China highlights New Zealand's sluggish foreign investment situation: Deputy PM

WELLINGTON, Aug. 13 (Xinhua) -- New Zealand has failed to move rapidly to find new ideas and capital through foreign investment, particularly with its second largest trading partner, China, New Zealand Deputy Prime Minister Bill English said Monday.

Sitting on the doorstep of the world's fastest growing economies, New Zealand had to learn how to attract the ideas and capital brought by foreign investment, English said in a published speech to joint New Zealand-China conference on contemporary China in Wellington.

"There will be many more people in the Asia-Pacific region with growing incomes who want more of New Zealand's products. Our trading partners, led by China, have opened the door for us," said English.

"Our challenge is to assemble enough capital, people and market knowledge to take advantage of this opportunity. How we go about that will define our economic success in the next generation."

Investment between New Zealand and China remained small, even as the two countries celebrated 40 years of diplomatic links this year and four years after New Zealand became the first developed nation to sign a free trade agreement with China.

"New Zealand's future growth depends on access to capital, knowledge and skills, and China's size and its enormous growth potential means it will be the largest - and likely the fastest growing - market for New Zealand exports," said English.

China was now New Zealand's second largest trading partner after Australia, as rapidly rising living standards, increasing urbanization and a shift to higher-protein diets had supported demand for New Zealand commodities such as dairy and wood products.

China was New Zealand's largest source of imports by value, but was also Australia's top trading partner, providing further indirect benefits for New Zealand.

"Despite our strong trading relationship, China is not a major investor in New Zealand, being New Zealand's 11th largest investor totalling 1.8 billion NZ dollars (1.46 billion U.S. dollars) in 2011," said English.

Foreign direct investment (FDI) from China was about half that figure, he said.

"By comparison, New Zealand has 52 billion New Zealand dollars of FDI from Australia and 11 billion NZ dollars from the US. China has made investments in New Zealand forestry, manufacturing and agriculture.

"China is also investing in New Zealand government bonds, contributing to the record low borrowing rates New Zealand currently enjoys. New Zealand is seen as a relatively safe haven in these difficult times and Chinese authorities want to diversify their international bond holdings.

"New Zealand's investment into China is similarly small, totalling 789 million NZ dollars in 2011, making China our 13th largest investment destination."

The figures reflected broader trends, such as the fact that while New Zealand was a recipient of foreign investment in line with the OECD (Organisation for Economic Co-operation and Development) average, New Zealanders invested overseas at well below OECD average rates.

"As a small country, we naturally rely on FDI to help us achieve economies of scale, and for access to ideas and consumer markets. We do not have the large stock of capital which older and wealthier countries have," he said.

FDI helped to cover a shortfall between New Zealand savings and investment needs, while driving growth in wages, jobs and output, as well as helping introduce technology and skills to New Zealand and improving exports to international markets.

But fears of foreign ownership were frequently overstated when New Zealand had among the most restrictive overseas investment regimes in the OECD, said English.

"Our constraint on growth is not the size of the opportunity. It is our ability to access capital, knowledge, and people, and we get to decide this in part through policy."

English was speaking at the Wellington Conference on Contemporary China 2012, co-hosted by Victoria University and Peking University's School of Government on Aug. 13 and 14.

Last week, a controversial Chinese investment in 16 North Island dairy farms drew to a close, when New Zealand's Court of Appeal upheld the right of Milk New Zealand Holdings Ltd., a Hong Kong-registered subsidiary of the Chinese mainland-based Shanghai Pengxin Group Co., to complete the purchase after a long legal battle with a rival New Zealand consortium. Enditem