I came across a very useful presentation by Prof. Bob Buckle (University of Victoria, Wellington) which focused on the Chinese economy and its implications for New Zealand. It looked at how China has remerged as global powerhouse and identified certain reforms that brought about this change:
1. Deregulation of markets with the introduction of export processing zones (EPZ) which ultimately attracted foreign direct investment (FDI).
2. In 1979 the then US President Jimmy Carter signed the MFN Agreement – Most Favoured Nation. It provided trade equality by ensuring that the importing country will not discriminate against the other country’s goods in favour of those from a third.
3. Reform of State Owned Enterprises which were extremely inefficient
4. Socialism with Chinese characteristics – The Chinese decided to keep the political system of communism but get rid of the economic system of communism and move towards Market Socialism. With that they could keep their political control but also have the benefits of the market place.
The implications for New Zealand of the growth of China include:
– China’s share of NZ trade risen dramatically and will continue to do so – affect of free trade agreement in 2008.
– Now NZ’s second largest trading partner after Australia.
– China’s investment in NZ industries is still relatively insignificant.
– Raised NZ’s terms of trade and net national income.
– Is China becoming the new 19th century Great Britain for NZ (and Australia)?