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China with Hong Kong now NZ’s second-biggest investment partner: NZ China Council

Tax and Finance

China, including Hong Kong, is now New Zealand’s second-largest source of foreign investment, but the investment relationship still lags behind trade and people-to-people links, according to a report published by the New Zealand China Council.

Understanding Chinese Investment in New Zealand shows that in 2017 China, including Hong Kong, invested a total of $8.25 billion across the country, slightly more than the US but well behind Australia, with investments of $55.97 billion.

Executive Director Stephen Jacobi says that contrary to public perception[1], Chinese investment is well diversified, driving key projects and improvements in the capital intensive primary and food and beverage industries, as well as the tourism, infrastructure and construction sectors.

“Foreign direct investment can be controversial, especially in some sectors, but investment from China is currently underpinning innovation, improved market access and high-value job creation, especially in regional New Zealand.

“Ice cream is being exported to China from the Hauraki Plains, advanced technology is being deployed to manage waste around the country and new hotels are being built to manage the growth in overseas tourists visiting New Zealand. These are just a few examples from the report which show how communities have benefited from increased levels of Chinese investment,” Mr Jacobi says.

Around 50% of investments are directed outside the main centres, with almost a quarter supporting regional development in the South Island.

Understanding Chinese Investment in New Zealand also draws attention to changes to regulation in both countries which could impact on future investment flows.

“Foreign direct investment remains critical for a number of our strategically important sectors in New Zealand. Without capital, expertise and market access, it’s much harder for businesses to invest for growth, take on new employees, upgrade technology or develop new channels to market,” Mr Jacobi says.

While investment from China has continued to grow strongly in recent years, New Zealand only receives 0.5% of outward direct investment from China and was ranked as the 35th highest recipient in 2017, down from 19th in 2015. This figure is underweight relative to our trading and tourism relationship, and when compared to other partners.

The report also shows New Zealand is a small investor in China, although many exporters have successfully invested in marketing and distribution in recent years.

“The solution to many challenges, from our shortage of tourism infrastructure and housing supply to low productivity and under-employment in the regions can be found at least in part through sustained and long-term investment partnerships with China.

“It is important to the health of our economy that flows of investment are sustained from all trading partners, including China, so the benefits outlined in our report continue to accrue for New Zealanders,” Mr Jacobi says.

Read more about the launch of the report here.

You can read the full report here.

[1] See the Council’s earlier report on Public Perceptions