Professional Documents
Culture Documents
Textbook China New Zealand and The Complexities of Globalization Asymmetry Complementarity and Competition 1St Edition Tim Beal Ebook All Chapter PDF
Textbook China New Zealand and The Complexities of Globalization Asymmetry Complementarity and Competition 1St Edition Tim Beal Ebook All Chapter PDF
Complexities of Globalization:
Asymmetry, Complementarity, and
Competition 1st Edition Tim Beal
Visit to download the full and correct content document:
https://textbookfull.com/product/china-new-zealand-and-the-complexities-of-globalizat
ion-asymmetry-complementarity-and-competition-1st-edition-tim-beal/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
https://textbookfull.com/product/biota-grow-2c-gather-2c-cook-
loucas/
https://textbookfull.com/product/the-globalization-of-
international-society-1st-edition-tim-dunne/
https://textbookfull.com/product/european-competition-policy-and-
globalization-1st-edition-chad-damro/
https://textbookfull.com/product/sociologies-of-new-zealand-
charles-crothers/
US China Competition and the South China Sea Disputes
1st Edition Huiyun Feng Editor Kai He Editor
https://textbookfull.com/product/us-china-competition-and-the-
south-china-sea-disputes-1st-edition-huiyun-feng-editor-kai-he-
editor/
https://textbookfull.com/product/the-palgrave-handbook-of-
australian-and-new-zealand-criminology-crime-and-justice-1st-
edition-antje-deckert/
https://textbookfull.com/product/the-law-of-coastal-adaptation-
insights-from-germany-and-new-zealand-linda-schumacher/
https://textbookfull.com/product/the-globalization-of-foreign-
investment-in-africa-the-role-of-europe-china-and-india-1st-
edition-adams-bodomo/
https://textbookfull.com/product/exploring-the-history-of-new-
zealand-astronomy-trials-tribulations-telescopes-and-
transits-1st-edition-wayne-orchiston/
Tim Beal
Yuanfei Kang
china,
new zealand,
and the complexities
of globalization
Asymmetry,
Complementarity, and
Competition
China, New Zealand, and the Complexities of
Globalization
Tim Beal • Yuanfei Kang
v
vi Contents
Statistical Appendix 241
Index 281
List of Figures
vii
viii List of Figures
ix
x List of Tables
Yuanfei Kang
Y. Kang (*)
School of Management, Massey University School of Management,
Auckland, New Zealand
For a period of more than three decades after establishment of the PRC,
the bilateral relationship mainly focused on political and diplomatic aspects.
For New Zealand, its relationship with China during this period was based
on the understanding that for its interest, New Zealand needs to be able to
have a direct dialogue with relevant parties in the world, especially follow-
ing the UK’s entry into the then-European Economic Community in 1973.
Moreover, the ending of its security alliance relationship with the USA in
1985 after the adoption of a nuclear-free policy by the New Zealand govern-
ment in 1984 served as a clear indication of its foreign policy being more or
less independent from its traditional allies. By the mid-1980s, New Zealand
developed a so-called ‘special relationship’ with China,5 and the two coun-
tries were able to achieve consensus on some important international affairs.
For example, China supported New Zealand’s initiative of the South Pacific
Nuclear Weapon Free Zone, and in 1985, became the first nuclear weapons
state to sign the protocols leading to the set up of such a zone, an action that
the Western nuclear states, including New Zealand’s traditional allies, the
USA and the UK, decline to take even after quite a long time.
However, for this period, trading relations remained less significant,
as China’s shares in the global trading and the world economy were still
rather small. The total value of bilateral trade was merely NZ$1.7 million
in 1972.6 For the period from the mid to late 1980s, the Chinese market
gained some importance for New Zealand. In 1985, exports to China had
reached a peak value at NZ$298.2 million, and China became the largest
buyer of New Zealand wool and the eighth largest export market overall.
The second and third ‘firsts’ came together in 2004. With the increasing
weight of the Chinese economy, it was important for New Zealand to get
better access to the Chinese market and a bilateral FTA would be an effec-
tive way to achieve this. When New Zealand initiated the idea of an FTA
with China, the Chinese side responded by asking for a formal recognition
of China as a market economy by New Zealand in exchange for the move
to start the FTA negotiation. It is highly important for China to be treated
as a market economy, as the market economy status would mean a pos-
sible removal of the de facto ‘China exception’ clauses relating to dumping
and trade remedies in the WTO protocol that China had to accept in its
15-year-long negotiation for its WTO accession.10 Recognition from New
Zealand as a Western country, although a small one, could help by setting a
precedent for more developed Western countries to follow. Some Western
countries did follow this precedent. For example, Australia became the
second Western country to provide this recognition. On the other hand,
as wishful as it may seem in retrospect, as of 2016, China is still campaign-
ing to gain recognition of the market economy status from the USA and
some EU member states. For New Zealand, the rationale for this deal is
the first-mover advantage gained through a proactive China policy. Based
on the pragmatic consideration, New Zealand would have little chance to
get a good FTA deal with China given the evidently asymmetrical nature
of the bilateral relationship, if it were not first in the line. In reality, the
deal of recognition of China as a market economy in exchange for initia-
tion of FTA negotiations was made by the two parties and was proceeded,
resulting in the second and third ‘firsts’ in which New Zealand became the
first in recognizing China’s market economy status in 2004 and the first in
starting negotiations to develop an FTA with China among the developed
countries a short while later in the same year.
Zealand, the rationale for a high-quality FTA with China is more compel-
ling. First, FTAs tend to be more important for the small countries if they
are formed between small and large countries, partly because FTAs can
help raise the profile of the small country. Second, there was only limited
room for New Zealand to have further reduction in trade barriers as it had
already been a rather open economy, while New Zealand could be more
substantially benefited from improvement in market access and reduction
in tariff level. Third, a comprehensive FTA would provide a good oppor-
tunity for New Zealand to gain the first-mover advantage in building a
long-term economic relationship with China as a rising economic power
in general and in getting better access to the Chinese market in particular.
More broadly, developing FTAs with its major trading partners is in
line with New Zealand’s long-term trade strategy.11 Since the early 1980s,
the New Zealand economy has been transformed from a protected and
heavily regulated economy to an open economy, which has a much higher
level of dependence on the access to foreign markets. However, as the
Doha round trade negotiations within the WTO framework stalled in
2008 after fruitless negotiations for almost a decade, a unilateral world-
wide trading treaty has been difficult to reach.12 As a result, regional eco-
nomic integration and bilateral FTAs have become the major approaches
for countries to achieve market access. New Zealand has been active and/
or even proactive in participating and achieving trade agreements at the
regional level. These involvements include being the founding member
of the Asia-Pacific Economic Cooperation (APEC), being the initial party
of the Trans-Pacific Strategic Economic Partnership (known as the Pacific
Four—P4) and the Trans-Pacific Partnership (TPP). However, because
of its isolated geographical position, New Zealand has been excluded
from the major regional trading blocs, such as the European Union, and
the North American Free Trade Agreement (NAFTA). Therefore, more
or less, bilateral institutional trading arrangements have become a more
effective way to build up foreign economic relations and to improve its
market access. In this regard, the huge benefits from the Closer Economic
Relations (CER) with Australia demonstrated the importance of bilateral
institutional arrangements for the New Zealand economy.
The New Zealand–China FTA has liberalized and facilitated trade
between the two countries across all the trading interests. The FTA con-
tributed to the strong growth of the bilateral trade, especially exports from
New Zealand to China, due to both the reduction in tariff level on New
Zealand’s export products and the benefit of the FTA in raising the pro-
8 Y. KANG
file of New Zealand products in the Chinese markets. Exports from New
Zealand to China climbed rapidly from NZ$2.091 billion in 2008, when
the FTA was in force, to NZ$11.572 billion,13 an increase of more than
4.5-folds within a short period of six years. For the same period, New
Zealand imports from China also experienced an increase, but at a much
slower pace, from NZ$5.470 billion in 2008 to NZ$8.062 billion in
2014,14 representing an increase of 47.3 %. As a result of different growth
rates for New Zealand’s exports to and imports from China, the trading
balance between the two countries changed from New Zealand’s deficit of
NZ$3.379 in 2008 to a surplus of NZ$3.510 billion in 2014. Evidently,
the positive effects of the FTA on the trading relations between the two
countries are more in New Zealand’s favour.
The fifth ‘first’ has resulted from New Zealand’s acceptance of China’s
invitation to found the AIIB in November 2014, the first developed coun-
try to do so. AIIB aims to support the building of infrastructure in the
Asia-Pacific region, providing an alternative funding source outside the
existing development finance institutions of the World Bank and the Asian
Development Bank (ADB). The rationale for China’s initiative of AIIB
is three-fold. First, levels of lending from the ADB and the World Bank
fall far short in meeting the Asia-Pacific region’s acute demand for infra-
structure development, especially in this new century as this region has
the most dynamic economies in the world and rapid economic develop-
ment has generated a huge demand for improvements in its infrastructure
facilities. Second, the initiative in establishing AIIB is also a reflection of
China’s dissatisfaction with the existing development finance institutions,
notably the US-dominated World Bank and the US–Japan-dominated
ADB. In China’s view, its current shares of voting in the World Bank (5.17
%) and in the ADB (6.47 %) do not reflect its rising economic power.
Third, this initiative has also resulted from China’s intention to boost its
global leadership credential through contributing to the regional prosper-
ity and to facilitate engagement of Chinese companies, especially state-
owned enterprises (SOEs), in the construction of infrastructural projects
in the Asia-Pacific region. The AIIB would also present opportunities for
New Zealand to amplify its influence in the region. Given its geographi-
cal position and the historical influence in the South Pacific region, New
Zealand would be able to help manage the likely future infrastructural
projects in this region that attract AIIB financial backing.
However, there is a trend that the rise of a new economic power
would create a new geopolitical situation for the existing power. In the
CHINA’S ECONOMIC GROWTH AND ITS INFLUENCE ON NEW ZEALAND 9
view from the USA, the AIIB initiative represents a challenge to the exist-
ing economic and financial order and there were also concerns about the
transparency in AIIB’s future lending and in this financial institution’s
governance and capital structure. There was pressure from the USA on
countries not to join the AIIB, although they expressed an interest to be
in it.15 For example, Australia did not accept the invitation in November
2014, although it had expressed its interest earlier16; eventually, it joined
the bank several months later with major European countries such as the
UK, Germany, France and Italy in March 2015.17
A major risk for New Zealand in joining the AIIB is whether this coop-
eration with China might inadvertently cool its recently warming-up
relationship with the USA after the rift in 1984 due to New Zealand’s
nuclear-free policy, given that the reengagement of the USA with its tra-
ditional allies in the region is partially motivated by its strategic policy
of ‘pivot to Asia’ in the face of a rising Chinese power. After signing the
Wellington Declaration with the USA in 2010, Hillary Clinton, then US
Sectary of State, described the US–New Zealand relationship as ‘stronger
and more productive than it has been in 25 years’.18 In comparison with
other Western developed countries such as Australia, the advantage for
New Zealand in terms of the US pressure is that this US pressure was
smaller because of its smaller size and the non-allied relationship with the
USA. Based on New Zealand’s consideration, the AIIB would go ahead
with or without New Zealand’s participation, but New Zealand’s inter-
ests with the development in the region, and more importantly, its wider
interest in China, would be better served by being a willing rather than a
reluctant or late participant.19
become the world’s second largest economy, the largest manufacturer, and
the largest exporter, accounting for over 11 % of the world’s merchandise
exports. Companies from China have also been increasingly integrated
into the regional and global supply chains. Consumption spending of the
Chinese people is making up a growing share of the final global demand.
The significant growth enabled China to gain the status of an upper
middle income economy from the status of a low income country.
Moreover, China has been able to make a major contribution and play
an increasingly important role in the world economy. When measured on
the basis of purchasing power parity (PPP), China’s growth contributed
around 0.8 percentage points per year to the annual growth of the world
economy in the early 2000s, and this contribution has almost doubled to
around 1.5 percentage points per year ten years later in the early 2010s.
This contribution rate is more than double in comparison with the contri-
bution made by the world’s largest economy, the USA. The positive role
played by China in the two major financial crises in the world economy
provides a good illustration of the contribution of the Chinese economy.
The first is the Asian financial crisis in the late 1990s. When it first
occurred in 1997, the currencies in a series of countries in the North
and Southeast Asian region depreciated one after another, leading to a
falling domino effect. This region had the most dynamic economies and
had witnessed the fastest economic growth since the Second World War.
The heavy blow of the financial crisis turned into a severe economic crisis
across the region, and the national economies of quite a few countries in
the region were on the brink of collapse. It was predicted that it would
need ten years or more for the economies in this Asian region to recover
from the crisis, and some pessimistic prediction even suggested that the
lost momentums might never be recovered in some economies of this
region. Against the tide of currency depreciations, the Chinese currency
did not depreciate, thus playing a stabilizing role for other currencies at
this difficult time. Furthermore, the Chinese economy still grew at an
average annual rate of more than 8 % for the three-year crisis period from
1997 to 1999. Stimulated by the high demand of the Chinese economy,
the East Asian economies recovered from the crisis within a few years.
The East and Southeast Asian economies as a whole had regained growth
momentum by the year 2000, much earlier than the previously predicted
ten years.
The second is the worldwide financial and economic crisis in 2008.
Trigged by the subprime mortgage crisis in the USA in 2007, this crisis
CHINA’S ECONOMIC GROWTH AND ITS INFLUENCE ON NEW ZEALAND 11
has been the most severe economic crisis in the world since the Great
Depression during the period 1929–1933. When almost all the major
developed economies in North America and Europe went into recession
following the blow from the crisis, the Chinese economy still grew at an
annual rate of more than 9 %, partially thanks to the Chinese govern-
ment’s ambitious stimulating package of RMB¥4 trillion (US$ 586 bil-
lion)22 as an attempt to minimize the impact of the crisis. China’s steady
growth during the crisis period played the role of a ‘stabilizer’ for the
recovery of the global economy from the worst hit in the global financial
tsunami. More importantly, China actually provided the ‘heavy lifting’ to
support a global economic recovery through its policies related to interna-
tional trading and exchange rate management. Despite the sharp decline
in its exports during and after the financial crisis, the Chinese government
tolerated a continuous currency appreciation, while other major interna-
tional currencies devalued against China’s currency of renminbi during
the recessionary years. That is to say, a combination of currency appre-
ciation and relatively high domestic inflation led to a significant loss of
competition for exports from China, while other countries, especially the
European countries made competitive gains through currency deprecia-
tions. As a result, there has been a significant change in China’s current
account balance. China posted a surplus in its current account equivalent
of 10.1 % of its GDP in 2007, the year before the financial crisis, and this
surplus was dramatically reduced to 2.0 % in 2013 and 2.1 % in 2014.23
The relative reduction of Chinese exports and increase of Chinese imports
demonstrated that China has been playing the role of ‘consumer of last
resort’ in the world economy, a role traditionally played by the USA.
countries are able to imitate, introduce and integrate the existing tech-
nological progress already created by the developed countries. Instead of
having to pioneer technological innovation, later-developed countries can
reap productivity gains simply by shifting workers from the traditional
and low productive agricultural sector to the more productive and export-
oriented manufacturing sector, employing the technology imported
from developed countries. The required conditions for such a develop-
ment model can be listed as: taking a good use of comparative advantage
between countries to develop export-oriented industries, capital accumu-
lation for investment and structural transformation of the economy from
a focus on the low productive sector of transitional farming to a high pro-
ductive sector of manufacturing.
Therefore, theoretically speaking, if a developing country can make a
good use of the growth potential of the latercomer advantage in achieving
technological innovation and industrial upgrading, this country should be
able to achieve a long-term growth faster than that achieved by developed
countries. Historically, a number of developing countries have made suc-
cessful use of the latercomer advantage in gaining long-term economic
growth, as suggested in ‘Growth Report: Strategies for sustained growth
and inclusive development’,25 produced by the Commission on Growth
and Development, which was chaired by the American Nobel laureate
economist Michael Spence. Based on this report, after the Second World
War, 13 economies, China being one of them, achieved an annual GDP
growth of 7 % or higher for 25 years or longer, a growth rate more than
double that achieved by developed countries as a whole in the same period.
Most of these successful economies are located in Asia, resulting in
Asia, especially East and Southeast Asia, becoming economically the most
dynamic region in the global economy. There have been four waves of
economic growth in the Asian region after the Second World War. The
first is the amazing transformation of Japan from a devastated economy
destroyed during the war period to a highly dynamic and advanced econ-
omy and the global leader by the end of the 1980s. The second is the
emergence of the four ‘Asian Tigers’ of Hong Kong, Singapore, Taiwan
and South Korea, starting from the late 1960s and reaching the high
income status by the1990s. The third is the high growth achieved by the
Southeast Asian economies of Thailand, Malaysia and Indonesia starting
from the 1970s. The fourth and latest is the rise of the two Asian giants,
China and India, each with a population over one billion, starting from
the 1980s, and the events and their consequences still unfolding.
CHINA’S ECONOMIC GROWTH AND ITS INFLUENCE ON NEW ZEALAND 13
same rate as the economy as a whole, maintaining its share at just below 50
% for the same period; the share of the service sector has expanded rapidly
and has more than doubled from 22 % in 1980 to 45 % in 2012. Rapid
industrialization since the beginning of the 1980s has further contributed
to a high investment level, as the industrialization is achieved through
construction of factories and investment in capital equipment.
Corresponding to the change in the economic structure, the Chinese
society has been experiencing a steady process of urbanization. The popu-
lation living in the urban area has expanded from 20 % in 1980 to 53 %
in 2012, the second year in which the urban population has exceeded
the urban population. The urbanization in the Chinese society has also
resulted from the high investment rate, as shifting workers from the rural
area to the cities has required extensive investment in housing and urban
infrastructure.
Exports have been the other major driving force behind the long-term
Chinese growth. In the beginning of the 1980s, China’s share of exports
in GDP (10 % in 1980) was slightly lower than that in other large econo-
mies such as Japan and the USA (around 10–15 %). Since then, having
benefited from the comparative advantage gained from its manufactur-
ing products focusing on the labour-intensive industries and a slightly
undervalued currency, Chinese exports have experienced dramatic expan-
sion at a pace much faster than its GDP growth. As a result, the share of
exports to GDP reached the peak at 39 % in 2007, just before the global
financial crisis (GFC). Although the contribution of net exports has not
been significantly high as Chinese imports of raw materials and capital
goods such as machinery equipment have also experienced a high growth,
Chinese exports, especially labour-intensive manufacturing products, have
been highly competitive in the international markets owing to its low
labour costs. China has had a consistent surplus in its current account,
which reached the peak also in 2007 at 10.1 % of the GDP. Consequently,
China has accumulated the largest foreign exchange reserves in the world,
which reached an all time high at just under US$4 trillion in 2014. On
the other hand, China’s surplus in current account has been mirroring the
increasing trade deficits of USA. The global economic imbalance result-
ing from long-term borrowing of the USA from China, mainly in the
form of Treasury bonds issued by the US Federal Government, has been
blamed as one of the key root factors causing the GFC. However, since
the GFC, the growth of China’s exports fell sharply, as its foreign markets
in the developed countries dramatically contracted due to a prolonged
CHINA’S ECONOMIC GROWTH AND ITS INFLUENCE ON NEW ZEALAND 17
Teja.