We have to watch the US-China trade dispute for its potential impacts here, along with many other international indicators of change.
The other obvious indicators are predominantly American – the Federal Reserve’s interest rate decisions and the programmes it launched post-global financial crisis, first to “quantitatively ease” and now to “quantitatively tighten”; the rising US public debt mountain; but also the ability of major US investors to seek out best opportunities.
In property, those US investors, such as Blackstone Group LP, have scoured the world for opportunities to invest rapidly increasing funds under their management.
That has meant targeting some European markets – Scandinavia has been popular recently, European residential portfolios have become popular over the last 3-4 years, and sometimes these foreign investors will buy in eastern Europe’s growing office & retail sectors.
Blackstone has also invested in New Zealand. In May, it bought the VXV leasehold office portfolio along Fanshawe St in the Auckland cbd from the joint venture between the Goodman Property Trust & Singapore sovereign wealth fund GIC for $NZ635 million.
In 2016, Blackstone bought Australian property giant Lend Lease Group’s portfolio of 5 retirement villages in New Zealand.
Trade issues are a comparative niggle
Those are investment examples, and there are many others. But the greatest influence unfolding internationally is much less about the intricacies of investment or trade behaviour.
The White House issued a report on 19 June harshly criticising Chinese behaviour on trade, and the Chinese Government-controlled People’s Daily lashed back on 17 July, with plenty of shouting between-times & since.
The 19 June report was issued by the White House Office of Trade & Manufacturing Policy, “outlining how China’s policies threaten the economic & national security of the US”.
The opening sentence of the White House report – a 2017 quote from the US-China Economic & Security Review Commission – confirms my view of what the trade war is a proxy for: “The Chinese government is implementing a comprehensive, long-term industrial strategy to ensure its global dominance.”
In short: The US is weaker than it’s used to being, doesn’t like it and is behaving fractiously.
The People’s Daily’s 17 July response includes the following: “After the White House website published a report on 19 June, accusing China of resorting to ‘economic aggression’, ‘economic coercion’ & ‘technology theft’, the United States has used the ever-intensifying trade conflict to launch a ‘targeted attack’ against China.
“But groundless verbal accusations can never resolve trade disputes between any 2 countries, let alone between China & the US. They can be settled only through objective & rational analysis of the causes followed by sincere negotiations.
The People’s Daily went on to ways the US had encouraged foreign input to its expertise, and the price China had paid in recent years for foreign intellectual property: “Aside from introducing knowledge from other countries, the US also attaches considerable importance to introducing scientists & technology experts from abroad to boost its innovation capability and consolidate its leading technological position. It is estimated that more than one-third of frontline researchers in the US were born in other countries, and the number of non-native US Nobel laureates was as high as 63 between 1901 & 2015, one-fifth of its total Nobel Prize winners. This makes the US’s accusation that China introduces foreign talents and encourages overseas Chinese students to return home to boost its technological development not only ludicrous but also immoral….
“And since 2001, the fees China has paid for using foreign intellectual property have grown on average 17%/year to reach $US28.6 billion last year.”
NZ’s position, and property interests
New Zealand can’t take sides in that kind of global positioning argument – either way, we’d probably lose. We can improve our relations with South Pacific islands through constructive investment & aid, and possibly through partnership with interests from both China & the US.
New Zealand is also embarking on a scheduled review of its free trade agreement with China. One issue falling outside that agreement will be the investment by Chinese nationals in New Zealand property. Our government has taken action to constrain Chinese investment in existing houses, and China has exerted more controls over its citizens’ export of money.
But there are plenty of Chinese investors playing important roles in New Zealand property. One big player in the Auckland residential market, Universal Homes Ltd, is owned these days by the state-owned China Merchants Group Ltd of Beijing & Hong Kong, a vast conglomerate.
Another, newer player in New Zealand property is China Construction Bank (NZ) Ltd, subsidiary of China Construction Bank Corp, originally (and largely still) a Chinese Government company, now listed in Hong Kong & Shanghai. Bank of America bought 9% of it in 2005, grew its stake to 10.5% and sold out completely in 2013.
Fu Wah NZ Ltd, a subsidiary of Chinese billionaire Chan Laiwa’s Fu Wah International Group, is developing the 200-room Park Hyatt hotel on the central city side of the Wynyard Quarter.
Hengyi Pacific (NZ) Ltd, part of Shandong Hengyi Investment Group Co Ltd, based in the Shandong province north of Shanghai, has started development of the 295-apartment Pacifica building between Commerce, Fort & Gore Sts in downtown Auckland, and local & Chinese company Shundi Customs Ltd has started the 221-apartment Seascape on Customs St East. Shundi’s building management is by China Construction NZ Ltd, a subsidiary of China Construction Eighth Engineering Division Corp Ltd, of Shanghai.
Trade war – or power struggle positioning?
Those are interests & investment partnerships more closely tying New Zealand & China. In essence, trade, with some scope for political positioning.
In contrast, I see the Donald Trump-inspired trade war as a weapon in a power struggle – the action purportedly to correct wrongful trade positioning is gamesmanship. After all, the US has been the world’s leading trade negotiator for decades and, if it chose to acquiesce in positions it could have improved on during negotiation, so be it.
A question at this point, in case you think the giant of capitalism has it over the theoretically communist novice: Does a nation schooled in poker beat a nation schooled in mah jong?
For their chips, the US has rising international debt and China owns a large portion of that. The US greenback is the reserve currency for about 60% of world trade, and China isn’t in a position to drive the value of those greenbacks down. But China has gained a stronger international currency position this year as one of the 5 BRICS nations (Brazil, Russia, India, China & South Africa) which, combined, have joined the US in having veto power at the International Monetary Fund (IMF), and thus a stronger position to support the IMF’s special drawing rights usurping much of the $US’s role in international exchange.
The power struggle is a different matter from trade issues, for which mediation routes are available, and is highlighted by China’s determination to reopen variations on the old Silk Road and, this year, by more openly using, for military purposes, the dots in the South China Sea it has turned into islands. China has also started to extend its influence through the Pacific Ocean, impacting on Australia & New Zealand’s long-begrudging support of South Pacific neighbours.
China has neatly positioned itself to challenge US dominance in the Pacific, and has challenged New Zealand’s relationship with South Pacific islands, bringing harsh talk from Prime Minister Jacinda Ardern & Acting Prime Minister Winston Peters.
Speaking your mind is one thing, enforcing your position is another, and New Zealand is not in any sense in a position of power.
Those Chinese contributors to our construction sector are part of a strengthening of New Zealand’s economy through diversity, while Chinese banking interests bring long-needed diversity to that sector.
While Australia seems as closely tied to US international positions as ever, New Zealand’s more independent stance recently opens up a role to introduce rational behaviour to the big powers’ brinkmanship.
Chinese People’s Daily, 17 July 2018: US tech claims biased & baseless
White House, 19 June 2018: Report release: “How China’s economic aggression threatens the technologies & intellectual property of the United States & the world”
White House, 18 June 2018: Report: How China’s economic aggression threatens the technologies & intellectual property of the United States & the world
White House, 29 May 2018: President Donald J Trump is confronting China’s unfair trade policies
White House, 29 May 2018: Statement on steps to protect domestic technology & intellectual property from China’s discriminatory & burdensome trade practices
Stuff, 28 May 2018: Winston Peters says first China trip successful, talks peace & security in Asia-Pacific
US-China Economic & Security Commission, 15 November 2017: Annual report to Congress (quote from page 24)
China Merchants Group
15 June 2018: 2 new Blackstone funds have $US9.4 billion to invest in Asia
18 May 2018: Goodman & Singapore fund sell VXV portfolio to Blackstone
11 February 2018: Spitting the dummy, and changing the international order
2 February 2018: Blackstone’s Arena Living buys Mt Eden Gardens
17 February 2016: Blackstone buys Lendlease’s NZ retirement villages
Attribution: People’s Daily, White House, Stuff, US-China Economic & Security Commission, IMF.