John Key’s China Anniversary Party delayed

John Key will take the political temperature of the administration in 2013.

Prime Minister John Key will now have to wait until 2013 to take the political temperature of the new Chinese Administration.

The Key Government this week finally postponed plans to celebrate the 40th anniversary of diplomatic relations between New Zealand and China until next year.

This is no bad thing.

The new Chinese president will be in place and being in the first cache of political leaders to pay a formal visit to Beijing so soon in his presidency is a positive.

For some months now select business people – including the members of the recently formed China Council – have been waiting for the proposal to hold the celebrations in Beijing in the second week of December to be confirmed.

Ructions in the Chinese leadership since the historic purge of Chongqing governor Bo Xilai earlier this year are said to have been the major factor in the failure of Beijing to confirm the timing for the bilateral celebration.

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This is hardly surprising given the late timing – November 8 – for the formal leadership transition itself to get under way in Beijing.

Local Chinese diplomatic officials did try to get Beijing to confirm a 2012 date citing the recent visit of US Defence Secretary Leon Panetta as a reason why the Chinese Government should move to keep New Zealand close.

But to no avail.

The upshot is the China Council’s first “partnership forum” with China will also be postponed until 2013, along with plans for a business week in Shanghai and the potential opening of New Zealand House in Shanghai.

Key will get a chance to touch base with the Chinese leadership at the East Asia Summit in Cambodia next month. In the past Chinese premier Wen Jiabao has attended.

Wen will be standing down in the New Year along with President Hu Jintao.

His relations with Key have been cordial. So too, Key’s relations with Hu’s expected successor Xi Xinping.

The East Asia Summit will take place against a background of intense US sabre-rattling against China. US President Barack Obama labels China as “an adversary and a partner”.

Republican Mitt Romney says he’ll slate China as a currency manipulator on day one of his presidency, if he wins .

Obama stood by while the House of Representatives Intelligence Committee beat up on Huawei as a vehicle for alleged Chinese Government cyber-spying.

Even now Romney’s claim that “Jeep is thinking of moving all production to China” is being furiously pored over by Democratic fact-checkers.

Claim and counter-claims about China have dominated over other foreign policy issues in the 2012 presidential election.

It is extremely doubtful that the United States – despite the overblown rhetoric of the two presidential contenders – wants a full-on major trade war with China.

China Daily warns there will be no winners if such a scenario was to emerge.

Xinhua says the ritual China bashing “negatively impacts China-US relations and leaves Americans with the impression that China is responsible for their country’s decline”.

Xinhua is right.

There is an element of mutual deterrence which will kick in the moment either presidential candidate tries to convert the rhetoric into action.

Crucially, China owns a huge portion of US debt – some US$1.15 trillion.

The US credit rating will be worth zilch if China asks for its money back.

Of course, China will not want to do this while the US dollar is itself at such artificially low levels.

In fact, the US Federal Reserve is just as much guilty of currency manipulation as China. Its policy of quantitative easing keeps the US dollar low.

Neither will the US want China to put its shutters up. Its exporters need access to China’s burgeoning middle-class consumer market.

These are the real issues that New Zealand policy-makers and businesspeople need to take on board.

New Zealand does not have to choose between China and the US.

We already have a free-trade agreement with China. Chinese consumption of NZ commodities has sustained this economy since the global financial crisis.

Links will be further deepened as the Asean regional economic partnership agreement is forged – a regional free trade area that New Zealand will be a party to but not the US.

New Zealand is also endeavouring to gain greater access to the US market through the Trans-Pacific Partnership (TPP) negotiations.

If Obama is re-elected the TPP negotiations will stay on course. If Romney gets in, the US TPP strategy will have to be reconfirmed.

It is inevitable that debate – sparked by the US side – will continue to focus on whether China plays by the rules.

The answer is that it makes its own rules when it comes to subsidising Chinese firms to expand on the world stage via soft loans by various banks.

Barriers emerge to get in the way of external players trying to build beachheads in particular sectors.

But the same is true in the United States.

China’s real competitive advantage is its large workforce, which is underpaid by Western standards, and its ability to provide massive manufacturing scale.

This is something the West – particularly the US – could do if it was prepared to pay low wages to its workers, automate more or pay higher prices for home-produced goods.

The reality is that US manufacturers have been to the fore in investing in China. Now the US wants more jobs at home it is China that is being demonised, not US manufacturers.

It is a growing debate and one that New Zealand should take a mature stance on and look to its own self-interest instead of taking sides.

By the time Key does get to Beijing, both the shape of the US and Chinese leaderships will have been determined – a good time to go.

  • This Herald column is republished courtesy of APN NZ.

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