definite projects: I can see scope for some projects that exist at the national level between New Zealand and China on bigger picture economic cooperation-type matters, and I can see scope for more discrete projects with individual provinces.”

But what did Mr Jacobi have to say this week?

He mightn’t be sure quite what the substance of the Initiative is, but Jacobi seems pretty sure it is a good thing.

Meanwhile China under its newly-empowered President is proceeding to implement the Belt and Road Initiative (BRI) as a new model for globalisation, precisely at the time when people all around the world are calling for new ways to make globalisation work better.

What China –  with far-reaching restrictions still in place on foreign access to its market, especially around services –  means by “globalisation” isn’t what most people think of.

And so he tells us that

It is the assessment of the NZ China Council that New Zealand cannot afford to stand aside from developing a contribution to Belt and Road.

If we choose not to engage, others most certainly will and we will find our preferential position in the Chinese market further eroded.

There is the odd caveat

At the same time, we need to proceed carefully and in a way which matches our interests, our values and, especially, our comparative advantage.

although I don’t think I noticed any substantive discussion of our values or what they might mean in this context.

The context for any New Zealand involvement is a Memorandum of Arrangement signed by the two governments a year ago.

As Jacobi puts it

The MoA is non-binding and largely aspirational –  it set a timetable of 18 months for the development of this co-operation – we understand the official wheels are now in motion to put some greater flesh on the bones of how we might co-operate in the future.

And the China Council is working up its own ideas.

We suspect the greater benefit for NZ is likely to be in the “soft infrastructure” rather than the “hard infrastructure” – the way goods, services, capital and people move along the belt and road rather than building the road itself.

New Zealand has wide policy expertise and commercial services to offer in this area which matches a number of the policy areas China has highlighted for Belt and Road including policy co-ordination, investment and trade facilitation, and cultural and social exchange.

And they’ve had a consultant’s report done –  to be released in May –  with proposals.

Count me a little sceptical.  When Statistics New Zealand released the country breakdown of goods and services exports a few weeks ago, I had a look at the services exports of New Zealand firms to the PRC.  Under services exports –  themselves only 20 per cent of the total –  were tourism, export education, and travel/transportation.  Fifth on the list of “major services exports” was “other business services”.  Last year, that totalled $32 million – a fraction of 1 per cent of total exports to China.  It isn’t surprising, given that tight restrictions China has on most services sector trade, but it does leave you wondering what Mr Jacobi has in mind from his champion of globalisation.

I hadn’t previously got round to reading the Memorandum of Arrangement.  On doing so, it was hard to disagree with Mr Jacobi’s “aspirational” characterisation.  But equally, one had to wonder whether these were aspirations we should share (with Simon Bridges, who signed the agreement for the previous government).

It was, for example, a little hard to take at face value this bit of the preamble

BRI 1

and a bit further on the preamble started to get positively troubling, the Participants

BRI 2

I’m quite sure I – and most New Zealanders –  have  little interest in pushing forward “coordinated economic…and cultural development” with a state that can’t deliver anything like first world living standards for its own people (while Taiwan, Singapore, South Korea etc do) and whose idea of cultural development appears to involve the deliberate suppression of culture in Xinjiang, the persecution of religion (Christian, Muslim, Falun Gong or whatever), the denial of freedom of expression (let alone the vote) and which has only recently backed away from compelling abortions.  And that is just their activities inside China.    “Fusion among civilisations” doesn’t sound overly attractive either –  most of us cherish our own, and value and respect the good in others, without wanting any sort of fusion,and loss of distinctiveness.  But perhaps Simon Bridges saw things differently?

The next section is “Cooperation Objectives”.  There is lots of blather, including this

BRI 3

Hard not to think that “regional peace and development” might be better secured if the PRC forebore from creating new articial islands, seizing reefs etc in the South China Sea, or patrolling menacingly around the Senkaku Islands, engaging in military standoffs with India, or even making threatening noises about Taiwan.  There seem to be two main threats to regional peace, and the other is North Korea.  But you’d never hear anything of that sort from a New Zealand government.

The next section is “Cooperation Principles” under which the governments agree to

BRI 4

In other words, if New Zealand keeps quiet and never ever upsets Beijing, whether about their domestic policies (economic, human rights, democracy), their foreign policies (expansionist and aggressive) or their influence activities in other countries, including our own, everything will be just fine, and the PRC will keep dealing with us.  And on the other hand…….?

There are then  five “Cooperation Areas”.   Apparently, we are going to actively conduct “mutually beneficial cooperation in….public financial management” (hint: that “wall of debt” is a sign things haven’t been done well so far).  But the one that really caught my eye was under the heading “policy cooperation”, where Simon Bridges committed us to

BRI 5

It isn’t obvious New Zealand now has any “major development strategies” (see sustained lack of productivity growth) or that the PRC ones offer much to anyone –  well, individual business deals aside –  when compared with, say, those of Taiwan, Singapore, or Korea.     And what is this bit about strengthening “communication and cooperation on each other’s major macro policies”?     Why?  To what end?     And who thinks it is desirable for New Zealand to “connect and integrate” our (largely non-existent) “major development strategies”, and our “plans and policies” with those of the PRC?  A country that, as even Mr Jacobi recognised in his earlier speech, has fundamentally different values.

And the agreement concludes

bri 6

One has to wonder how it is in the interests of the people of New Zealand (as a whole –  as distinct perhaps from some individual businesses looking for a good deal), or consonant with their values, to support such an initiative, or a regime such as that of the PRC. Apart from anything else, it all seems curiously one-sided: the agreement isn’t to support New Zealanders, but rather to advance a geopolitical projection strategy of a major power, with very different values than our own.   Can anyone imagine us having signed such an agreement with the Soviet Union in the 1970s?

We can only wait and see the details of what the China Council will propose in their paper in May.   And, even more interestingly, what the government comes up with –  being bound to formulate a detailed work plan by September.  Winston Peters may regret the previous government signing up, but he is now stuck with the agreeement for four more years.  One hopes the government will find a way to some minimalist, not very costly, arrangements, but given how keen governments of both major parties have been to cosy up to Beijing –  party presidents praising Xi Jinping –  it is difficult to be optimistic.  On the other hand, it is difficult to see quite what any New Zealand involvement might amount to, and perhaps Beijing has already had the real win –  getting a Western country, a Five Eyes member, to sign up to such a questionable deal with such an obnoxious regime.

But to get back to Mr Jacobi’s speech, nearing the end he observes

There is currently a debate in New Zealand about the extent of Chinese influence in our economy.

I am on record as being concerned about some of the “anti-China” narrative in that debate, especially in the unfortunate targeting of prominent individuals in the Chinese community, but there is nothing wrong with a debate focused on how to build a resilient relationship with China given the difference political values between our two countries.

While I welcome his final half-sentence, it is a little hard to take seriously when he never – at least in public –  engages seriously with the concerns that people like Anne-Marie Brady have been raising.  As I noted about his earlier speech, among other things he will simply never

  • address why it is appropriate to have as member of Parliament in New Zealand a former Chinese intelligence official, former (at least on paper) member of the Communist Party, someone who now openly acknowledges misrepresenting his past on forms to gain entry to New Zealand (apparently because that is what the PRC regime told people to do),
  • address the PRC control of the local Chinese language media, and associated (and apparently heightened) restriction on content,

Instead he falls back on plaintive laments about the “unfortunate targeting of prominent individuals in the Chinese community”.   These same people –  since presumably he has in mind Jian Yang and Raymond Huo –  sit on his own advisory board.  And both are not members of the public, but elected members of Parliament: not in either case elected by a local constituency (and certainly not by “the Chinese community”), but by all New Zealand voters for their respective parties.     And yet both of them –  but particularly Jian Yang –  simply refuse to answer questions or appear in the English language media to explain and defend (in Yang’s case) the background, and their ongoing ties to the PRC and apparent reluctance to ever say a critical word about that heinous regime.

It must now be six months –  since the Newsroom stories first broke –  since Jian Yang has appeared.   At the moment, it looks much less like “unfortunate targeting”, than quite specific and detailed targeting, with unfortunate defence and distraction being played by key figures in the New Zealand establishment, including Mr Jacobi.  Perhaps people might be more persuaded by Jacobi’s case –  that working closely with, and constantly deferring to, the PRC was in the best long-term interests of New Zealanders, if he called for his board members to front up, rather than giving them cover to simply shut up.

In concluding the post a few weeks ago about Mr Jacobi’s earlier speech, I had a speculative paragraph on some uncomfortable parallels between the PRC now, and Germany in the 1930s.  If the parallel isn’t exact –  and we must hope not, given how the earlier episode ended –  it still seems closer than any other historical case I can think of, including the same desperate desire to appease, to understand, to get alongside (key figures in the British Cabinet were still hoping to do economic deals with Berlin well into 1939), and the same reluctance to confront evil or take a stand (even at some cost to some businesses).  In a week when the PRC “Parliament” passed the amendment to remove the term limit on the office of President with 2958 votes in favour and two against, I decided to check out the results of the referendum Hitler staged in August 1934 after President Hindenburg died, to finally concentrate all power in his own hands.  This was 18 months into the Nazi era.  Despite widespread intimidation, almost 10 per cent of voters (on a high turnout) felt free to dissent

For 38,394,848 88.1
Against 4,300,370 9.9
Invalid/blank votes 873,668 2.0
Total 43,568,886 100

There is something to be said for our governments openly and honestly confronting the nature of the Beijing regime.   We can’t change them, and it isn’t our place to, but we can choose with whom we associate, we can choose how often we just keep quiet, and how much of our own values (and the interests of many of our own Chinese citizens) we compromise in the quest for a few deals for a few businesses (and universities) – and a steady flow of political party donations.   And we can, and do, as I’ve pointed out before, make our own prosperity.  If individuals firms want to deal with the PRC, on its terms, then good luck to them I suppose, but we then need to wary of those same firms and institutions, and to ask whose interests they are now, implicitly or explicitly, championing.

There is a weird line in Matthew Hooton’s column in today’s Herald in which he asserts that no one should be critical of China because “China is just doing what emerging Great Powers always do”.  That may be a semi-accurate description.  It didn’t stop us calling out, and resisting, the expansionist tendencies of Germany, Japan, or the Soviet Union.  It shouldn’t hold us back in recognising the threat the latest party-State, the People’s Republic of China, poses both abroad and here.

 

 

Bad economics from the China Council

For several years, Donald Trump has made much of the bilateral trade deficits between the US and Mexico, and between the US and China.   That rhetoric was to the fore again last week when Trump announced the imposition of steel tariffs.  This was from one of Trump’s tweets on Friday

Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

I’m not aware of a single economist –  with the possible exception of Trump adviser Peter Navarro –  who regards this focus as meaningful or as sensible economic analysis. At an aggregate level, a country’s overall current account balance is a reflection of the savings and investment choices of its own residents.  Thus, if for some reason one were concerned about a US current account (or trade) deficit, one thing that might make a difference could be a cut in the US fiscal deficit (lowering public dis-saving).

The mercantilist mentality, revived by Trump, sees trade deficits as, in some sense, a loss to the country, perhaps by analogy to the situation of a company running deficits (losses).  But the parallel is simply wrong.  Trade deficits are no more presumptively bad than trade surpluses are presumptively good.   Both can be reflections of bad policies, or indeed of good policies.  To the extent that the purpose of economic activity is to consume, trade deficits typically mean that of what your country produces not much is sold abroad, relative to what is purchased from abroad.  If product isn’t sold abroad it is available for domestic consumption.  And trade surpluses can be indicative of a deflationary impulse emanating from your country –  you are selling stuff abroad (absorbing demand from other people), but not matching that with an equivalent demand for the stuff others have produced.

I don’t want to be read as taking these arguments too far.  There have been plenty of trade imbalances (current account imbalances) that proved to be quite unsustainable, and the subsequent adjustment process was often quite messy and costly.  In the very long-term, and roughly speaking, people consume what they earn.  So sometimes, large aggregate imbalances can be a prompt to review policies.  Large surpluses in a fixed exchange rate country, for example, might finally trigger an upward exchange rate adjustment (as in China a decade ago).

But the argument is even more than usually flawed when focused on individual bilateral surpluses/deficits, which have almost no economic meaning.  That, in turn, is so for a variety of reasons.   At a statistical level, in an age of global value chains, any finished product (especially manufactured products) is likely to have been added in a number of countries, but the country where the finished product is exported from will record all the value in its gross exports.   An Airbus aircraft, for example, might have its final assembly in France.  If the plane is sold to, say, a Turkish airline, the full value of the plane will be included in the Turkey-France trade balance, even though much of the value might have been added by firms in, say, Germany or the UK.

And at an economic level, since money is fungible –  and we aren’t in a world of 1930s bilateral clearing agreements – why should anyone in the United States care whether there is a trade deficit with Canada and a surplus with France, or vice versa?   What is earned in one place can be spent in another.   Almost all of us, as individuals, have a goods deficit with the local supermarket, offset by the primary income surplus derived from selling our labour to some other firm.

At a country level, a country exporting mostly, say, diamonds might have a huge trade surplus with Belgium and Israel (places with specialist diamond-cutting industries), and large deficits with most other countries (spreading consumption more broadly).  What of it?  New Zealand won’t export many dairy products to, say, Ireland or Denmark, but might to desert places with not much of a dairy industry.  And what of it?

None of this is to suggest that there aren’t bad policies, or policies which distort the trade numbers.  But if the policies are bad –  eg China’s restrictions on access to its markets for service sector firms, or lack of market disciplines on firms in some sectors with major overcapacity, large US fiscal deficits when the economy is back near full-employment, or New Zealand policies which, in effect, subsidise export education by bundling immigration access with the commercial product –  they are bad on their own terms, regardless of any impact on particular bilateral trade balances.

But this isn’t a post about Trump and his take on economics. It was prompted by a rather similar outbreak of Trumpian economics from someone local who really should know a lot better.    I wrote last week about the speech from Stephen Jacobi, the Executive Director, of the New Zealand China Council attempting to push back against concerns raised in various quarters about the influence activities in New Zealand of the People’s Republic of China and the Chinese Communist Party.  Jacobi doesn’t have any specialist background on China –  he’s a paid advocate –  but he does apparently have a strong background in trade issues, from his time at MFAT, and subsequently as a lobbyist for trade liberalisation.

But his latest statement, released on Friday, left me thinking he must have put any economics to one side.    We were told that

China trade surplus shows relationship working in our favour

March 2, 2018

New figures out today showing a $3.6 billion trade surplus with China demonstrate the value of our growing economic connections with China, according to the New Zealand China Council.

It does no such thing.   Bilateral trade surpluses aren’t “a good thing” (or a “bad thing”) and bilateral trade deficits aren’t “a bad thing” (or “a good thing”).  They just are.

Here is a chart showing the bilateral goods and services trade surpluses/deficits for the top 25 “trading partners”, taken straight from an SNZ table.

bilateral trade surpluses

It is a mildly interesting chart, but I’m not sure it tells us much about anything, and certainly not about trade or economic policy.   Should we think better of Algeria and Sri Lanka  (which presumably have a taste for milk powder) than of Switzerland and Thailand?  I can’t think why we should.  And I suspect that if the bilateral balance with China ever swung into deficit –  and it does move around quite a bit with milk powder prices –  Mr Jacobi would be the first to (rightly) push back against true local mercantilists suggesting that such a deficit was reason for concern.

It isn’t even as if the trade by New Zealand firms with Chinese firms is extraordinarily large.  It is about the same size as our trade with Australia –  a country with about 2 per cent of China’s population.  Overall exports/imports as a share of GDP aren’t large at all for a country our size.  And here is quick table New Zealand China-based economist Rodeny Jones put out last week

NZ has only middling trade exposure to China by regional standards:

% of exports to China/HK 2017

Taiwan 41%
Australia 37%
Korea 32%
Singapore 27%
Philippines 25%
NZ 25%
Japan 24%
Malaysia 19%
Thailand 18%
Indonesia 15%

Mr Jacobi’s argument has the feel of rank opportunism.   Perhaps that might be acceptable in a corporate lobbyist (although I doubt it in the longer run) but Jacobi’s salary as Executive Director of the New Zealand China Council is largely paid by the New Zealand taxpayers.  We deserve better.

As it is, Mr Jacobi’s questionable economics is just the basis for another bid for New Zealand to maintain its subservient, deferential, attitude towards Beijing, and not get bothered about an expansionist hostile power seeking to exert influence in New Zealand politics.

“We need to see China as more than just a market. In New Zealand, China is looking for a long term, reliable partner which means working hard to build cooperation, trust and mutual respect even despite our obvious differences.

Indeed, the PRC is more than “a market”.  It is the government of a repressive dictatorial state, unable to produce for its own people the sorts of living standards places like Taiwan and South Korea have achieved, with an active agenda –  hardly masked –  of projecting its powerful and fundamentally different values [Jacobi’s own term from his recent speech] into countries and regions around the world, defying international law, and attempting to cow any country that makes a stand for its own values and its own self-respect.  It isn’t a regime worthy of trust, or respect.  Perhaps there are some trade opportunities for individuals, but it should be a clear case of “seller (or buyer –  but the sellers tend to have more concentrated interests) beware”,  in which it is more recognised that every time you defer to the regime, you advance an evil cause.

A bit like our politicians really.  Just occasionally, there is reason to think that perhaps our Minister of Foreign Affairs might take a different view.   There were the very delicately-phrased words in his speech the other day about Chinese activity in the Pacific.  There was the response, in after-speech questions, about the memorandum of understanding the previous government signed with the PRC on the Belt and Road Initiative (“I do regret the speed with which the previous government signed up”).

But what does it amount to?  Here is Winston Peters on Q&A yesterday, from the transcript

CORIN You know full well that the Chinese will be watching every word you’re saying right now. Are you worried that there could be—? They don’t like public declarations about the South China Sea from New Zealand. I know that. Are you concerned?

WINSTON No one has been more respectful of the place of modern China in the world than New Zealand First and Winston Peters.

Or

CORIN So do think there is too much? Because, I mean, we’ve got Anne-Marie Brady’s report. We’ve got Rodney Jones, Michael Reddell, others raising concerns and wanting a debate about Chinese influence in New Zealand – politics, but wider life. Do you think there is too much influence?

WINSTON Look, if you’re concerned about too much Aussie influence when it comes to banking you should say so upfront, and I have. If you think there’s been too much untoward American influence in this country in some ways then we should be upfront and say so, and I have. It doesn’t matter where it emanates from.

And thus our Foreign Minister, in his own inimitable style, but in much the same patterns as decades of his predecessors, trivialises the issue.  Just like Mr Jacobi in that speech a week or so back,

Of course, the other side of politics is no better.   Simon Bridges was also on Q&A.  Here he is on the Belt and Road initiative, a mechanism for Chinese power projection in many countries, partly (but not exclusively) by loading pliant recipient countries up with debt they have little prospect of servicing.

[UPDATE: Just after completing this post I noticed this new report on the debt aspects of OBOR.]

CORIN Give me an example of what the Belt and Road means?

SIMON Well, it means economic opportunity, and what do I mean by that? Infrastructure. You’re seeing China invest significantly in infrastructure around the world–

Never mind the strategic foreign policy perspectives, but there might be some consultancy opportunities for New Zealand firms.  It is reminiscent of Lenin’s line about the capitalists selling the rope they will, in time, be hung by.

I also heard Bridges on Morning Report this morning. It was straight out of the John Key playbook.  We will “engage positively”, and might even (quietly) mention the rule of law, democracy etc, all while avoiding the issues that should matter rather more to other countries, including New Zealand –  the expansionist efforts of the PRC beyond its own borders, and the influence activities in an increasing range of other countries, including our own.  I haven’t yet heard Bridges grilled about his MP Jian Yang, but on what we’ve heard so far there seems no reason to believe that he has departed from the Key/English approach (largely shared by the Labour Party) –  selling out our birthright, little by little, for the proverbial mess of potage.   Keep the deals flowing for the selected business elites, keep the party donations flowing and never mind any self-respect, or frank discussion of the nature of the regime, and the nature of the threats it poses.

 

 

 

New Zealand and the PRC: links and questions

Anne-Marie Brady has been at the forefront of identifying, and highlighting, the ways in which the People’s Republic of China, through the Communist Party’s United Front work programme, appears to have been attempting to influence, and interfere with, public life in New Zealand –  both among the local ethnic Chinese community, and more generally.  Her Magic Weapons paper remains required reading, and for all that apologists have attempted to brush aside the issues raised in the paper, no one has made any serious efffort to engage with, and refute, the concerns she has raised.

Most other New Zealand academics, with familiarity with the Chinese language, have stayed silent.  But another person –  with Chinese language –  who has written, quite extensively, about the New Zealand situation is the author of the pseudonymous blog Jichang Lulu.    He has a new and substantial piece (if characterised by an idiosyncratic style) on the United Front activities in New Zealand, which is likely to repay reading for anyone interested in these issues.  Whoever the author is, his usual focus is regions far from New Zealand (Nordics) but has been paying a lot of attention to the New Zealand situation in the last year or so and appears to be quite well-connected.   I linked the other day to his detailed piece on PRC efforts to attempt to bring Norway and Mongolia to heel.

Much focus in recent months has been on National Party list MP Jian Yang.  But, of course, National is in Opposition at present. Jichang Lulu has raised specific concerns about senior Labour backbencher Raymond Huo, who also appears to have close connection to the PRC regime.   From his latest post

According to a source with knowledge of the matter, recent requests from a CCP-unfriendly NZ Chinese organisation to have ministers send Chinese New Year greetings were reportedly redirected to Raymond Huo, effectively making the ruling party’s leading United Frontling, whose PRC-consonant views are wellknown, the government’s gatekeeper to contacts with the Chinese community. In contrast, ministers and other politicians didn’t hesitate to attend celebrations with PRC diplomats. In other words, the Party-state, through its local advocates, can vicariously veto official support for something as apolitical as a calendrical festivity, at least when the persons seeking such support happen to have Chinese surnames.

Huo currently chairs Parliament’s justice committee –  responsible for the triennial review of the election, and for handling new electoral legislation more generally.  And the way governments typically turnover their members, there has to be a pretty significant chance that he’ll be a member of the executive before this parliamentary term is out.  Much focus in recent times has been on past and present ties of senior National Party figures to PRC interests.  But with Labour in government –  and their party president an effusive public supporter of Xi Jinping –  it is about time harder questions were asked of the new government.

Another thing worth reading (although behind a paywall) is an article in The Australian today under the heading Cold War: Freeze on China Ties.  It builds on reports last week that

university leaders were concerned about Chinese government attempts to dissuade ­students from coming to Australia to study. In an escalation of the pressure on universities, school visits have been cancelled, senior educational meetings in Beijing have been “postponed” and messages warning of the dangers of studying in Australia have been posted on the website of the ­Chinese embassy in Canberra.

claiming that

China is putting Australia into a diplomatic deep freeze, stalling on ministerial visits, deferring a trip by our top diplomat and putting off a broad range of lower-level ­exchanges to pressure Malcolm Turnbull over the new foreign ­interference laws and naval challenges to disputed Chinese claims in the South China Sea.

Government sources are reported as conceding that “there is a diplomatic and ­bureaucratic stalling over a range of visits, as Beijing voices its ­displeasure at foreign-­interference laws”.

I guess this is the sort of thing that the subservient apologists in our own political, bureaucratic and business establishment worry about.  But perhaps it should prompt them to think again about the nature of the regime they want to cosy up to.    The PRC might have some capacity to hurt individual New Zealand economic sectors –  as, say, the Mafia or organised crime might in other countries – but our prosperity as a nation is simply not based on those firms’ trade with China.   And sometimes, just occasionally, there are advantages to distance: Korea, Vietnam, or the Philippines (let alone Taiwan) have to live with the PRC on their doorstep.  We don’t, and it is surely time to reflect on what manner of regime they abet, whether actively or by silence.

The other day, New Zealand Prime Minister gave her first major foreign policy speech.  As far as I could tell, it was better than it could have been on the PRC.

China’s global influence has grown along with its economic weight.  Its leadership on issues like climate change and trade liberalisation could add momentum to our collective efforts in those areas.

Naturally, there are areas where we do not see eye to eye with China.  My government will speak honestly and openly with our friends in Beijing.  Whether it is about human rights, pursuing our trade interests, or the security and stability of our region.

Taking that approach isn’t about singling countries out, , but about taking a consistent approach on the issues and principles that matter to us.

It wasn’t very grovelly –  none of the nonsense Murray McCully was using just a few months ago about China saving us through the financial crisis of 2008/09 –  although anyone who thinks China is somehow at the forefront of global trade liberalisation hasn’t looked very closely (or doesn’t wish to).

By contrast, here is Julie Bishop quoted in that same Australian article

After Mr Trump said he would “love” Australia to join the US in military passages through Chinese disputed territorial waters, Mr Turnbull refused to say in advance when an operation would take place. Such an operation, which the US has conducted in the past, would contradict ­Beijing’s claims of sovereignty in the South China Sea and assert the right of free passage for international shipping.

In Australia, Ms Bishop said: “We have been traversing the South China Sea for many years in accordance with international law and we will continue to do that. Australia is an upholder and defender of the international rules-based order. We believe strongly in the principle of freedom of navigation and freedom of overflight, and we will continue to traverse the South China Sea as we have in the past”.

I’m no great fan of the current Australian government more generally, but there is a degree of realism about the nature of the regime, and its external threats, that seems deliberately absent from the utterances of our own leaders, of whatever party.

Prompted by the events of the last few days, I wonder whether journalists might consider asking a few questions of some of our political leaders:

  • what do the Prime Minister, the Minister of Foreign Affairs think of the PRC actions in recent days to remove the term limit on how long Xi Jinping can serve as President?  One might hope that any answers would be somewhat more serious –  more engaged with the level of international unease – than suggesting, say, that, after all, we have no term limits, and our head of state reigns for life.
  • since National Party president Peter Goodfellow and Labour Party president Nigel Haworth (and former Prime Minister Jenny Shipley) have quite recently been effusive in their praise of Xi Jinping and his approach (links in the Jichang Lulu piece), how do they view this latest step?  It is no good attempting to say “oh, we are just party functionaries we do the organising”: if you are willing to praise the foreign leader of an aggressive dictatorial state, that increasingly threatens not only the human rights of its own people but other nations, you owe us your take on this latest step.
  • and since Bill English refused ever to engage seriously on the issue of Jian Yang –  the former PLA intelligence official, who now concedes he misrepresented his past to enter New Zealand, and who maintains very close ties to the PRC authorities –  perhaps they could ask Simon Bridges, the new National Party leader.  Is he comfortable having such a person in his caucus, and (reportedly) as one of the party’s leading fundraisers.   Most likely, Bridges would fob journalists off as English did whenever anyone asked, or fall back on the slurs his shadow Attorney-General has relied on.  But even if he did, at least we would have a clearer steer on the character of the man, and the nature of the new generation of New Zealand’s political leadership.

 

 

A semi-official take on New Zealand and China

The New Zealand China Council was established by the government a few years ago.  It exists primarily as an advocacy body, using (mostly) taxpayer money

in support of deeper, stronger and more resilient links between New Zealand and China.

It has been very close to  the government.  The Secretary of Foreign Affairs and Trade, and the chief executive of New Zealand Trade and Enterprise are both ex officio members of the Executive Board.  The Council is chaired by one former Deputy Prime Minister (Don McKinnon), and another member –  with considerable ties to People’s Republic of China institutions – is former Prime Minister, Jenny Shipley.   The Advisory Board, another 20 people, includes as members several of those about whom questions have been raised in recent months (Jian Yang, Raymond Huo, and Naisi Chen)  –  as well as, somewhat surprisingly, a senior journalist.

The public face of the Council seems to involve relentless optimism about things that don’t obviously seem to require taxpayer-funded advocacy (eg the several tweets about the first New Zealand avocadoes into China) and rather gushy, one-eyed, takes on the PRC/New Zealand relationship, always extremely careful never to utter a critical or sceptical word about the PRC.  More recently, in response mostly to the issues raised by Anne-Marie Brady (and the Jian Yang story) they seem to have been pushed somewhat onto the defensive.

The Council employs a part-time Executive Director, Stephen Jacobi.  He spent considerable time at MFAT, but from his own account his focus was Europe and North America (including as our deputy high commissioner in Canada) and in trade negotiations.  Since leaving MFAT in 2005 he has run his own consulting firm, and been employed as the public face of various trade-related bodies, including serving as Executive Director of the NZ US Council from 2005 to 2014.  He is articulate and readily available to the media, but has no specialist expertise in China or (indeed) on the workings of New Zealand democracy.   That isn’t a criticism –  after all, neither do I –  just to note that his arguments, and evidence, need to be reflected on and carefully examined, perhaps having regard to the interests that are paying him, not as coming from an expert authority in the area.

I’ve written previously about one of Jacobi’s speeches, given late last year at a regime party to mark the PRC national day.  Those were pretty brief (and obsequious) remarks, albeit to a PRC audience.  And so it was interesting to see that last week he had delivered a much more substantial address, Dancing with the Dragon – Opportunity and Risk in the New Zealand China Relationship, to the Nelson branch of the New Zealand Institute for International Affairs.  There is also a much shorter op-ed by Jacobi in the Herald today, headlined on the China Council’s own website as “Anti-China narrative not the Kiwi way”.   I’m not going to comment specifically on that piece –  it covers mostly similar ground to the speech – except perhaps to suggest that deferring to vested interests (business and political) who want us to hurry along and simply accept that there is nothing to see here shouldn’t be “the Kiwi way” either.

What of the speech?

The first couple of pages (of eight) is reasonably unexceptionable.   There are lots of statistics about the growth in trade between New Zealand firms and Chinese ones –  curiously, only about exports, and barely a mention of (the benefits of) the imports.   There is some nonsense about New Zealand alleged heavy reliance on China in the ‘global financial crisis”, but on the other hand a welcome acknowledgement that the New Zealand – China trade agreement isn’t the only factor explaining the growth in two-way trade and investment.  Of course, there is no acknowledgement that the interest of the entities exporting to China –  many represented around his board table – might not always be the same as those of New Zealanders as a whole.

But then he turns towards addressing the (quite limited) New Zealand public debate on issues around the activities of the People’s Republic of China and the Communist Party which controls it.  Part of Jacobi’s rhetorical strategy  appears to be to imply that anyone raising concerns about the Chinese regime and the Party that controls it, is somehow anti-China/Chinese more generally.  It is never quite put that like  –  just insinuations –  but the impression is pretty clear. Mention the poll tax, for example, to play up the guilt, but never mention that we and China (pre-Communist) fought on the same side in World War Two.   And never, ever (that would be job-ending for Mr Jacobi no doubt), note that across the Taiwan Straits is a highly succesful, prosperous, free, and non-threatening ethnic Chinese democratic state.  Never, ever, mention the unease apparently felt among numerous New Zealand citizens of ethnic Chinese origins –  some of whom migrated here to escape the party-state and its evil –  about the effective control regime-associated groups have over most of the Chinese language media in New Zealand, and many community groups.

Around the world there has been growing unease –  including in such impeccably liberal circles as academics –  about the growing number of Confucius Institutes established as part of many Western universities.  With PRC funding comes PRC restrictions, on hiring and on the sort of issues lecturers are allowed to address.   There are several of these institutes in New Zealand universities – Canterbury, Victoria and Auckland  In various places overseas there has been a pushback and some major universities –  notably Chicago – have closed their Confucius Institutes.   I’m sure no one has a problem with the PRC government subsidising Chinese language learning in New Zealand –  any more than with Alliance Francaise or the Goethe Institute –  but not as part of New Zealand universities, subject to a foreign governments controls and constraints.

Why do I raise this?  Because Jacobi included this line

There has been pleasing progress in the number of primary schools teaching Mandarin, especially with the help of the 150 Chinese language assistants in New Zealand, but this has not followed through at secondary and tertiary level.

I presume this is a reference to things like the Confucius Classrooms programme (or here) .  By this means PRC-funded and chosen people are operating directly in our school classrooms.  One can only imagine the awkwardness if a student asks about Taiwan or Tibet, the rule of law, or freedom of speech.

Can anyone imagine us allowing Soviet funded teaching in our schools in the 1970s, or German-funded teaching in the 1930s?  But Mr Jacobi, and his government-funded council, simply avoid ever confronting the nature of the regime.  (I’m sure they are quite aware of it, but if the public ever got concerned it might threaten the Council’s easy life, and the business and personal opportunities of some of its members.)

And then Jacobi turns directly to the recent debate, such as it has been.

Public debate about the relationship is to be welcomed in a robust democracy like ours, although care needs to be taken to ensure that public debate remains civil and properly focused on the issues.

And who is going to disagree?  But then perhaps Mr Jacobi could point us to examples of where the debate has been less than civil and not “properly focused on the issues”?  I can think of the former Attorney-General at an election meeting attacking Anne-Marie Brady as somehow “anti-foreigner”, but then I’m pretty sure he and Mr Jacobi are on the same side.    I’ve heard various claims that people raising issues are being “racist” or anti all things Chinese, but I’m pretty sure that not once have those sorts of slurs –  the stuff Jacobi purports to dislike –  been backed up with arguments and evidence.  In this speech, Jacobi certainly makes no attempt to.  For a taxpayer-funded body it is a pretty poor show really.  But then, unfortunately, it is par for the course.    Neither politicians, nor outfits like China Council, have made any attempt to address seriously and directly the issues raised in Professor Brady’s Magic Weapons paper, or the issues around the background and ongoing associations of National MP Jian Yang.

Jacobi notes that occasionally the New Zealand government and the PRC disagree

While we do have occasional public disagreements, these have not detracted from the momentum in the relationship.

If so, presumably because when such “occasional public disagreements” matter, politicians and diplomats scurry round and assure Beijing it will never happen again.  It is hardly news that the New Zealand government has operated a policy of avoiding do anything that might upset Beijing.  Nor that the PRC is not some typical country which recognises that the possibility of robust differences of view characterises real mutual –  as distinct from subservient – relationships in this world.

Politically, even while we receive occasional Chinese naval ship visits, we continue to maintain close defence and intelligence relationships with our Western allies.

I’m pretty sure we never welcomed naval vessels from the Soviet Union or Nazi Germany.  But even setting that to one side, Mr Jacobi simply never addresses the  unease our traditional Western allies –  including through Five Eyes –  have reportedly come to feel about the New Zealand government’s relationship with the PRC.  And he does not even seek to address the PRC’s own strategic interests, which might include a fostering a more semi-detached relationship between New Zealand and the countries which share rather more of our “fundamental values” [Jacobi’s own term].

And then there is the attempt to play distraction, with the suggestion that all that is going on is “soft power”, and “everyone does that”.

New Zealand itself uses soft power with great effect when it seeks to portray a positive view of our country overseas, including by funding visits by journalists and other “influencers” to New Zealand.

Although Americans, Europeans and Japanese all use soft power, it is the Chinese use of soft power that is being questioned today.

If the PRC wants to subsidise artistic or cultural displays in New Zealand, to foster a positive view of the regime, probably not too many are going to object very loudly.

But that isn’t the sort of influence that Professor Brady was writing about, and Mr Jacobi is well aware of that.    We don’t have (for example) formerly-French members of the New Zealand Parliament, constantly liaising with the French Embassy, and in front of whom former diplomats are careful of what they say.  And even if we did, there is a much greater commonality of “fundamental values” between,  say, France and New Zealand than there is between the PRC and New Zealand.  The British government doesn’t attempt to control the English language media in New Zealand.    The US government (and government-controlled entities) doesn’t dangle post-politics opportunities in front of former senior politicians.  No other government I’m aware of attempts to exert tight control over the students’ associations of its overseas students, in the way that the PRC does with the Chinese Students and Scholars Associations (CSSA).

Jacobi goes on

Some prominent members of the Chinese community have faced intense criticism about their past and present connections with the Chinese Government and the Chinese Communist Party.

Chinese community networks have been described as being a conduit for Chinese representatives to promote a positive view of China and to subvert local decision-making.

The funding of New Zealand political parties has also been highlighted.

Some of this criticism appears to be linked to a similar debate in Australia, although I would argue that the situation in Australia is quite distinct – although we share many things, we have a different political culture, we are not a military ally of the United States and we see our role in the world differently.

In all that, there is just nothing specific at all.  Jacobi doesn’t, for example:

  • address why it is appropriate to have as member of Parliament in New Zealand a former Chinese intelligence official, former (at least on paper) member of the Communist Party, someone who now openly acknowledges misrepresenting his past on forms to gain entry to New Zealand (apparently because that is what the PRC regime told people to do),
  • address the PRC control of the local Chinese language media, and associated (and apparently heightened) restriction on content,
  • address how it can be appropriate for the Mayor of Auckland to receive anonymous donations (from China) of $150000 for his mayoral campaign.

He asserts that the situation in Australia is ‘quite distinct’, but makes no effort to back his claim.  If anything his three points reduce to little more than “we’ve decided to just ignore these things, and that’s the way we do things in New Zealand”.    There is an increasing volume of material on Chinese influence activities in a range of countries, and if the situation here is not that of, say, the Maldives, or Cambodia or even perhaps the Philippines, there is little to suggest that things are materially different here than in Australia, or Canada, or a variety of European countries.

Jacobi response is

Recent allegations here in New Zealand have sought to identify ‘smoking guns’ but mostly without the proof or evidence to demonstrate culpable wrong doing.

Everyone in New Zealand is innocent until proven guilty.

If there has indeed been misbehavior or unwarranted interference, a higher standard of evidence needs to be provided so that this can be investigated by the proper authorities.

Innocent until proven guilty is, rightly, the criminal standard.  If crimes have occurred, they will need to be proved to that standard to secure a conviction.  But as Mr Jacobi knows very well (a) someone in authority needs to take an interest for anything to be proved to that standard, and our leadership appears to have an active lack of interest in doing so, and (b) plenty can be inappropriate or threatening that need not be illegal.    I’m not aware, for example, that anyone has suggested that Jian Yang’s membership of the New Zealand Parliament is, or should be, illegal (unless concerns about his citizenship application come to something).    The argument is that it is highly inappropriate in the specific conjunction of circumstances (PLA and Party background, deliberate misrepresentation of his past, continued close association with regime representatives in New Zealand, failure ever to say anything critical about the PRC regime, and so on).   Perhaps Mr Jacobi has a compelling and specific alternative perspective?  If so, it would be very interesting to hear it, but that would require engagement, rather than lofty disregard (“someone else’s problem”).    Perhaps next time he talks to Jian Yang he might suggest that in an open and democratic society, making yourself available to the local media for a searching interview is the way things should be done.  As it is, Yang has not made himself available for a single English language interview since the story first broke in September.  And this is an elected MP, paid with public money.

Jacobi has a brief discussion of trade ties.

I was struck by a comment on Twitter this week which suggested that China could if it wanted to “paralyse New Zealand’s economy at will”.

I’m not sure why China would ever see it in its interest to attempt to do such a thing

As I’ve noted in various posts, China can’t paralyse our economy.  We make our own prosperity.  But they could make a great deal of difficulty for specific industries.

And they have form in this regard.  Specifics around experiences of Norway and Mongolia are here, and the PRC was active in using sanctions on specific sectors on firms in South Korea last year over the deployment of the THAAD missile defence system.  So for Mr Jacobi to say “I’m not sure why China would ever see it in its interests” to do such a thing in respect of New Zealand is either simply deliberately avoiding actual recent experiences with this particular regime, or saying “so long as we never upset Beijing” we have nothing to worry about.  (Of course, in Norway’s case, it wasn’t even the government that upset Beijing, but a (prominent) private entity, the Nobel Prize     committee).   Surely we deserve better than this from taxpayer-funded mouthpieces?

There is plenty more questionable material in the speech

Chinese economic policy is changing too – a move away from investment-led growth to consumer-led growth and the realisation that a significant and growing share of the economy is now in the hands of the private sector rather than state owned enterprises.

A new generation of Chinese leadership is in office – President Xi Jinping has consolidated his power at the recent Party Congress.

The leadership knows the old style of economic management cannot continue, but it looks at the ravages the global financial crisis caused the Western economies and is determined not to see the same thing happen in China.

Globally we see China’s economic weight continue to grow and the mantle of leadership pass from an increasingly inward-looking United States to a more confident China.

China has some way to go to “walk the talk” of openness and inclusion, particularly in terms of the way it regulates its economy, but the language from Beijing these days is more appealing to many than what we hear from Washington.

China too is grappling with the demands of a growing middle class becoming more impatient with the restrictions on human rights and personal freedoms.

All of which is clearly designed to suggest that things are improving in the PRC, when demonstrably they aren’t.

For example, the economy might largely (and formally) be in private hands, but Mr Jacobi –  and his MFAT funders –  know very well that the Party has been increasingly extending its tentacles directly into private sector entities, domestic and foreign, and that no business in China can be considered much apart from the regime.

And China “has some way to go to ‘walk the talk’ of openness and inclusion”?  Is there any evidence  –  even a shred –  of an intention to adopt a culture of”openness and inclusion”?  The environment for people less than enamoured of the regime just seems to be getting tougher as Xi Jinping’s power is further consolidated.   (Nonetheless, it doesn’t stop the presidents of the National and Labour parties gushing about Xi and the regime.)

And the “middle class becoming more impatient with restrictions on human rights and personal freedoms”.  Perhaps they are, perhaps they aren’t.  But really what matters is the regime, and its resolve.  At present, that doesn’t seem to involve more freedom.  The chilling new “social credit” control scheme is just another example.  But you hear nothing of any of this from Mr Jacobi, and his supporters, who just want to keep the deals flowing.

Some modest political/societal convergence might have been a plausible narrative 15 years ago.  It isn’t now.  And really I’m sure Jacobi knows it, as he’ll know the expansionism in the South China Sea, the military stand-off over the Senkaku Islands, the suborning of various regional governments, and so on.

Perhaps the most chilling sentence in the entire speech was this one.

A second consequence is that as China’s confidence grows they will become less willing to accept challenges to their political system and their own decision making processes. This will require careful handling on the part of New Zealand

Quite possibly, Jacobi is descriptively accurate, but it doesn’t lead him to suggest that we might be increasingly wary of the PRC regime, or uneasy about the power projection (including into New Zealand) that accompanies this greater confidence. It doesn’t lead him to point that true friends – and genuinely self-confident people  –  live happily, and embrace –  challenge, debate and scrutiny.  Nothing about self-respect.  Nothing about the shared interests of like-minded countries.  No, apparently for Jacobi we should simply double-down and “engage even more with China, not less”.

There was the, surely laughably deluded –  but perhaps just an attempt at distraction –  invocation of his former MFAT colleague’s argument.

Former New Zealand Ambassador to China Michael Powles has written recently about the need for New Zealand to “develop the already strong relationship with China to increase the prospects for New Zealand to have influence with China as it wields increasing regional and global power”.

Michael writes that New Zealand has a lot of experience in being a “small friend to a great power” ie with Britain and the United States – co-operating actively but also discussing differences frankly.

In what plausible world does any of this make sense?  Set aside the fact that to the extent that we were ever a “small friend” to great powers the US and UK, it was based on shared values, shared heritage, largely common interests etc.  Friends, even brothers, don’t always agree, but they share crucial commitments or interests.  There is simply no sign that the sort of values the PRC regime lives by  –  increasingly so at present –  are ones most New Zealanders any part of.  And nor is there any reason to suppose that China would be likely to heed New Zealand’s counsel around the exercise of its rising “regional and global power”.      New Zealand’s policy, after all, seems to be premised on not upsetting Beijing, and the PRC are better placed than we are to know what will upset them.

At the very end of his speech, Jacobi returns to one of his early themes

With this engagement invariably comes public debate – it is a debate worth having, but we are a better nation if we respect the people about whom we speak.

Frankly, I don’t respect Xi Jinping, or the PRC regime, or the Chinese Communist Party.  The Party has been a great force for evil in its own country –  depriving tens of millions of liberty, and even life, and presiding over a system that can’t even produce prosperity (unlike, say, Singapore or Taiwan, or South Korea or Japan).

I don’t have much respect for Jian Yang either.  He may be a perfectly pleasant person, may even have been a competent academic.  But that isn’t the issue.  He served –  voluntarily –  an evil regime, in its military intelligence system, he misrepresented that past to get into New Zealand and into Parliament.  And if he has ever had a Damascus Road experience –  now deploring the evil he once served –  the public has heard nothing of it.  Oh, and despite being an elected member of Parliament –  on the list, elected by all National voters –  he simply refuses to front the media.   You can avoid searching scrutiny in the PRC, but you shouldn’t seek to (and shouldn’t be able to) here.

I don’t have much respect for those who’ve, apparently successfully, managed to exert regime control over Chinese language media here.

And I have even less respect for the New Zealand politicians, and party leaders, from every single party (so it appears), who simply let this stuff go by, and try to pretend there isn’t an issue.

Oh, but those weren’t the people Jacobi was meaning?   I guess probably meant ethnic Chinese New Zealand citizens. But as a group, they simply aren’t the issue anyone (including Professor Brady) has been raising issues about in this debate.   If anything, part of the issue is about protecting the rights and freedoms of these people –  fellow New Zealanders –  from the PRC regime interventions, and attempt to exert influence and control.   But it suits those who want to avoid the real issues to pretend that the debate is about ethnic Chinese in New Zealand more generally, rather than about the activities –  some probably illegal, others just threatening or flat-out wrong – of a heinous regime.

I’ve been reading a lot about the interwar period recently.  As I’ve done so, the more apparent the similarities between the current situation vis-a-vis the PRC and that of the 1930s.  Parallels are never in the nature of exact mirror images.  And perhaps in the end the differences will prove greater than the similarities.     But the same expansionist tendencies, the same denials of personal liberties, the same making trouble among diasporas, the same border disputes, perhaps even (in the long term) the same economic weaknesses, and (on the other side) much the same –  India aside this time perhaps –  desperate desire to appease and pretend there is nothing much to worry about.  As I say, perhaps the parallels are overblown, but I suspect we’d get much more value from some serious engagement on those sorts of topics, rather than more taxpayer-funded efforts to pat the public on the head, suggest there is nothing to worry about, and bat away any critics –  expert ones like Professor Brady –  as somehow insufficiently civil or respectful.

On which note, where are the rest of the genuine China experts in New Zealand?  Presumably many of them will have perspectives on these issues?  I wonder if the media have approached these people –  mostly academics paid with public money, partly to advance knowledge, public debate etc.  If they won’t talk, one has to wonder why not, and what that would say about our self-respect as a society, and our willingness to nurture and cherish what made countries like New Zealand what they were at their best.

At very least we deserve rather better, and more substantial, engagement with the issues and concerns from our elected leaders, and from their paid voices (such as Mr Jacobi).

“We could be the next Albania” – Brady

To their credit, the Herald yesterday ran a substantial op-ed from Professor Anne-Marie Brady on the influence-seeking and interference by the People’s Republic of China (PRC), and the Communist Party that controls the state, in New Zealand.

Professor Brady has been in the headlines in recent days over a burglary at her Christchurch home in which several laptops, phones etc (but nothing else of value) were stolen, the burglary occurring after she had received a letter warning that she was being targeted by the PRC regime.   The media has –  rightly –  sprung to her defence, suggesting a need to get to the bottom of just what is going on.   Another article in yesterday’s Herald suggested that the Police weren’t doing much about the break-in until the Prime Minister herself expressed concern.  In general, it is a bad look (and bad practice) for ministers to be putting pressure on Police to investigate, or not investigate, particular cases.  But perhaps on this occasion the end might almost justify the means.

Professor Brady’s article ran under the heading ‘We could be the next Albania’,  a reference to the reported observation last year by a senior Chinese diplomat that (in Brady’s words) “favourably compared New Zealand-China relations to the closeness China had with Albania in the early 1960s”.    Having fallen out with the Soviet Union, Albania sought refuge in ties with the PRC (a relationship described by one Western scholar as “one of the oddest phenomena of modern times: here were two states of vastly differing size, thousands of miles apart, with almost no cultural ties or knowledge of each other’s society, drawn together by a common hostility to the Soviet Union.”) before later also falling out with them.

Brady reports, and presumably is in a position to know, that this “startling and telling analogy…disconcerted New Zealand diplomats”.   She perhaps over-eggs the Albania point, arguing that

In the late 1970s the relationship ruptured over China’s failure to deliver economic development assistance. By the end of the Cold War era, Albania had become one of the poorest, most politically divided, and most corrupt of the former Eastern Bloc states.

Perhaps, but if we look at Angus Maddison’s collection of historical estimates of GDP per capita, Albania had long (well before the Communist era) been one of the poorest of those countries and had not exactly been a byword for political stability either.  Their failings were their own.

But I guess the real point –  and probably the one the Chinese diplomat was getting at –  was that New Zealand was seen from Beijing (with perhaps just a bit of exaggeration for effect) as small, remote (clearly both true), somewhat detached from its former allies, and diplomatically and economically subservient.   True or not, the suggestion will have put MFAT noses out of joint.

Brady goes on

Xi Jinping has been emboldened to pursue an increasingly assertive foreign policy and insisting that its strategic partners such as New Zealand fall into line with its interests and policies.  Accompanying this more assertive foreign policy has been a massive increase in the CCP’s foreign influence activities. China did not have to pressure New Zealand to accept China’s soft power activities and political influence: Successive New Zealand governments actively courted it. Ever since PRC diplomatic relations were established in 1972, New Zealand governments have sought to attract Beijing’s attention and favour. New Zealand governments have also encouraged China to be active in our region.

And not a word of scepticism is ever uttered openly, whether by politicians or by the (mainly government-funded) entities like the China Council and the Asia New Zealand Foundation.   No doubt, in most cases they genuinely believe their stance (quiescence) to be in the interests of “New Zealand” –  however those interests are defined.  In all too many cases, it also appears to have been in the personal economic interests of those involved.

The real point of Brady’s article appears to be to encourage the new government to think seriously about doing things differently.   As she highlights, the Australian government is taking these issues much more seriously   (for those still sceptical of the significance of these issues, in addition to Anne-Marie Brady’s main Magic Weapons paper, various of the submissions on the new Australian legislation make sobering reading –  for example, no 20 (by an academic whose new book on the subject –  already the subject of PRC threats –  is due out next week), or no 33 (from a national security academic at ANU) or no 32 (from an ethnic Chinese group, the Foundation for a Democratic China).

Brady appears to think there is a realistic possibility of change

In order to deal with the issue it can’t just attack the policies of the previous government, it also has to clean its own house. Significantly, unlike the previous National government, Ardern’s government has not endorsed Xi Jinping’s flagship policy the Belt Road Initiative, bringing New Zealand back in line with its allies and nearest neighbours.

It will take strenuous efforts to adjust course on the direction the previous National government set New Zealand. New Zealand has to address the issue, but the Ardern government must find a way to do so that does not invite pressure it cannot bear from the CCP, which is watching closely.

But is there any sign that this government is any different?  I’d like to believe that not having yet endorsed the Belt and Road Initiative (a sprawling massive geopolitical play, designed to extend PRC reach and in some cases load up poor countries with additional debts in ways that further extend PRC political influence) is significant.    But the New Zealand China Council –  largely taxpayer-funded, and with the Secretary of Foreign Affairs sitting on its Council –  was promising late last year that early this year they would have a report out on how New Zealand can engage with the initiative.  And senior Labour backbencher –  chair of a major select committee –  Raymond Huo seemed right behind the initiative

Meanwhile, China-born legislator Raymond Huo believed the Belt and Road Initiative can help solve the problem of infrastructure development facing many developed nations.

“There is a dilemma. New Zealand, Australia and other developed countries including the US and Canada are all facing the same problem,” Huo told Xinhua.

“We haven’t done much upgrading, so we need money, we need capital, and we need the construction capacity. China has both,” he said.

Huo said he first realized the potential of Belt and Road Initiative when he attended two high-level conferences in China, and he believed New Zealand should seize the opportunities it offers.

Along with other experts on China and leading business people, he has established a think tank and foundation on the Initiative.

What other straws in the wind are there?

As recently as this week, interviewed on Radio NZ about the Brady break-in and other matters the Prime Minister refused to express concern at all about PRC influence-seeking and interference in New Zealand. At one level, it is fine to talk about being concerned about any foreign influence from any source (as we all should be), but there is a real and specific issue around the PRC, which needs serious political leadership to address.  But instead there is a void.

It isn’t just the Prime Minister of course. In a post late last year, I highlighted that her minister responsible for the intelligence agencies, Andrew Little, was specifically dismissive of concerns around the PRC activities.

Andrew Little, the Minister Responsible for the SIS, said he was not aware of any undue Chinese influence.
“I don’t see evidence of undue influence in New Zealand, whether it’s New Zealand politics, or New Zealand communities generally.

“We have a growing Chinese community. We have a strongly developing trade relationship and diplomatic relationship with China. I don’t think those things, on their own, connote undue influence.

“If there’s other things she says constitutes undue influence, we’d have to know what that is.”

It was documented in Brady’s substantive paper minister, a paper which has had substantial coverage around the world.

Then, of course, there was the Deputy Prime Minister and Minister of Foreign Affairs.  Out of office he had occasionally been heard to express concerns, including around National MP Jian Yang.   In office, at a New Zealand event marking 45 years of diplomatic relations with the PRC, he wouldn’t even address the issue, stressing how cordially he would raise (privately) any concerns he ever had, and went on to suggest that, after all, one had to break a few eggs to make a omelette, and really no should get too bothered about human rights issues in China either.

“Sometimes the West and commentators in the West should have a little more regard to that and the economic outcome for those people, rather than constantly harping on about the romance of ‘freedom’, or as famous singer Janis Joplin once sang in her song: ‘freedom is just another word for nothing else to lose’.

“In some ways the Chinese have a lot to teach us about uplifting everyone’s economic futures in their plans.”

And since the election, Labour president Nigel Haworth –  presumably with his leader’s knowledge and approval – hobnobbing with the Chinese Communist Part itself, has been effusive in his praise of Xi Jinping and the Chinese regime.

One could add to the mix the stony silence of the Labour Party leadership –  pre and post-election – on the succession of revelations around National MP, and former PRC intelligence officer, Jian Yang.  From anything they say (or don’t say) in public, the Labour Party, and their allies in the Greens and New Zealand First, seem quite unbothered about the presence in Parliament of someone who acknowledges misrepresenting his past in his residency/citizenship applications,  who is widely regarded (by experts in the field) as likely to still be a member of the Communist Party, who closely associates with the PRC embassy, and who has never once been heard to criticise the Party-state that is the PRC.  Recall, former diplomat Charles Finny’s line, that be was always very careful what he said around Yang (and Raymond Huo) since both were known to be close to the PRC embassy.    But is there any sign that any of this bothers our new government?

Professor Brady calls for the government to emulate its 1980s predecessor

the Fourth Labour government made a principled stand on a matter that affected our sovereignty and our values with the nuclear issue; then it passed legislation to back up these principles. Now is the time for the sixth Labour government to take another principled stand to defend our sovereignty and values and make legislative changes such as to the Electoral Finance Act.

In truth, and whether you supported the anti-nuclear stance of not (I didn’t and don’t, and certainly don’t see it as a matter affecting our sovereignty) this one is a great deal harder.  For a start there wasn’t really money at stake around the nuclear-free issue.

I presume one of the issues that will be exercising ministers, and their MFAT officials, will be the negotiations around the proposed upgrade to the preferential trade agreement with China.  It would be easy enough for the PRC to put those negotiations on a slow track, or simply halt them altogether.  Such agreements might not matter very much taken as a whole, but they might matter quite a lot to a small group of people (with good political connections).  In the Australian context, there already appear to be some signs that the PRC is reacting to tougher Australian stance (and new legislation) by damping down the flow of foreign students.  We’ve already seen here the apparent ability of the export education industry to see off for now Labour’s promised changes to student work visa arrangements.  Those would have mostly affected the lower-level PTEs.  But our more prestigious – and government owned/controlled – universities get a lot of PRC students, and several attract direct PRC funding for their Confucius Institutes.  Chancellors and vice-Chancellors will be very nervous that if the government actually looked like taking a stand, their flow of revenue might be disrupted.  And they will constantly be bending the ears of ministers and officials, if ever the government showed any sign of self-assertion, and a respect for New Zealand values (and the interests of New Zealand citizens of Chinese origins).  And then there will be Auckland airport and the tourism operators too.

I’ve noted previously that during the Cold War it was much easier to maintain a moral clarity.  Most Western countries –  including New Zealand –  didn’t do much trade with the Soviet Union, and so there wasn’t a major self-interested constituency in New Zealand (or the US, or the UK) for simply bending over and letting a hostile regime, practising a completely different set of political values, have its way.  I noticed yesterday a recent interview with former (Obama-era) US Defense Secretary Ash Carter making much the same point.

Last time we competed with or had a long difficult strategic relationship with a large communist country was during the Cold War, and our approach to that was simply not to trade with them. Now, one of our largest trading partners is in fact a communist country, and I don’t think that the economists have given us much of a playbook to protect our companies and our people.

I’m not sure that economists can necessarily help much, except perhaps to repeat the point I’ve made here before: the PRC does have the ability to severely adversely affect the fortunes of individual firms/sectors (ask the Norwegian salmon industry, or some of the South Korea firms last year), but the PRC did not make Australia and New Zealand rich and it cannot, whatever unsubtle economic sanctions it attempted, make us poor.  Our prosperity, as a whole country, is very largely in our own hands.   And the very fact that we can worry about the possibility of such sanctions is perhaps the best case for making a stand now, rather than continuing to roll over, keep quiet, and hope that Beijing is happy.

But perhaps the other piece of economists’ advice might be, in this as in other fields, “beware of rentseekers”, people/institutions who will seek to use governments to advance their own economic interests, at the expense of the values, the freedoms, the self-respect, of the nation as a whole.  Governments have a poor track record of doing so, and there is little sign at this point that the current government will be any different.  As I wrote earlier

One of things we need to remember is that the interests of businesses (and universities) who deal in countries ruled by evil regimes, are not necessarily remotely well-aligned to the interests and values of New Zealanders.   Selling to China, on government-controlled terms, isn’t much different than, say, selling to the Mafia.  There might be money to be made.  But in both causes, the sellers are enablers, and then make themselves dependents, quite severely morally compromised.

Professor Brady’s Herald column seemed to build on an earlier (and somewhat longer) paper she produced shortly after the new government took office on things the government could do if it were serious about addressing the PRC political influence activities.   I wrote about it here (and here is the updated link to the paper itself).  In that earlier piece she had quite a list of things that could, or should, be done.

What should be done?  At an overarching level she says

The Labour-New Zealand First-Greens government must now develop an internally-focused resilience strategy that will protect the integrity of our democratic processes and institutions. New Zealand should work with other like-minded democracies such as Australia and Canada to address the challenge posed by foreign influence activities—what some are now calling hybrid warfare. The new government should follow Australia’s example in speaking up publicly on the issue of China’s influence activities in New Zealand and make it clear that interference in New Zealand’s domestic politics will no longer be tolerated.

Getting specific she calls on the government to

The Labour-New Zealand First-Greens government must instruct their MPs to refuse any further involvement in China’s united front activities.

That would be Raymond Huo I presume.

The new government needs to establish a genuine and positive relationship with the New Zealand Chinese community, independent of the united front organizations authorized by the CCP that are aimed at controlling the Chinese population in New Zealand and controlling Chinese language discourse in New Zealand.

And there is a list of six other specifics

  • The new Minister of SIS must instruct the SIS to engage in an in-depth investigation of China’s subversion and espionage activities in New Zealand. NZ SIS can draw on the experience of the Australian agency ASIO, which conducted a similar investigation two years ago. 
  • The Prime Minister should instruct the Department of Prime Minister and Cabinet to follow Australia’s example and engage in an in-depth inquiry into China’s political influence activities in New Zealand. 
  • The Minister of Commerce and Consumer Affairs should instruct the Commerce Commission to investigate the CCP’s interference in our Chinese language media sector— which breaches our monopoly laws and our democratic requirement for a free and independent media. 
  • The Attorney General must draft new laws on political donations and foreign influence activities. 
  • The New Zealand Parliament must pass the long overdue Anti-Money Laundering and Countering Financing of Terrorism legislation.
  • The new government can take a leaf out of the previous National government’s book and appoint its own people in strategically important government-organized non-governmental organizations (GONGOs) which help shape and articulate our China policy, such as the NZ China Council and the Asia New Zealand Foundation.

Most of those suggestions look sensible (although I’m no fan on AML/CFT legislation, with all its inane consequences –  goodbye ipredict, hello ID cards for 94 year olds changing banks).  There has been no sign of activity on any of these fronts.  Quite probably – based on what we saw in their BIMs, and Professor Brady’s mention of a Five Eyes discussion (itself repeated in the New York Times article last year on these issues –  our intelligence agencies themselves are worried).  But intelligence agencies can only apply the (current) law.  It is the political leaders who can bring forward legislation (on matters amenable to legislation, which not all of these are) and can display the leadership and moral standing that say “enough”  –  whether about Jian Yang, political donations, control of the Chinese-language media, university funding, PRC activities in the South China Sea, or whatever.   They could display such leadership, but there is no sign –  from any political party –  of anyone doing so.

I noted the other day that perhaps some journalist could ask the five contenders for the National Party leadership about their attitude to these issues, including (but not limited to) matters around Jian Yang and political donations.  A reader reminded me yesterday of Chris Finlayson’s arrogant and dismissive attitude before the election, when he was both Attorney-General and minister responsible for the intelligence services.  Finlayson still sits on the National Party front bench, and is still shadow Attorney-General.  Perhaps, five months on, someone could ask him if still thinks there is just nothing there, that Professor Brady is jumping at shadows etc.  Or is it that he just doesn’t want to know?

(I linked the other day to a couple of reports on PRC influence activities in other advanced economies.  For anyone interested –  including those doubting the seriousness of the PRC agenda –  I suggest searching out the (easy to find) serious articles about PRC involvement in places like the Philippines, the Maldives, Sri Lanka, Cambodia, and Pakistan.  The issues aren’t primarily about the internal nature of the PRC –  domestic human rights etc –  but about external expansionism, power projection, and the attempt to have other countries including (in Professor Brady’s words) “New Zealand fall into line with its interests and policies”, policies that are generally hostile to open and free societies.)

UPDATE:  Interesting ABC article based on an advance copy of Clive Hamilton’s book on PRC influence activities in Australia (book to be published next week).