Australia does better than us

I’m old-fashioned.  Key bureaucrats should mostly be seen and not heard.  Officials advise, ministers decide.  And ministers are the ones we get to hold to account, weakly or otherwise, through the political and electoral process.

The chief executive of New Zealand’s Ministry of Foreign Affairs and Trade doesn’t appear to give many speeches, at least not on-the-record.  That is, mostly, as it should be.  But the Secretary of the Australian Department of Foreign Affairs and Trade, Frances Adamson, gave a very interesting address in Adelaide the other day on Australia and China.  It was sufficiently clear and forthright that one can only assume she had the full endorsement of the Australian government.

The speech was given in a slightly odd context.  It was the annual lecture of the Confucius Institute at the University of Adelaide.    There are hundreds of these Confucius Institutes in universities around the world (several in New Zealand),  funded by the government of the People’s Republic of China to promote the interests of China. A couple of years back

The American Association of University Professors (AAUP) called for agreements between Confucius Institutes and nearly 100 universities to be either cancelled or renegotiated so that they properly reflected Western values of free speech.

“Confucius Institutes function as an arm of the Chinese state and are allowed to ignore academic freedom,” the AAUP said in a statement, urging US universities to “cease their involvement” with the institutes unless major reforms are instituted.

China’s network of 300 Confucius Institutes – including 11 branches in on British university campuses – can be a lucrative source of funds for universities but are exempt from many of the basic rules governing academic discourse.

They are designed to project a favourable image of China’s ruling Communist Party around the world through language and cultural programmes, but are allowed to restrict discussions of topics unpalatable to China’s ruling Communist Party such as the occupation of Tibet.

The University of Chicago has shut their Confucius Institute over related concerns.

But if Frances Adamson didn’t tackle that specific issue head-on (and had some polite remarks to her hosts), what she did say was pretty blunt, even if none of it should have been controversial in a free, open and democratic society reflecting on its relationship with an expansionist repressive authoritarian state that is moving further away from, not nearer to, the sort of values that have shaped the West.

While we are complementary economies, there is no getting around the fact that Australia and China are very different places, with different political and legal systems, values and world views.

A pretty simple statement, but I’m not sure I’ve seen its like from our own leading ministers and officials.

Partly this is because the closer we get, and the more we interact, the more we need to account for and manage the differences between us – differences that cannot be wished away but that should not prevent the further development of relations between us.
This emphasises the need for a healthy dose of tolerance, for mutual respect and for openness to the patterns of give and take that underpin any successful relationship.
We understand the hesitation in China to ‘air the laundry’ so to speak.

Australians are happy – perhaps too happy sometimes – to tell each other exactly what we think.

This of course reflects different cultural attitudes:

In China, the thinking is that proper friends will not say things that offend;

Whereas in Australia, a willingness to be frank is proof of a genuine friendship.

These characteristics apply as well to our government-level interactions, something that both sides have come to recognise (though not necessarily always accept!).

Each of our approaches has utility, and we will need large measures of both respect and candour as we conduct the far-sighted diplomacy necessary to bridge our differences and progress our common interests.

Both approaches, the saving of face and the preference for frankness, also have shortcomings.

For our part, Australians should, and I am sure will, be authentic and true to our own selves, while respecting the practice of others.

Australia is a pluralistic society: a place where open debate, individual rights and freedoms are the foundation upon which we have built our political and economic systems. We are a society that thrives on the competition of ideas.

The health and vibrancy of Australia’s democracy is fundamental to our national success – it helps explain why migrants come to our shores and why they can succeed based on their talents and hard work.

And to students, in the context of various recent reports in Australia of a minority of PRC students, and PRC-dominated Chinese students associations, trying to suppress discussion

And here I want to address my remarks to those of you who are international students:
We want you to experience our contest of ideas and participate fully in it, as it is part of what constitutes an authentic Australian education.

You have paid your money; you are surely entitled to the full experience.

No doubt there will be times when you encounter things which to you are unusual, unsettling, or perhaps seem plain wrong. And can I tell you, as someone who has studied overseas in three different continents, if you aren’t encountering strange and challenging things you aren’t getting out enough! So when you do, let me encourage you not to silently withdraw, or blindly condemn, but to respectfully engage.

The silencing of anyone in our society – from students to lecturers to politicians – is an affront to our values.

Enforced silence runs counter to academic freedom. It is only by discussion, and of course discussion which is courteous, that falsehoods can be corrected.

Respectful and patient discourse with those with whom you disagree is a fundamental skill for our ever-more-connected contemporary world.

and to a wider audience

There has been much attention in recent months to the quality and reliability of news and information available to us.

We have seen accusations of ‘fake news’ and we have seen attempts at untoward influence and interference.

This is worrying and is being taken seriously in a number of countries. In our case, the Prime Minister has said: “The sovereignty of Australia, the sovereignty of our democratic processes, free from foreign interference is a matter of the highest concern.”

The Australian Government takes seriously its responsibility to ensure a robust legal framework within which free and open debate is protected and can flourish. That work is proceeding.

As well, Governments themselves must expect, and invite, scrutiny of their actions and their policy positions.

As China becomes more important to Australia’s future and to that of the world, it follows that there will be more scrutiny of China, including the ways in which it seeks to exercise influence internationally.

All of us here, as participants in a free society, have responsibilities as well.

It is our responsibility to challenge and question ‘fake news’. We can readily reduce the risk of being manipulated by seeking out collateral and confirmatory information, by testing through a second opinion.

And when confronted with awkward choices, it is up to us to choose our response, whether to make an uncomfortable compromise or decide instead to remain true to our values, “immune from intolerance or external influence” as Adelaide University’s founders envisaged.

The prospect of public scrutiny is an excellent discipline, and a vital corrective for our political culture and our institutions, including our universities.

We want to ensure these institutions remain secure and resilient.

Our success depends in part on the legal framework, but also on the attitudes and responses of all of us when exposed to unexpected pressure.

And in contrast, what do we have in New Zealand?   Almost none of our political party leaders has been willing to comment in any substantive way on the concerns raised in the recent paper by Professor Anne-Marie Brady.    The leaders of the National Party, the Labour Party, and the Green Party seem totally unbothered about –  and unwilling to substantively discuss – having as a member of Parliament a (now) acknowledged member of the Chinese Communist Party and former member of the Chinese intelligence services, who is now widely credited as one of the National Party’s chief fundraisers.  Speeches on China topics by our own Ministers of Foreign Affairs seem mostly to take on a fawning and deferential tone, as if they are afraid of asserting, or embarrassed by, our own values.  And the Attorney-General was just reduced to making stuff up (lies) and personal attacks on institutions raising concerns.

The speech by the Australian Secretary of the Department of Foreign Affairs and Trade has been widely reported in the Australian media – and she’s just a (very senior) bureaucrat.   And what of New Zealand?

It remains striking, puzzling, and more than a little disturbing, just how little media attention either the general or the specific issues have received in the New Zealand media.    There is a column in this morning’s Herald by Bryan Gould, former Vice-Chancellor of Waikato University and former UK Labour MP prompted by the Brady paper (I’m told the column is on line but I couldn’t find it UPDATE:  here).   In it Gould opens thus:

The Herald’s readiness to report the important conclusions of University of Canterbury research into links between China and past and present New Zealand politicians and their family members is to be commended.

Surely in a serious country with media doing the job of providing searching scrutiny, it wouldn’t be cause for self-congratulation, but something just taken for granted?  A leading academic raises serious concerns about the extent of a powerful country’s influence in New Zealand and he seriously suggests that it might not be reported by the country’s largest newspaper?

It would be interesting to know whether the issues have been reported in the Chinese Herald (I gather not), but even if we stick to the English language media, just how much reporting has there in fact been?  I found a total of two stories in the Herald, one (on a quite specific element) on Stuff, nothing on Radio New Zealand (a non-commercial broadcaster with an extensive news and current affairs operation), a single story of Newsroom, nothing on TVNZ and nothing on Newshub.  Perhaps I missed the odd story, but what is striking is not the New Zealand coverage of the issues and concerns, but the lack of coverage and lack (apparently, thus far) of any sustained follow-up.    (And has the New Zealand media ever looked searchingly at those Confucius Institutes?)

The contrast with Australia is striking, worrying, and sad.  I don’t really buy the stories of extreme economic vulnerability to China, but if anything Australia’s direct economic exposure is a bit larger than ours.  And yet officials, ministers, and media in Australia are willing to speak up, and have an open and vigorous debate on the issues.  Reasonable people might differ on appropriate policy responses, but who is seriously going to defend the deafening silence as the way in which a free and open society should handle such issues?


Exporting to a large communist state

One of the things that seems to worry establishment people in New Zealand is a belief that our economy is somehow very vulnerable to anything that disrupts the trade of New Zealand firms with China.  It is a more-than-slightly puzzling concern, since only around 20 per cent of our exports go to China, and exports themselves aren’t an overly large share of GDP in New Zealand.   For the firms involved –  even if not the wider economy –  there are clearly somewhat greater risks, since China has a demonstrated track record of being willing to use targeted trade sanctions for “punishment”.   Those are the risks you take, as a private company, when you choose to play in that particular sandpit.

For the world economy, of course, any serious dislocation of China’s economy is a significant risk.  With interest rates in most of the world not much above zero, any serious downturn in one of the world’s two largest economies could be quite problematic (as the US recession/financial crisis in 2008/09 was).      But such downturns generally do even more damage to the economy at the centre of the problems than to everyone else.  We all have a stake in a better-managed Chinese economy, even if the Chinese authorities are showing increasingly autarckic tendencies, and even if China isn’t anywhere near as internationally connected as the major Western economies are.  But that interest isn’t a good reason to orient foreign policy around deference to China, or to refuse to have an open debate about Chinese government interference in the domestic affairs of other countries.

One case study that sometimes get mentioned when people talk about the vulnerabilities of trade with China is Finland.   After a rather difficult time in World War Two –  gallantly losing to the Soviet Union in 1939/40, and then ending up on Germany’s side –  Finland spent the post-war decades in an awkward position.  A new word was added to the international vocabulary: Finlandization

the process by which one powerful country makes a smaller neighboring country abide by the former’s foreign policy rules, while allowing it to keep its nominal independence and its own political system.  The term literally means “to become like Finland” referring to the influence of the Soviet Union on Finland’s policies during the Cold War.

And largely, no doubt, just because of geography, much of Finland’s foreign trade was with the Soviet Union during those decades (it was a highly managed and regulated trade).  Eyeballing a long-term chart, over the post-war decades to 1990 around 20 per cent of Finland’s exports were to the Soviet Union. And in the 1970s and 1980s, total exports as a share of GDP averaged just over 25 per cent in Finland.   In other words, exports to the Soviet Union were averaging about 5 per cent of Finland’s GDP, pretty similar to New Zealand exports to China today.  (A century ago, by contrast, New Zealand exports to the United Kingdom in the 1920s were 20-25 per cent of our GDP.)

The Soviet Union ended messily, at least in economic terms.   Here is a chart, using Maddison data, of real per capita GDP in the (once and former) Soviet Union.


In the slump, and associated disarray, imports plummeted, including those from Finland. In fact, in 1992 Finnish exports to Russia (the largest chunk of the former Soviet Union) were less than 1 per cent of Finnish GDP.

At the time, Finland itself was going through one of more wrenching recessions seen until then in post-war advanced economies.  The unemployment rate rose from 3 per cent to over 17 per cent in just three years, and real per capita GDP fell by 11 per cent from 1990 to 1993.

The collapse of the Soviet Union wasn’t the only thing going on at the time.  There were recessions in many western economies (including New Zealand and Australia) around 1991, but Finland’s experience was particularly savage (and also worse than the experiences around the same time of other Nordic countries).

One distinctive was house prices.

finland real house prices

Real house prices rose by about two thirds (across the country) in just a couple of years, and then more than fully reversed the increase.  The 50 per cent fall in real house prices involved a very sharp fall in nominal house prices, only matched in recent times in Ireland.

To some New Zealand readers it will all seem like just the sort of stuff they worry about.  Isn’t our economy heavily dependent on trade with China, which could easily but cut off or otherwise implode, and aren’t house prices extraordinarily high?  Isn’t the great Finnish recession exactly the sort of thing Graeme Wheeler and the Reserve Bank were warning of?

No doubt there are some similarities in what they were warning about.  But if Finland offers lessons for us, they aren’t about who our firms trade with, nor even really about house prices and housing lending exposures.  Instead, they are the (now) age-old lesson about the risks of severely overvalued exchange rates, with an overlay of a warning about the transitional risks of financial liberalisation (readers will recall that New Zealand and Australia also had a tough time in that transition in the late 1980s).

Finland had had quite high inflation even by the standards of many other European countries during the great inflation of the 1970s.    Persistently high inflation, in a fixed exchange rate system, is typically accompanied by a succession of devaluations.  We went through almost 20 years of something similar in New Zealand.   But in Finland in the 1980s they decided to break the cycle, and set out to maintain a “hard markka” –  the fixed exchange rate holding down imported inflation and, supposedly, imposing domestic disciplines that would lower domestically-sourced inflation.    Much of the advanced world was disinflating at the same time, and so for a while the approach looked pretty successful.  Core inflation was 12 per cent in 1980, and not much above 3 per cent by 1986.

But the Nordic economies, including Finland, were also liberalising their domestic financial systems in the 1980s.  And a necessary corollary of a fixed exchange rate system is that, with an open capital accounts, your country’s interest rates are heavily influenced by those abroad.   And German interest rates, which had been 7.5 per cent in 1980, just kept on falling –  the Bundesbank’s discount rate was 2.5 per cent by 1988.

In process –  fixed exchange rate, falling global interest rates – what followed was a massive speculative credit and investment boom in Finland. Lending and asset prices surged.  Inflation picked up, and Finnish industry became increasingly uncompetitive internationally.  That in turn created doubts about the stability of the exchange rate peg, prompting increases in domestic interest rates.

Here is what happened to the real exchange rate

fin rer

And a measure of real short-term interest rates

fin int rates

Real interest rates didn’t peak until well into 1992, two years after the recession began.  Why? Not because inflation was a particular problem –  it was back down to not much above 3 per cent in 1992 and falling fast –  but because of the extreme reluctance of the authorities to float the exchange rate.   There had been grudging periodic adjustments under pressure, but it wasn’t until September 1992 that the markka was finally allowed to float.

In the process –  the boom over the late 80s and the subsequent bust, both heavily linked to the fixed exchange rate  –  the Finns managed to bring on themselves a very severe domestic financial crisis.   And there had been huge shifts in the shares of various components of the economy.  Here was the export share of GDP.

exports finland

Investment as a share of GDP fell from around 30 per cent at the end of the boom, to around 19 per cent at the trough.

Floating exchange rates can be messy, but unless you economy is very closely aligned to –  and integrated with –  the currency of some other country, they are usually better than the alternative.  That was certainly Finland’s experience over the crisis of the early 1990s.

And what of the financial crisis?  Surely with house prices falling by that much, residential mortage losses must have been a big part of the story?  In fact, the overwhelming bulk of the problem loans were to businesses and although many residential borrowers did get into trouble –  rapid increases in unemployment and rising real interest rates in combination can be a toxic brew –   in the end only 1 per cent of household loans were written off.   That isn’t particularly surprising, is a point made in numerous studies, and is consistent with a survey of financial crises done a few years ago by the Norwegian central bank.  As they put it

We look at a wide range of national and international crises to identify banks’ exposures to losses during banking crises. We find that banks generally sustain greater losses on corporate loans than on household loans. Even after sharp falls in house prices, losses on household loans were often moderate. The most prominent exception is the losses incurred in US banks during the 2008 financial crisis . In most of the crises we study, the main cause of bank losses appears to have been propertyrelated corporate lending, particularly commercial property loans.

And thus it was in Finland (and neighbouring Sweden for that matter).  It is a point I’ve been making about New Zealand: when severe adverse shocks hit, provided your exchange rate is floating, not only does the exchange rate fall, but interest rates typically do too.  Those are typically very powerful buffers, especially in the case of an adverse shock that isn’t global in nature.

And what of the role of the collapse in Finnish exports to the (now) former Soviet Union.  I found various books and articles on my shelves about the Finnish experience –  it was one of the handful of defining post-war crises.  None of them regard that sudden drop as a particularly important part in the Finnish recessionary story.  For anyone interested, there is an interesting recent paper by a couple of Finnish researchers.  Their summary is as follows

It is shown that empirically, the strong credit expansion resulting from the simultaneous liberalization of the domestic financial markets and international capital movements has played the most important role in explaining the changes in real economic activity in Finland during the time period analyzed. In fact, over a longer time period (1980-2005) exports to Russia emerge as a countercyclical variable: slightly contractionary after the crazy years, and expansionary during the following depression [exports to Russia recovered somewhat after the first chaotic year or two].

Exporters were fairly soon able to find alternative markets for their products, helped –  after 1992 –  by the much lower real exchange rate.

And what of the overall Finnish economy itself?  After freeing the exchange rate and allowing real interest rates to drop sharply, the economy itself rebounded quite rapidly.  By 1997, real per capita GDP was already 4 per cent above somewhat flattering boom-exaggerated 1990 levels.

finland real pc GDP  And consistent with a story I’ve run here in various posts over the years, through all that disruption and dislocation, here is the path of Finnish real labour productivity (real GDP per hour worked).

fin real gdp phw

As was the case with the numerous US financial crises in the 19th and early 20th centuries, there isn’t much sign of any enduring damage to productivity (levels or growth) from the Finnish crisis.  That’s reassuring, if not terribly surprising.

(Finland’s economic performance in the last decade has been pretty shockingly bad, including a productivity performance that –  like the UK’s –  is even worse than New Zealand’s over that period.  But that is a story for another day.)


Some Australian perspectives on PRC influence-seeking

For those interested in the activities of the People’s Republic of China and the Chinese Communist Party in this part of the world, Professor Anne-Marie Brady’s paper remains essential reading.   The material Professor Brady lays out on the New Zealand is deeply troubling, as is the near-complete subsequent silence from most of our political leaders.

But if New Zealand remains somewhat unique in having a Communist Party member and former member of the Chinese intelligence services –  who has never disavowed his past and remains very close to the People’s Republic of China embassy –  as a serving member of Parliament, the issues around PRC influence-seeking, pressure on the Chinese diaspora, and direct meddling in the domestic affairs of other countries aren’t unique to New Zealand. In yesterday’s post, I highlighted several links to contribution to the open and active debate on these issues in Australia.

But today a new collection of 22 articles, speeches etc on the issue of PRC activities in Australia (“The Giant Awakens” ) has been released by Vision Times, one of the relatively small number of remaining independent Chinese media in Australia (as in New Zealand, most of the Chinese media in Australia are now apparently under the effective control of the PRC).  More than half the authors are themselves ethnic Chinese, including a former PRC diplomat to Australia who defected a decade or so ago.

I haven’t read the entire collection, but of those I have read almost every piece struck a chord in one way or another, with so much of what is written about raising similar issues and concerns to those Professor Brady alerts us to in New Zealand.   I’d commend it to anyone interested in the subject, both because Australia (a) matters to us, and (b) seems to have very similar issues to us, and because…..well….sadly there is nothing similar in New Zealand.   The near-complete cone of silence still appears to hold.

I’d particularly commend the first paper in the collection by Professor Rory Medcalf, who is currently the Head of National Security College at the Australian National University.   It is an easy read –  only three pages – but an uncomfortable one.

A few extracts

Here in Australia we have seen the Chinese Communist Party involved in what appears to be multi-faceted campaign to influence our politics and independent policymaking. This includes propaganda and censorship in much of this nation’s Chinese-language media as well as channels of interference through intimidation of dissident voices and the establishment and mobilisation of pro-Beijing organisations on Australian soil. There is also the troubling question of political donations and their motives.

On political donations –  recall the magnitude of some of the disclosed donations here

It has also been reported recently that Australia’s main political parties have received close to $6 million in donations over the last few years from individuals associated with the Australian Council for the Promotion of the Peaceful Reunification of China. The Council, in turn, is reported to have connections to the United Front Work Department, an organisation which reports to the Central Committee of the Communist Party of China.

But whatever the mix of motives, one thing is clear. The donations were enough for the Director-General of the Australian Security Intelligence Organisation (ASIO) to take the highly unusual step of directly warning the major parties that they and Australia’s national security could be compromised by such donations. For the head of ASIO to take such a step suggests he was genuinely worried, from a national security and national interest point of view. Security agencies cannot take effective action on any of this because it has been entirely legal – all they can do is raise the alarm. It is now up to the political class to decide whether there is, within Australian democracy, enough self-respect to function without money linked to the Chinese Communist Party. This, after all, is a massive, secretive, self-interested and foreign organisation, with interests that can sometimes clash directly with Australia’s.

These issues are at least as much about the interests of ethnic Chinese New Zealanders and Australians

Indeed, much of the worry about such influence is within this country’s diverse Chinese communities. If, as a nation, we chose to ignore such concerns, we would be effectively treating such dissenting voices among our Chinese-Australian population as second-class Australians, whose freedom of thought and freedom of expression do not warrant protection.

So the issue of foreign interference needs to be addressed in a context of respect for the rights of Chinese Australians. That means this needs to be an issue that is seized and owned by the moderate, bipartisan centre of Australian politics. This way, the issue cannot be captured by extreme voices or be distorted, misconstrued or falsely portrayed as one of xenophobia.

One of the points I’ve been making in a New Zealand context is that our economic dependence on China is (often) much-exaggerated.

The risk is that we will buy the story that our economy is so comprehensively dependent on China that Australia cannot afford to cause China much difficulty on security and political issues, even when our interests diverge. Indeed, perceptions of Australia’s vulnerability to Chinese economic pressure are exaggerated. Economic pressure from China that would have the biggest impact on Australia – most notably through iron ore trade – would also impose restrictive costs on Beijing. Privately or publicly, Beijing criticises or complains to Canberra frequently over multiple issues. But the accompanying threats tend to be implicit or general – that the bilateral relationship will suffer some unspecified deterioration if Australia does not heed China’s wishes.

…..If Beijing felt it needed to send an economic signal to reinforce its displeasure, its initial response would likely involve non-tariff barriers over quarantine and safety standards, or making life difficult for businesses operating in China, with limited long-term economic impact on itself or Australia.

Beijing has adopted this approach towards South Korean business interests, yet has not succeeded in its goal of changing Seoul’s stance on missile defence cooperation with the United States. Economic vulnerability is often as much about perception as reality – and it is in China’s interests for Australia to imagine itself highly vulnerable. Already, some voices in business, academia and the media focus on the possible economic impacts of annoying China. The perception of economic harm can have an outsized effect on domestic interests, creating pressure for rapid political compromise. If we overreact to any Chinese economic threats and self-censor on issues perceived to be problematic for Beijing, it will not protect Australia from further pressure – it will signal that such pressure works.

And finally

Foreign interference in Australia is not solely a national security issue. It is a fundamental test of Australian social inclusiveness, cohesion, equity and democracy that we ensure all in this country have freedom of expression, freedom from fear and protection from untoward intervention by a foreign power.

It is a paper, part of a collection, that should be widely read in New Zealand.

In my post yesterday afternoon, I linked to an article published in the AFR by Peter Drysdale and John Denton, attempting to play down the issue of Chinese influence and suggesting that critics are “demonising” the People’s Republic, or indeed Chinese-Australians.   There is a nice, accessible, response to that article by John Fitzgerald, another Australian academic.

…for Australia, the issue at stake is not whether Leninism and liberal democracy can work happily and co-operatively in their separate jurisdictions but whether it is possible for a democracy to maintain jurisdictional separation in a dependent relationship with a Leninist state without adjusting its everyday modes of operation. Whatever we may think of authoritarian Leninist states, of which contemporary China is clearly one, they are founded on an ‘enemy mentality,’ and they have immense difficulty recognising the territorial and jurisdictional limits of their overweening hierarchical authority. How is a liberal Australia to deal with a Leninist China as that country becomes more assertive beyond its borders?

A bold free press is one of the few instruments a democracy has at its disposal to check the encroachment of a Leninist state into its jurisdiction. An open, respectful, and evidence-based conversation on this encroachment in the media is essential to getting Australia’s relationship with China right.

It is not demonising China to report what the Chinese government says about itself: that it is a wealthy and powerful Communist Party state that has no time for democratic accountable government, no independent courts, security, or media, that denies universal adult political participation, that offers no protection for the exercise of fundamental rights of freedom of speech, religion or assembly. In China this is called guoqing. There are no plans to change anytime soon. Similarly, querying the behaviour of a few named and alleged influence peddlers from China no more tarnishes the reputation of all Chinese Australians than querying the conduct of Putin’s agents in Washington impugns the loyalty of all Russian Americans.

Meanwhile, here in New Zealand the final election results will be declared tomorrow.  A self-confessed member of the Chinese Communist Party, former member of the Chinese intelligence services –  both facts hidden fron voters for years, and partially hidden from the New Zealand immigration and citizenship authorities “because that is what the Chinese authorities told us to do” – will once again be confirmed as a member of Parliament.  That alone –  the tip of the iceberg in the issues Professor Brady raises –  should be deeply troubling.  But our establishment elites seem unbothered.  Nothing is heard from the Prime Minister. Nothing is heard from the Leader of the Opposition.  Nothing is heard from the Green Party.  Nothing is heard from the Minister of Foreign Affairs.  And when last heard from, the Attorney-General and minister responsible for several of the intelligence services resorted to simply making stuff up.

“That was a Newsroom article, timed to damage the man politically.  I’m not going to respond to any of the allegations that have been made about/against him. I think it is disgraceful that a whole class of people have been singled out for racial abuse.  As for Professor Brady, I don’t think she likes any foreigners at all.”

The best response to erroneous claims is the facts. As far as I’m aware, nothing in the original Financial Times/Newsroom articles, nothing in Professor Brady’s paper, and nothing in yesterday New York Times article has been refuted.  I’ve not even seen anyone try.  Some mix of embarrassed silence, and brazening through, in the hope that the issue will just go away seems to be what our “leaders” now count as responsible leadership.

The kowtow

EARLY IN the morning of 14 September 1793, George, Lord Macartney, the first British ambassador ever to visit the Chinese court, entered the imperial tent in Jehol, the Manchu capital, to see the emperor Qianlong.

As one, a thousand demonstrated their submission to the Son of Heaven by performing the ceremony of the kowtow. Three times they fell to their knees, and three times on each occasion they touched their foreheads to the ground. Macartney, however, refused to kowtow. He would bend one knee, he said, to his sovereign; both knees he would bend only to his God. Three times, with the greatest politeness, he went down on one knee. And three times, in the course of each genuflexion, in rhythm with the mandarins, he respectfully bowed his head. But he flatly refused to touch his forehead to the ground.

(from this)

There is a good article today in the New York Times today on the Jian Yang affair –  or non-issue as the National Party, and most other parties, and most of our establishment appear to believe (and want us to believe).   As the article notes

While New Zealand is a small country, it is a member of the “Five Eyes” intelligence sharing partnership along with the United States, Britain, Canada and Australia. And so vulnerabilities in New Zealand’s government could have wider import.

Curiously, not being particularly well-connected, I’ve had several people mention in the past few days private talk among our traditional allies of possibly ending New Zealand participation in Five Eyes over our government’s growing deference to China.   Whether that possibility would bother a majority of New Zealanders is questionable, but it should.

The article goes on

Chinese-language news media outlets in New Zealand reported that Mr. Yang had presented awards in April to members of the New Zealand Veterans General Federation, a group made up of former Chinese military or police officers now living in New Zealand. The awards were reportedly for members’ activities during a visit to New Zealand by Premier Li Keqiang of China, when they blocked the banners of anti-Chinese government protesters and sang military songs.

Chen Weijian, a member of the pro-democracy group New Zealand Values Alliance and the editor of a Chinese-language magazine, Beijing Spring, said Mr. Yang was “very, very active” in New Zealand’s Chinese community.

“When he speaks, he speaks more as a Chinese government representative, instead of a New Zealand lawmaker,” Mr. Chen said.

And this is how New Zealand now appears in yet another impeccably liberal part of the global press?

There are several organisations in New Zealand, partly or wholly government-funded that serve, in effect, as fronts to advance the establishment perspective on China.   There is the Asia Foundation, the Contemporary China Research Centre, and the New Zealand China Council.   The Council is chaired by a former National deputy prime minister, and includes a former National Prime Minister (who holds various positions in the gift of the Chinese government, and other Chinese directorships), the chief executive of the Ministry of Foreign Affairs, the chairman of Fonterra, and other mostly less well-known figures.  The Executive Director is Stephen Jacobi, a former diplomat and industry advocate (with a past focus on North America).

At the People’s Republic of China (PRC) national day celebrations last week, the Consul-General invited Jacobi to speak.  He posted the text of his remarks on the Council’s website.  Those brief remarks were both extraordinary and banal.   Extraordinary for the degree of deference to the PRC, and the indifference to any concerns around Yang and Raymond Huo, and yet probably just what one has come to expect from an establishment whose considered approach appears to be never, ever, openly say anything that anyone could possibly construe as critical of the PRC.   National day celebrations aren’t the time to gratuitously offend people, but with normal countries it is quite appropriate to recognise differences of values, interests, and perspectives.  We and the United States, or the UK, don’t always see eye-to-eye, as you’d expect with two different countries.  With China, per Jacobi, it is as if our hearts are at one –  or at least our minds are well-trained to pretend so.

It is an honour for me to be with you this evening and to convey the warmest greetings and congratulations of the New Zealand China Council on the 68th anniversary of the founding of the People’s Republic of China.

Toasting the founding of a regime that has brought forth so much evil… turns one’s stomach.  He goes on to describe it as an “auspicious day”.

The relationship is going from strength to strength, building on the firm foundation of mutual respect, shared interests and a history of co-operation.

As one observer of China noted, it is “Party-speak” (and not of the cocktail variety).

As we have watched China emerge as a major global power, we have continued Rewi’s pioneering spirit as we have built a Comprehensive Strategic Partnership based on expanding trade, investment and people to people links.

From the earliest days in the history of our country we have welcomed Chinese immigrants, thereby increasing the vitality and diversity of our nation.

And, so on the one hand we simply rewrite our own history –  Chinese migrants weren’t exactly welcome in the 19th century –  and on the other we blithely celebrate the emergence of a global power that simply flouts international law (South China Sea) and its own international commmitments (including around the WTO).  For a country –  New Zealand –  supposedly committed to a rules-based international order, it is extraordinary obseisance.

And then unadorned congratulations.

I would also like to congratulate Dr Jian Yang MP and Raymond Huo MP and the other MPs with us this evening on their re-election to Parliament.

If anyone close to the Council is remotely troubled by Yang’s past –  hidden from the electorate for years – or the wider arguments advanced by Professor Brady, they are obviously keeping very quiet.    As with Charles Finny the other day, this is the establishment falling right in behind the position of these questionable figures –  particularly Yang in our Parliament.

While we have achieved much together, I believe there is more to come.

For now, though, it gives me great pleasure to propose a toast to the health and prosperity of the great Chinese people and to the relationship between New Zealand and the People’s Republic of China.

It is almost as if Jacobi and the Council believe that the PRC has any concern with advancing the interests of New Zealand and New Zealanders.    And thus he concludes with his toast to a regime that has been responsible for the deaths of tens of millions of its own people (and tens of millions more unborn), that is increasingly repressive of its own people, is actively engaged in subverting the political process and values of countries like New Zealand, and which is an increasing expansionist threat to other countries in its neighbourhood.

Perhaps you might charitably think this is just stuff he had to say.  You sell your soul, and you pay the price.

But then earlier this week, Jacobi was tweeting his endorsement (“message in here for us kiwis too”) for a piece in the Australia Financial Review,  in which the authors –  an academic and a business figures –  push back, by very heavy use of straw men, against any concerns about the PRC and its activities in, in this case, Australia.  Nothing to worry about apparently, China no different from any other country, and foreign donations are just a “fact of life”.  And this in a country where earlier this year an Opposition Senator had to resign his shadow frontbench position over claims he’d been backing China’s position on the South China Sea in exchange for money.

At least there seems to be a serious debate occurring openly in Australia.   Denton and Drysdale can make their case for the defence in the AFR.  But others are considerably more sceptical.  There was an excellent sceptical piece in the Australian cultural, political, and literary monthly, Quadrant  by a former senior China analyst in the Australian Office of National Assessments and a former Australian ambassador to the Koreas.    And perhaps more powerful was a short article yesterday by a former senior Australian diplomat and deputy secretary in the Australian DPMC, “The China-Australia free trade agreement meets the all-controlling state”.

Philosophically, Australia and China occupy different solitudes regarding trade and investment. These days, not always, the underpinning attitude for Australia is free enterprise capitalism: commercially motivated, profit-driven, private sector enterprise, pursued within a clear legal framework. Beijing’s version is state capitalism, plus an underpinning of autarky: investment at home and abroad directed to national priorities, improving China’s competitive advantage (often using subsidies). The aim is to enhance China’s economic power and sovereignty.


At a societal level, President Xi has been emphatically reasserting the centrality of the Communist Party. Controls over China’s citizenry are being tightened—for example, by the ‘great firewall’ scrutinising and limiting access to the internet, and by closer monitoring of all citizenry for a ‘social credit score’.


The recurrent experience of foreigners seeking to invest in China has been that they are pressured to provide information on their secrets and systems as part of the price on entry. One fears for Cochlear and CSL. This is now being taken a step further. According to a recent Angus Grigg article in the Australian Financial Review, in future all foreign companies operating in China will be forced to hand over sensitive commercial data to Beijing under a system directed at generating a ‘social credit score’ for commercial enterprises as well as individuals.

More generally, while foreign investment in China is encouraged in cutting-edge industrial sectors, foreign firms are squeezed out once they reach maturity, with their key technologies secured. Writing some months ago in the Australian, Rowan Callick noted that China opened its mining industry to foreign investors about 20 years ago. At the peak, in 2009, there were 300 foreign mining operations in China. The number is now down to a handful. ‘Through a range of contrivances their services have been dispensed with.’

I presume Fonterra is well aware of all this, although one wonders if their farmer shareholders are.

There are other examples  (or here) of a robust debate in Australia, and serious open scrutiny of the way in which the PRC is attempting to exert influence in Australia.  Reasonable people might differ on the conclusions and appropriate policy responses, but in New Zealand any discussion or debate seems to be regarded as some sort of lese-majeste.    And yet this is the government of our country we are talking about.

One of the issues that needs to be tackled is our political donations laws.

In the Charles Finny defence of Jian Yang I linked to the other day, there was this line

It is my understanding that Dr Yang has become one of National’s most successful fundraisers, in much the same way Raymond Huo is important for the Labour Party’s fundraising efforts.

I dug out Barry Gustafson’s history of the National Party, published only thirty years ago.  There Gustafson’s records the active efforts of the party stalwarts to raise funds, while noting that

“An unwriten  but scruplously observed rule has always been that no MP should be placed in the position of seeking, receiving, or even being made aware of money collected on behalf of the party”

No doubt the culture change is not just of relevance to ethnic Chinese MPs or candidates.  MPs –  legislating in the interests of all New Zealanders –  shouldn’t be known for their fundraising prowess. But, more particularly, we shouldn’t be running a system where the largest known donor to the governing party is a foreign-owned company with quite modest New Zealand operations.

How has New Zealand come to this?   Where even the debate is almost disallowed, where neither the politicians nor the local media seem to have any interest in pursuing the issues (whether specific-  Yang –  or general, those raised by Brady).    When did we become the sort of country where the Financial Times and the New York Times  –  worthy outlets both –  are the ones raising more searching questions about New Zealand’s polity, and its relationship with a hostile foreign regime than our own media and our own political figures (past or present)?

What makes our establishment so willing to perform what amounts, in effect, to today’s full kowtow?

A national day for lament, not celebration

Eamon de Valera, Prime Minister of Ireland, visited the German Embassy in Dublin on 3 May 1945, to pay his condolences to the Ambassador on the death of Hitler. He apparently justified it afterwards on grounds of diplomatic protocol, but it reinforced ever afterwards impressions that de Valera had been sympathetic to the Nazis.

Yesterday was the national day of the People’s Republic of China, marking the formation in 1949 of the Chinese Communist Party government. Various people have been highlighting photographs that have appeared in the Chinese-language media show National MP Jian Yang at the Chinese Embassy’s celebratory function, posing with Ambassador, the embassy counsellor, and the military attache.


(the latter tweet including a link to some further offshore commentary on the New Zealand situation).

Perhaps protocol more or less requires that, for example, the Minister of Foreign Affairs and assorted MFAT staffers attend national day celebrations. It is a part of normal state-to-state relationships. But there is no such obligation on obscure government backbenchers, and certainly no reason for such people to allow themselves to be photographed happily with the leading representatives in New Zealand of such a vile regime. A not unreasonable conclusion might be that Dr Yang is really rather sympathetic to, and supportive of, the PRC regime. Perhaps he just takes the view that what is in Beijing’s interests is, somehow, also in the interests of New Zealanders? Either way, with a (belatedly) self-acknowledged background like his, he shouldn’t be in our Parliament. The National Party should be ashamed to have him in its parliamentary caucus. Should be, but presumably isn’t. There is, after all, no sign that the whips have told him to lie low (and not, for example, be photographed with representatives of the PRC regime).

But, convinced as I am that Yang shouldn’t be in our Parliament – even if, as may well be the case, he has done nothing illegal – in a way, his conduct doesn’t seem out-of-step with that of our professional diplomats; neutral public servants one might hope.

The government-sponsored China Council was out openly celebrating 69 years since the Communist revolutionary victory.

And they were retweeting the enthusiasm of the New Zealand consulate in Chengdu

(note the exclamation mark. Is 68 years of a brutal murderous regime something to celebrate?)

And then somehow I stumbled on the Twitter account of the New Zealand Consul-General in Shanghai. Her tweet managed two exclamation marks.

She describes herself as “Addicted to China. From the government (MFAT) and here to help.”

I guess I can understand a passion of things Chinese, for the culture and history, but “addicted to China” doesn’t exactly suggest the sort of calm dispassion we might hope for from our senior diplomats – in dealing with a friendly country with whom we share values, let alone a brutal regime that appears to directly interfere in the New Zealand political process, and in entities and media outlets serving New Zealand (ethnic Chinese) citizens.

It is as if our entire establishment can’t bring itself to acknowledge the nature of a regime which has gone from one horror to another over the decades, barely regretting or apologising for any of them, and which now – richer and stronger than it was before, if a distinct economic laggard even in the region – poses real and new threats to its own people – the ramping up of surveillance for example – to regional stability, and to countries (including New Zealand) with a significant population of Chinese-born people. Are MFAT and the New Zealand China Council – and the New Zealand government – untroubled by any of this? Perhaps in 1938 their predecessors would have been celebrating the anniversary of the Nazi accession to power, all the while playing up the “trade opportunities”, and quietly observing that it wouldn’t do to upset the party-state?

It is a regime that is evil epitomised for this generation. Not, to be sure, North Korea and yet (a) chief protector of that evil regime, and (b) much more of threat to many more people and countries than North Korea is ever likely to be. And yet National MPs happily celebrate another anniversary of the evil. And quite probably Labour MPs do too, and would were they to form a government.

But it does prompt the question, where is the Green Party in all this?. I’m not a natural Green Party supporter and could not ever imagine voting for them. But over the years I’ve had a certain respect for them, and some of their MPs, when they’ve stood up against oppression, against surveillance, against threats to civil liberties. I was, perhaps a little strangely, an admirer of Keith Locke on this score. But on these issue – whether the specifics of Jian Yang, or the wider issues of PRC meddling- just total silence from the Greens. I’m not sure I really understand why. They don’t represent big and established business interests, and they don’t – as I understand it – have any track record of being heavily reliant on questionable fundraising. If there was ever a time to act as some sort of moral conscience, surely this is one of those?

I’ve found it a little hard to take too seriously earnest calls in the US for inquiries into Russian attempted interference in the US election last year (and am well aware of plenty of instances where the US has interfered in the elections of other countries). But if there is a case for such investigations in the US – and I think there probably is, even though Russia is a much inferior power to the US – how much stronger is the case here for a serious inquiry into the sorts of claims, and evidence, Professor Brady has outlined in her paper.

And there are simpler questions still that should be put to Dr Yang, whether by the National Party itself, or by the media. For example, can you name – say – three occasions on which, since you were elected to Parliament, you have disagreed with a policy stance taken by the PRC, and where you have spoken out clearly in defence of New Zealand interests and values? Shouldn’t be that hard. After all, South China Sea adventurism is in flagrant breach of international law. And the growth of the surveillance state in China under Xi Jinping isn’t exactly consistent with the sort of values the National Party proclaims. Or the increasing uses of “big data” highlighted in this article in the Financial Times today. Or one might ask how differently he sees the PRC being from, say, the Soviet Union or (the much shorter-lived) Nazi Germany – the latter being particularly active among the ethnic German populations in neighbouring countries in the 1930s. Does he look forward to a day when freedom of speech, freedom of religion and multi-party democracy prevails on the mainland – as it does, say, in Taiwan? As I say, it shouldn’t be hard to get clear and straightforward answers from someone who has genuinely abandoned his party (and military/intelligence) past.

Finally, while Dr Yang, MFAT, and assorted official China-promoters in New Zealand are celebrating 68 years of evil, there is this alternative perspective from Hong Kong, where people more readily appreciate the evil, the threat, that the PRC now represents.

I’m not suggesting that our government should deliberately go out of its way to upset the regime. And normal state-to-state relations (as we had in later years with the Soviet Union) are to be expected. But our governments – our diplomats – are supposed to be there to serve the interests, and values of New Zealanders. And that means, among other things, recognising and acknowledging the dreadful character of the regime they are dealing with. Hermann Goering was known to throw a good party too. Nuremberg rallies were, reportedly, spectacular.

Two faces

In the few weeks since the Financial Times/Newsroom story about Jian Yang broke and, independently, Professor Anne-Marie Brady’s conference paper on the extent of People’s Republic of China influence-seeking activities in New Zealand became available I’ve been doing a bit of reading around the issues. As far as I can tell, overseas experts appear to see Professor Brady’s paper as portraying a situation in New Zealand that is more extreme than (and more successful?), but consistent with the direction of, PRC activities in a range of other countries. Her paper seems to have attracted quite a lot of interest abroad, even as our own politicians (in particular) and media have largely overlooked the apparently serious issues she raises. The approach of successive governments, but perhaps particularly the most recent one, appears to closely resemble “never, ever, say anything to offend Beijing”.

In the course of reading around the issue, I found a couple of interesting papers on the MFAT website. The first, Opening doors to China: New Zealand’s 2015 Vision, was released in 2012. It is currently described as

The NZ Inc China Strategy maps the possibilities for the relationship on a 10-15 year horizon.

The document is totally consistent with the relentlessly upbeat and deferential tone that seems to characterise the New Zealand government’s approach to China. It begins with a Foreword from the then Prime Minister John Key.

With its talk of “centralised plans” it seems strangely apt for China.

The NZ Inc China Strategy is the second in the Government’s series of centralised plans – developed to strengthen our economic, political and security relationships with countries and regions, and to encourage people-to-people links and two-way investment.

He continues, in a paragraph that rather gives the game away.

Our strategy for China starts from an explicit recognition that an excellent political relationship is the foundation upon which everything else must be built. We can’t engage with China just on the trading front – we need to work across all sectors to build the range of links that will enhance our understanding and familiarity with one another.

That isn’t how normal countries, and firms in them, typically operate. Trade is, largely, a firm to firm matter, and governments set overarching standards and (largely) stand back. But not with China: that compliant political relationship really seems to matter.

Even the economics seem shonky, or (deliberately?) naïve.

Knowledge is in fact set to be a key driver of our rapidly growing relationship. Clearly it is a two-way street – we want to work with China to drive forward science and technology linkages, and we want to exploit the fruits of that collaboration to the commercial advantage of both countries.

But China isn’t at the leading-edge of technological innovation – thus, it is still a relatively poor middle income country – and while it has had a strong interest in acquiring western technology, by legal means or otherwise (so much so that research agreements between western universities and Chinese interests are raising increasing concerns), there is considerably less evidence of a “two-way street”.

Key concludes

The New Zealand Inc China strategy articulates the vision of a relationship with China that stimulates New Zealand’s innovation, learning and economic growth.

I won’t blame the New Zealand-China relationship for the lack of any productivity growth at all in New Zealand for the last five years. But perhaps we could just say that the claimed benefits to the wider New Zealand economy are still somewhat hard to identify.

I’m not going to comment on the detail of the rest of the 40-page document, which is full is pretty upbeat stories, and some (no doubt) useful advice to firms considering China. But this snippet did grab my attention, as I suspect it captures the flawed mindset that lies behind so much of our government’s approach to China.

China’s increasing economic success has given it greater influence in regional and international politics. Its prosperity has driven prosperity and stability throughout the Asia-Pacific region.

But that simply isn’t true on either count. Singapore, Taiwan, South Korea and Japan – the advanced countries of east Asia – aren’t rich because of the People’s Republic of China, but because they had their own policies, institutions, and people that equipped them to catch up with the leading economies of the West (something China is still failing to do). As for “stability” well it isn’t my field, but I doubt it is an impression shared by China’s neighbours dealing with its South China Sea expansionism. (I’ll try to do a separate post on the fallaciousness of the proposition that New Zealand’s economic prosperity, wellbeing, or stability depends to any large extent on China, hopefully drawing from some possible historical parallels.)

As is perhaps so often the case, what is missing from the document – the shop-front of the government’s China strategy, whether for firms looking to operate in China, or for citizens interested in evaluating government policy – is as interesting as what is there. There is no mention of how deeply corrupt much of China is, there is no mention of the pervasive controlling role of the Chinese Communist Party (generally regarded as more important than the state itself), and nothing on the absence of the rule of law (which means not the presence of courts, but the willingness to have independent judges apply laws impartially even when it doesn’t suit the authorities). You have to wonder whose interests those omissions serve. Beijing is no doubt happy. Established businesses trying to protect their interests in China may be too. Big China-associated donors to major parties might be.  But this is supposed to be a government of 4.8 million New Zealanders.

The other document I found on the MFAT website suggested that, in fact, at least among some officials there is a rather greater degree of realism about China than politicians seem ever willing to allow. In conjunction with MFAT, the Victoria University Contemporary China Research Centre is conducting five-day “master classes” for public servants. The purpose is described as

To develop a pipeline of China-savvy public sector professionals with global perspective and deep insight into the political, economic, security and cultural dimensions of the New Zealand government’s relationship with China.

It looks like a really interesting course. Among the speakers they have the retired ANU China expert, Geremie Barme, now resident in the Wairarapa, whose post on Professor Brady’s paper I linked to the other day.

Among the themes course participants will be considering are:

• The three Chinas: through the eyes of the Party, its history, and a leading global Sinophile
• What it means to be China savvy – developing a political, economic, security and perspective
• The peculiarities of media in China and the roles that Party and government play in controlling media
• The role the Chinese government takes in the threat of commercial failure to safety of Chinese. people in China and for Chinese outside of China.
• The nuances of building and protecting a brand in China, the Chinese legal system and the cultural nuances when doing business in China
• The profile of the modern Chinese in New Zealand and media influence on Chinese youth abroad.

But if this shows signs of a greater degree of realism, there are clearly limits. In the brochure for next month’s course it states of Day 1.

Scenarios throughout the day cover visiting delegations, the Māori-Chinese relationship, and navigating authorities.

But I also happened to find on-line a brochure for a version of the course run earlier this year. In that brochure it says of day 1.

Scenarios throughout the day cover visiting delegations, being Chinese in New Zealand, corruption issues, and the party-state structure.

Perhaps that was getting just a bit too close for comfort?

Last night I finished re-reading Richard McGregor’s excellent 2010 book The Party. On his final page, there were a couple of telling quotes.

The Chinese communist system is, in many way, rotten, costly, corrupt and often dysfunctional.


China has long known something that many in developed countries are only now beginning to grasp, that the Chinese Communist Party and its leaders have never wanted to be the West when they grow up. For the foreseeable future, it looks as though their wish, to bestride the world as a colossus on their own implacable terms, will come true.

That was, of course, written before the ascendancy of Xi Jinping.

Somewhat more immediately, a couple of people last night sent me a link to a new article by Charles Finny, former senior diplomat, and now a partner in the government relations firm Saunders Unsworth (where he describes himself as “making the impossible possible”). For someone who knows a great deal about China, and must surely be well aware of the sort of regime it is, and the nature of its activities, it did remind me of Lewis Carroll.

“Alice laughed. ‘There’s no use trying,’ she said. ‘One can’t believe impossible things.’

I daresay you haven’t had much practice,’ said the Queen. ‘When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.

Finny’s article is headed “Time for NZ political parties to take the migrant vote seriously” (actually I was pretty sure Labour had been doing just that in South Auckland for decades), but his focus is on the ethnic Chinese vote, and Jian Yang.

On the last day of the Westie experience [some years ago] I was introduced to a National Party candidate, Dr Jian Yang. He was teaching in the political science department at the University of Auckland. We talked about his academic background, about what he had done in China before leaving for Australia (where he completed his PhD at ANU), about the China-New Zealand relationship and about the Chinese Embassy and Consulate network in New Zealand.

It was clear Dr Yang was very well-connected to the leadership of the Chinese communities in New Zealand, as well as to the Embassy of the People’s Republic of China and its Auckland Consulate. He also had significant connections in China, both to government figures, and to the business community. This was the first of many meetings I have had with Dr Yang. We have met in his context as a MP, as a member of select committees and at social functions. We have travelled together to China and elsewhere as part of official delegations. It is my understanding that Dr Yang has become one of National’s most successful fundraisers, in much the same way Raymond Huo is important for the Labour Party’s fundraising efforts.

Did they, one wonders, back in 2010/11 discuss Yang’s background in the Communist Party and his teaching role in the Chinese foreign intelligence services?

What is astonishing is that one of New Zealand’s most-experienced China experts is, at least in public, untroubled by any of this: the close connections to a foreign government’s embassy, even as he serves as a member of the New Zealand Parliament, or the key role he describes both Yang, and Labour’s Raymond Huo playing in party fundraising?  Not that many decades ago, the convention – perhaps not always rigorously observed – was that elected politicians stayed well clear of party fundraising efforts, for good reasons to help maintain the integrity of the parliamentary system.

Finny is in full defence mode for Yang (and presumably Huo).

But it was a strange campaign period, with political players employing various strategies. Among the twists and turns, a rather strange and well-coordinated analysis/investigation was undertaken and then reported by Newsroom and the Financial Times about the past of Dr Yang. Subsequent coverage has led to calls for Dr Yang’s resignation.

Now, I have been involved in politics long enough to know that there are few stories of substance to emerge in the middle of an election campaign by coincidence (particularly ones that are so thoroughly researched). This was a story suggested by someone who had an agenda of some sort – and the timing was intentional.

If 10 days before an election isn’t a reasonable time to ask questions about a candidate’s background. I’m not sure when is? And it isn’t as if, to date, anything those media outlets reported has been disproved or refuted?

And Finny has nothing at all to say about Professor Brady’s paper, the timing of which was determined by the dates of an international conference she was presenting at. As he talks up – no doubt correctly – the importance of the migrant vote, surely suggestions that a major foreign power might be actively engaged in attempting to control most of the local Chinese-language media, and Chinese cultural associations, might have been worthy of some mention? These people are, after all, voters in our system, and our system allows new arrivals to vote much sooner than any other democracy.

I’m sure Finny is well aware of all this stuff, and is probably well able to distinguish the stronger bits of Professor Brady’s case from any that might be more questionable, or which might require more evidence to confirm. But nothing, not even a word. Would saying more have queered the pitch in terms of his future professional dealings?

Of course, if so, he isn’t the only one. Those master-classes MFAT is promoting had a number of eminent speakers. Some are current public servants and they, of course, must serve the government of the day. But most weren’t. And, of them all, the only one I’ve seen engage openly on the issues, and potential/actual threats Professor Brady raises, is Geremie Barme. And he’s Australian.

I’ve been critical of much our mainstream media for their lack of ongoing or substantive coverage of either the Jian Yang issue, or the more general influence-seeking activities Professor Brady describes. But you might have supposed that the Chinese-language media would be agog with the stories. In fact, I asked a fluent Chinese speaker about that. That person found that other than in Epoch Times (an anti-communist network of papers – including a NZ version – based in the US, apparently with some Falun Gong connections) there has been little about the Jian Yang story, and nothing at all about Professor Brady’s paper.

As Brady notes

New Zealand’s local Chinese language media platforms (with the exception of the pro-Falungong paper 大纪元/The Epoch Times) now have content cooperation agreements with Xinhua News Service, get their China-related news from Xinhua, and participate in annual media training conferences in China. Some media outlets have also employed senior staff members who are closely connected to the CCP. As part of Xi era efforts to “integrate” the overseas Chinese media with the domestic Chinese media, New Zealand Chinese media organizations are now also under the ‘guidance” of CCP propaganda officials.

The (lack of any) coverage of her paper and its claim would appear to consistent with her story.

And lest there is any doubt about the sort of regime the rest of the world faces in the People’s Republic of China, I thought this Reuters story on internal censorship in the modern age was a good place to end. It tells of a flash private company in China, full of eager young “auditors”, scouring the web for material to delete, anticipating/implementing the Chinese government-Party edicts.  Here, it seems, all too many of our government and opposition politicians, our academic and business elites, and too much of our media seem all too ready to do the same.  Whether it happens through naivete, a misreading of New Zealand’s economic exposure to China, the influence of private business interests, political fundraising opportunities, post-political opportunities, sponsorship deals, access, some combination of these, or whatever, it isn’t what we should accept in a free and democratic society.


On the China connections and our democracy

On Saturday, New Zealand voters elected as a member of Parliament Jian Yang, a man who:

  • by his own acknowledgement
    • was formerly a member of the Chinese Communist Party (many experts claim that the way the party works, no one is ever regarded as having left unless they are expelled),
    • was formerly part of the Chinese intelligence services,
    • in seeking New Zealand citizenship did not disclose to New Zealand authorities his past with the intelligence services and their training schools, and apparently regards as an acceptable justification for that omission the wishes of the authorities of the People’s Republic of China (PRC), a country he had left a decade earlier.
  • has apparently never denounced the PRC (party or state) for the manifest evils for which it is responsible domestically, or for its increasingly expansionist and aggressive stance internationally.  He has never indicated any regret at having previously chosen to make himself part of that brutal and repressive system.
  • clear documentary evidence, including photographs, indicates that he clearly remains in the good graces of the PRC authorities, and participates in many PRC- sponsored functions in New Zealand.

Perhaps it was bad enough that Yang was first elected to Parliament in 2011, and again in 2014.   At the time, voters knew none of this.

Perhaps the National Party did?  If so –  and they didn’t care, or think it relevant to voters –  that seems even worse than if they never bothered to do the checking and (as this 2011 article suggests) were simply playing identity politics and wanting an ethnic-Chinese candidate who would, among other things tap the potential donor base.  On that latter note, last week a National Party member and conference delegate recounted to me a past conversation with Peter Goodfellow, National Party president

The President once told me the Chinese are more important than the farms – they don’t complain and they pay up.

But if Jian Yang’s election to Parliament was quite bad enough in 2011 and 2014 –  when voters didn’t know and the National Party either didn’t know either, or knew but didn’t care or think it any concern of ours – it is astonishing this time round.    Of course, he was already on the party list, in a fairly secure spot, when the Financial Times/Newsroom stories broke.   But if he couldn’t by then have been removed from the party list, the National Party leadership could have disowned him and, for example, made clear that they would not accept the vote in Parliament of someone with such a tainted past and apparently close associations with the government/party of an alien power.   If they cared.

As it is, there is no evidence that they do care.   The leader of the National Party seemed to say nothing beyond the simple descriptive statement that Yang was reviewing his citizenship application papers (some of which were released under the Official Information Act late last week).  Yang himself seems to have said little beyond things like “people don’t understand the Chinese system” –  when in fact the problem is that they do (no former public servant in New Zealand, a decade after leaving New Zealand, is going to misrepresent his or her past to the government of another country “because that is what the New Zealand government told us to do”).  And then, of course, we had the Attorney-General, Chris Finlayson –  holder of an office with responsibility for upholding some of the fundamental values of our democratic system –  who, when asked in the closing days of the campaign about the appropriateness of someone with Yang’s track record being a New Zealand member of Parliament, had only the despicable “its all racism, and targeting the entire Chinese community” attempt at distraction to offer in response.   Whatever the faults of the impeccably liberal Financial Times, “racism” isn’t among them.

If you were of a charitable inclination, you might leave open the possibility that there really is some disquiet in the upper reaches of the National Party but….well……it was a close election, and better perhaps just to deal with these things quietly afterwards.  It is pretty openly acknowledged that the government has a policy of never upsetting the PRC government in public.  Perhaps in time Yang will find that “family commitments” or somesuch will mean he regrettably has to leave Parliament, by when the National Party will have smoothed the waters with Beijing and their representatives in New Zealand.   One can but hope, and even if there was some truth to this – wishful – hypothesis, it would still be telling about the enfeebled and compromised state of New Zealand democracy.

(One also sees various comments from smart people along the lines of “why is this an issue. If he was a spy, wouldn’t it be rather too obvious, and in any case there is no evidence that during his time in the intelligence services he, say, committed crimes against humanity?”   To my mind, neither is a remotely relevant issue.  And I’ve not heard anyone suggest Yang is a spy.  But as we’d have regarded it as incredible –  simply not believable or acceptable – to have had an unrepentant former member of the KGB or the GRU, still liaising closely with the Soviet Embassy, as an MP 40 years ago whatever specific role the person had played in that evil empire, so we should regard former Chinese foreign intelligence officials now.  No matter how pleasant they might be individually, or how good an academic they might have been.  Parliament is different.

And if the National Party is particularly culpable here, the Labour Party (as principal opposition party) emerges barely better.  Over the last six years, Yang has sat opposite them in Parliament?.  Didn’t they seek to learn more about the background of MPs of the opposite party, looking to identify points of vulnerability in the governing party?  Isn’t that part of what we should expect from opposition parties.  And since the Financial Times/Newsroom stories broke, the Labour Party leadership have been almost silent –  a week out from an election.  Professor Brady’s paper suggests that the Labour Party has also been somewhat compromised by too close associations with PRC interests, but whatever the reason robust democracy depends on serious scrutiny and challenge from the opposition.  It is –  supposed to be –  an intrinsic part of the system, even if it is not an approach that commands much favour in Beijing.

And then there is the press. Financial Times/Newsroom broke the story.   The local media gave it coverage for one day’s news cycle –  TVNZ even broadcast a call from Beijing-based New Zealand economist, Rodney Jones, calling for Yang to resign.  And both Stuff and the Herald OIA’ed Yang’s citizenship application.  But that was about it.  I’m pretty sure there wasn’t a single editorial about the issue, and no sign of relentless questioning of political party leaders about the issues on the campaign trail.  And the Finlayson attack was neither reported nor followed up.

I’m not sure what to make of the silence?   Some talk about the possible commercial interests of the newspaper owners –  Fairfax signed a deal a year or two back to distribute an occasional China Watch supplement –  but that doesn’t seem terribly persuasive as an explanation.  Among other things, Fairfax papers in Australia have been writing recent stories about PRC attempts at influence in Australia, and their Asia-Pacific editor has highlighted a number of these issues, including the Brady paper and comment on it, on his Twitter feed.  And, of course, it wouldn’t explain the near-complete silence of non-commercial media like Radio New Zealand.   Perhaps there is something in the story that PRC-funded entities assist media outlets with travel to China, and one needs to be careful not to bite the hands that feed?   If so, so compromised, and worse.  So we must hope that isn’t the story either.

Our major media outlets don’t usually seem afraid of taking on the government.  Agree with them or not –  and I didn’t follow the issue closely –  Stuff recently devoted large amounts of resources to serious investigative work around New Zealand involvement’s in Afghanistan.  Health system problems, child poverty, housing, multi-national tax issues have alll seen extensive investigations, and in some cases what amount to “campaigns”.  But not, it seems, either the specific issue of the presence in our Parliament of an Chinese-government affiliated MP, and former member of the Chinese intelligence services.  Or the wider issue Professor Brady has highlighted –  and attracted plenty of positive coverage abroad for –  of the systematic PRC (state/party) efforts to exert influence, both directly and through the Chinese diaspora, in democratic societies.   It seems extraordinary that I can find correspondents from the New York Times, the Financial Times, or Fairfax Australia drawing attention to the Brady paper and the Yang issue, but not most New Zealand media.  Or international China scholars and writers, but few other local academics.   Frankly I’m a bit incredulous.

I also don’t really buy the line that the near-complete silence is explained by fear of being called “racist” –  the initial Stephen Franks interpretation – even if a senior Cabinet minister did go straight to that line of attempted defence.    No serious person thinks that this issue is about Chinese people per se, whether native-born citizens of New Zealand, more recent citizens or residents, or whatever.   China is a big and emerging power.  As the China Daily put it just yesterday, a “lion awakening”, sparking this reaction from one wit.

There have been other emergent big powers previously – the Soviet Union and Germany in just the last 100 years –  whose interests and values were antithetical to our own.  They pursued their interests, and their attempts to do so were threats to us and our interests and values.  China isn’t really any different –  it is just even bigger.

So I can only assume that the silence of the New Zealand media, and most of the political parties, and of the current and former business elites, must reflect something like them having bought into a New Zealand government narrative (established over a long period of time) that we simply mustn’t say anything critical of China, and certainly not openly.  That New Zealand’s best interests are somehow served by accommodating China’s interests and preferences wherever necessary.   In that world, perhaps, someone like Jian Yang is seen as a useful “friend at court”?      It would be a curious stance for the media at least –  after all, their self-image is often one of fearless challenge, speaking the truth to power, asking hard questions other won’t.  But what other explanation makes much sense?

You have to wonder quite what New Zealanders have to fear.   And here perhaps the double-edged sword of trade becomes relevant.  I went and dug out the numbers yesterday for New Zealand’s trade with the Soviet Union in the 1970s.  Our exports to the Soviet Union then made up around 2-3 per cent of our total exports.  By contrast, our exports to China are now around 20 per cent of total exports.

Trade is generally good and mutually beneficial. I’m a free trader, who would prefer to see all our remaining tariffs and trade restrictions removed (they harm us, not other people) and am somewhat sceptical of the various preferential trade agreements our governments have been signing.  But I suspect trade between New Zealand firms and firms in countries where governments have a pretty hands-off approach are rather different than when the trade involves firms (often effectively government/party controlled anyway –  as, say, Sanlu was ) in state with a fairly totalitarian approach to the use of trade as an instrument of heavy-handed foreign policy.

I’m sure New Zealanders benefit from trade with China, and Chinese do too.  That is, in general, the nature of trade.    But if trade access for particular firms –  and their directors and owners –  depends on making nice to a government of a state with values and practices antithetical to those of most New Zealanders then there is an unpriced externality involved.     With the Soviet Union, maintaining moral clarity around the nature of the regime was relatively easy: not that many people in New Zealand, or similar countries, had a strong economic interest in making nice to the Soviet Union.  With China it is different.  We have Fonterra and the milk powder companies.  We have university vice-chancellors and their counterparts in other educational establishments.  And we have tourism industry leaders all looking to their own economic interests –  which aren’t necessarily the same as the interests in New Zealand –  in encouraging people to look the other away, to ignore Chinese abuses, and to aim to ensure that the public never gets too bothered about the actions of the PRC in New Zealand, including among our own fellow citizens who are ethnic Chinese.

There is a view abroad – propounded for example by people at the Contemporary China Research Centre, based at Victoria University – that somehow China is critical to whether or not New Zealand succeeds economically. I found this quote in a recent major report (the bulk of which I want to come back to)

New Zealand’s future is increasingly bound with China’s continued growth and prosperity. Perhaps not inextricably, but certainly the way that China tracks over the next decade and beyond will have a profound impact on whether New Zealand prospers as a nation. Most public and political commentary in New Zealand focusses on the state of the economic relationship. It is hard to overstate its importance
for New Zealand’s prosperity.

That is simply wrong. Nations largely make their own prosperity – or their own failures. Individual firms (and tertiary institutions – several of which take direct funding from the PRC) might be deeply affected by things China’s government could do, but over the medium to longer-term, New Zealand’s fortunes won’t be. As I’ve noted previously, the exports of New Zealand firms to China are (directly) around 5 per cent of our GDP. By contrast, say, Canada’s exports to the US are more than 20 per cent of Canada’s GDP.

There are plenty of countries with much larger direct exposure to China (this chart I found yesterday uses data a few years old, but the general point holds).


South Korea is an interesting example, with a much larger direct trade exposure to China than we do. But that trade exposure is now smaller than it was, because in recent months China has been expressing its extreme displeasure with South Korea, imposing what are in effect economic sanctions in response to South Korea allowing the installation of the THAAD missile defence system. You can read some of the details here.

As it happens, there was a New Zealand column about just this issue on yesterday, from Victoria University’s professor of business in Asia (a chair sponsored by BNZ, but also by a clutch of government agencies. After discussing the Korea situation he concludes

The THAAD case shows that it is critical to keep an eye on the political alignment between a business’ home country and the host country where it seeks to do business.

Which sort of makes my point. The interests of businesses wanting to trade in a particular country won’t always align well with the interests and values of the home country. That isn’t likely to be much of a problem in trade with the UK or Australia, or Singapore for that matter. It is, as the Koreans have found, with China. The very fact that China operates in the way it is doing with Korea suggests it isn’t the sort of regime our governments and media should be deferring to.

Some people might look at it the other way and say “if they can do it to Korea they can do it to us”. First, South Korea will survive economically, and is proceeding with the THAAD deployment. But, second, South Korea – and the entire situation on the peninsula – is likely to matter a great deal more to China than New Zealand does. It is difficult to imagine severe trade sanctions because New Zealand was willing to have an open and honest debate about whether it is appropriate for someone like Jian Yang to serve in our Parliament, let alone about the way in which the PRC seeks to exert influence and neutralise potential criticism in countries like our own. There is more of that sort of debate already in Australia and Canada. But if, just suppose, they did – to “make an example” perhaps – wouldn’t that be a moment of moral clarity, that brought into sharp relief how a state we constantly defer to operates. There was highflown talk – John Key and Xi Jinping – of a Comprehensive Strategic Partnership with China. We’d never have considered one with the Soviet Union. The PRC is today’s Soviet Union, with many more routes into our system directly than the Soviet Union ever had.

What have we come to?

I was exchanging notes the other day with a very senior journalist in Asia who observed of this state of affairs that “I have found that the more expert in China a person is the more troubling they find all of this”.

On which note, I had an email out of the blue the other day from someone with an unfamiliar name, and when I opened the link he sent me I found it was for something called “The Wairarapa Academy for New Sinology”. I wasn’t quite sure what to make of it, being instinctively sceptical of (yes, prejudiced about) the Wairarapa. But it turns out that an eminent Australian expert on China, Geremie Barme, formerly Director, Australian Centre on China in the World and Chair Professor of Chinese History at Australian National University has retired to the Wairarapa, where he contines to research and write on related issues, and is establishing the (mostly virtual) academy. He has a good new piece out on these issues, which appears to have been quite widely disseminated among China observers abroad. He might be someone New Zealand media could consider talking to. Can any good thing come out of Featherston? Apparently so.

UPDATE (Thurs)
There is a new short commentary by Professor Brady on the PRC-influence issues, and a Newsroom story suggesting that Winston Peters may continue to regard the Jian Yang issues as worth pursuing.