Is NZ risking cocking-up its relationship with China?

Sunday, 28 September 2025

ANALYSIS: In the same way New Zealand’s wine, butter and kiwifruit find favour on the Chinese palate, this country’s pioneering willingness to enter into a free trade agreement with China has given us a special place in the hearts and minds of many of the people of the Middle Kingdom.

But, through a combination of appearing to be siding with the erratic Trump administration, late and scant efforts by Prime Minister Christopher Luxon to show his face in China, and the huge opening up of the Chinese markets to other countries - including those that compete with us in the primary sector like Brazil - New Zealand stands poised to potentially cock-up this unofficial favoured-Western-nation status.

That’s the general gist of what The Post gleaned from a range of conversations with Chinese and New Zealand officials and business people, economists, foreign correspondents and others spoken to when it visited three urban centres in China last week. The Post, along with other media, was sent to China courtesy of the New Zealand China Council based in Auckland, and the Chinese People’s Institute of Foreign Affairs, a body conducting diplomacy on behalf of the Chinese government.

The conversations were conducted on a fact-finding basis to satisfy visa requirements, where individuals could largely not be quoted, but the information gathered could be used for stories written upon return to New Zealand. The schedule saw us meet with a phalanx of Chinese officials, who, as expected, impressed upon us the many ways in which the country is resolute in its power and growing in leaps and bounds, while outlining many of the challenges that remain.

US President Donald Trump’s iconoclastic approach to everything from holding a glass of water to international diplomacy and beyond is the biggest wildcard, and a constant topic of conversation. While it’s a headache for Chinese diplomats on the day-to-day, it has brought the population and its leaders together to ride a wave of nationalistic pride. In fact, Trump’s widely used nickname in China is 建国同志 - “Comrade Jianguo” - aka “the nation-builder advancing Chinese interests by causing chaos in the US” or as some would have it “Make China Great Again!”

But there do remain underlying, persistent challenges for China as well, and they feel familiar to New Zealand. An ageing population, a “two-track” economy (in China, where cities are outpacing rural areas), low consumer spending and a reeling property market are issues of genuine concern, even while GDP growth continues to top 5%.

New Zealand has these challenges too - minus the GDP growth and the enormous consumer market to fall back on - and on top of that, we have to retain a healthy trading relationship with the large, capricious and grudge-bearing US administration while also watering the flower of our primary trading relationship with the large, highly astute Chinese administration, which is watching our every move.

That is not to say that New Zealand is top of mind for China, but that our actions are closely noted. At almost all meetings with Chinese officials and think-tanks, for example, it was acknowledged - with some disappointment - that New Zealand appears to be aligning itself more with the 5 Eyes grouping. There was sheer incredulity expressed at the establishment of an FBI office in Wellington. Little heed was paid to New Zealand’s bumbling, belated efforts to suggest it was part of a 5-D master plan to combat drug smuggling, and understandably more was paid to FBI Director Kash Patel’s comments that the office was in part a plan to counter “the CCP [Chinese Communist Party] in the Indo PACOM theatre”.

Both Chinese officials and, interestingly, foreign correspondents working in China for the likes of Bloomberg, Reuters, and the Associated Press, spoke to us of how it had been noted with positivity that former PMs Helen Clark and Sir John Key attended the recent military parade in Beijing marking the 80th anniversary of the end of World War II.

Just as well

On the flip side, it was also noted - and not in a good way - that Luxon’s first official trip to China came almost two years into his term as prime minister. The fact he only stayed three days in the country, compared with Australian PM Anthony Albanese’s six days, was highlighted.

This was not only mentioned by those on the Chinese side but also by some New Zealand businesses operating in China, who appeared to expect a little more by way of face-to-face time.

That said, Trade Minister Todd McClay visits frequently, keeping the wheels greased and, in any case, Luxon’s trip was relatively well received by the broader Chinese press. As New Zealand’s Asia Media Centre found in assessing the coverage, Luxon’s promotion of New Zealand products during a major shopping festival, his announcement of Southern Link flights between China and South America via Auckland, and upcoming removal of transit visa requirements for Chinese nationals travelling through Auckland, were positives, and “meetings with National People’s Congress Chairman Zhao Leji, Premier Li Qiang, and especially State Chairman Xi Jinping received prominent coverage”.

While the slight relaxation of visa requirements for transiting visitors was welcomed, complaints over the cost of visitor visas to New Zealand remain (not only in China but by tourism players in New Zealand), and given by several as a reason why this country’s tourism take is stuck at below 90% of pre-Covid levels. Chinese visitors now pay an international visitor levy of $100 per person, an NZ Electronic Travel Authority (between $17-$100) per person, translation costs, and airfares of between $1000-$5000 depending on the time of year they come here, which is hefty compared to other locales.

New Zealanders, meanwhile, pay much less to fly to China and can waltz in without a visa if staying for under 30 days.

There would be those that argue that a Chinese consumer spending slump explains the fact tourists from the country have not returned to New Zealand in such large numbers. However, a mid-year report from McKinsey on the Chinese consumer finds that even while consumer confidence remains low and households continue to save at historically high levels, certain retail sectors are recovering - and one of those is air travel, which has surpassed 2019 levels.

“Travel has roared back. Chinese consumers are flying in large numbers again,” the McKinsey report says. “In the first and second quarters of 2025, inbound and outbound international air passenger traffic exceeded 2019 levels by 9% and 13%, respectively.”

New Zealand is not getting its traditional share of this trade.

Bigger problem

A longer-term problem for this country surfaced in talking to the various parties on our trip to China, and it had nothing to do with any faux pas or otherwise on the part of New Zealand. And that is that with the pace and ferocity with which China is establishing trade liberalisation zones, New Zealand’s first mover advantage into the Chinese market is at risk of being lost.

This was not explicitly stated as much as hinted at. We were told frequently that Chinese consumers with more disposable cash like our consumables, and they continue to pay high prices for our products, or products made with our premium ingredients, such as those produced by Fonterra and Tatua.

Fonterra has retained its brands business in China (unlike elsewhere), and these are still sold at a hefty premium in supermarkets. Zespri, meanwhile, seems to have cornered the market in branded Kiwifruit sold to Chinese consumers keen for premium fruit to both eat and take to celebrations. The company signed Memoranda of Understanding with four of its long-term distribution and retail partners in China during Luxon’s visit to double the current value of $1.4 billion it sells into China currently - a cause for celebration, even if our lovable mascots the “Kiwi Bros” didn’t feature quite so prominently as in official visits past.

However, the Chinese consumer market is rapidly and deliberately opening up, and it could be that other trade groupings like Brics (the Global South) vie ever more ferociously with New Zealand products into China over time. In addition, China’s own food and goods production industry is wholeheartedly embracing technology and productivity enhancement.

Zespri, for example, supplies less than 5% of all Kiwifruit in China; China itself is the world’s largest producer of the fruit, as well as the biggest market. Fonterra could not quantify how much it produces of China’s total dairy consumption; but Brazil, for example, has grown its dairy exports to China by 315.7% in volume and 581.2% in revenue in the first quarter of this year alone.

Dr Zhou Mi, a senior Research Fellow at the Chinese Academy of International Trade & Economic Cooperation said efforts towards mutual understanding would have to ramp up to face this increase in competition New Zealand producers would inevitably feel in China.

“[New Zealand] … has a lot that is really good - not just agricultural products but wine , seafood and berries,” he told The Post. “But in recent years China has opened our market wider, including importing lots of agricultural products from African countries.

“The choices of Chinese consumers have widened, are improving, are diversified. So the competition in China is becoming even stronger compared with previously.”

Dr Zhou recommended two plans for action for New Zealand exporters - one was more information sharing between suppliers and consumers, especially over strategies in e-commerce, which is the most common form of selling even in the country’s remote and rural areas.

“And the second … is to develop that better mutual recognition about standards, habits, appetites, and preferences … maybe through more cultural exchanges. It's not like before when Chinese people would buy anything that supermarkets provide, because we have so many choices. It’s not just the exporters but the producers and farmers that have to understand changing tastes as well.”

He said, however, not to be afraid of competition, as the market size would accommodate all smart operators, but “it’s about how can you really meet the demand of the consumers and also - how do you make them sticky to your products?”

Dita De Boni travelled to China courtesy of the New Zealand China Council based in Auckland, and the Chinese People’s Institute of Foreign Affairs, a body conducting diplomacy on behalf of the Chinese government.