Jacinda Ardern and the Labour Party now face a critical choice which could threaten the whole structure of the coalition government.

They must now choose whether to allow more Chinese investment into New Zealand or face no new concessions from China on dairy, forestry and horticultural exports.

That was the clear message from China’s President Xi Jinping to Prime Minister Jacinda Ardern in their meeting in Beijing  on Monday and revealed yesterday in semi-official Chinese newspapers.

Ardern gave only a non-committal answer when asked about the foreign investment issue at her media conference in the Chinese capital  on Monday night.

But yesterday the newspapers reported that this was discussed by both the President and Premier Li Keqiang in their meetings with the Prime Minister on Monday.

The “Chinese Daily” with its access to official Chinese sources reported  said: “President Xi Jinping called on New Zealand to provide a fair and unbiased business environment for Chinese investors.”

And the ““Global  Times”” reported that in her talks with Premier Li Keqiang, he too had “urged both countries to provide a fair investment environment for companies .”

The paper went on to report Li as calling for a hastening of negotiations on the updated Free Trade Agreement.

What is noteworthy in the coverage by the papers, which always faithfully reflect Chinese government views, is the prominence given to the investment story and the linkage by Li to the free trade negotiations.


What the coverage would seem to confirm is what has been leaking out of the talks for some time now, and that is that China wants movement on investment before it will make concessions on trade.

And what must worry the Beehive is that China effectively wants the coalition government to back away from its election campaign promises to tighten up on foreign investment.

That could well be a bridge too far for New Zealand First, but the downside of accommodating their anti-foreign investment policies could be that the Chinese would be unwilling to make concessions on dairy, forestry and horticultural access.

This should not stop the Free Trade Agreement upgrade going ahead. The proposals on investment and goods access are outside the formal agenda for the upgrade talks.

But that would mean the result would be similar in impact to the list of bland agreements announced in the Great Hall of the People by Premier Li  Keqiang and Ardern on Monday.

 President Xi Jinping at the talks with the New Zealand delegation

The Chinese papers also highlighted the Huawei issue, or as the Prime Minister might prefer to describe it; the Huawei non-issue.

There could be no government in the world that would find it more difficult to understand her argument that New Zealand’s security services are independent of the government than China.

And it was clear from an editorial in the Chinese Communist Party owned “China Daily” that that was not what they took out of her visit.

The paper  said relations between the two countries had  made remarkable progress in recent years, producing many “firsts”, including New Zealand being the first developed country to recognize China as a market economy, the first to sign a free trade agreement with China and the first to sign a memorandum of understanding on the Belt and Road Initiative with China.

“But against this rosy picture there have been less desirable undercurrents too,” it said.

“These have largely stemmed from Wellington’s seeming enthusiasm to jump on the US bandwagon to contain the overseas growth of Chinese science and technology companies.”

The paper said Ardern was at pains to show this was not the case.

NZ and China flags flying on a lampost by Tianamen Square to mark Jacinda Ardern's visit to the city.

The “Global  Times” ran an editorial supplied by the state-run news agency Xinhua which praised the way the relationship between the two countries had developed over the past 47 years.

“As two countries with different historical and cultural backgrounds and social systems it is normal for China and New Zealand to have different opinions on certain topics,” it said.

“However almost five decades of China-New Zealand bilateral relations have shown that as long as they can join forces for mutual benefits on the basis of mutual respect and equality their partnership will keep on growing.”

The question of allowing more Chinese investment is a tricky one.

The Government is currently reviewing the Overseas Investment Act under the leasdership of Associate Finance Minister, David Parker, who has historically been a critic of some foreign investment and who is one of the Cabinet Ministers closer to NZ First.

Last October he said the  reforms we would  ensure New Zealand remained an attractive destination for beneficial, long-term foreign direct investment, “while examining ways to ensure prospective foreign investments are consistent with New Zealand’s national interest.”

“Many of our closest allies have the ability to block significant investments that are inconsistent with their national interests. New Zealand currently cannot,” he said.

“It is likely that a broad, but rarely used, discretion to decline approval for significant foreign investment, such as infrastructure assets with monopoly characteristics, will be introduced.”

New Zealand First though take a much tougher stance.

Their Southland list MP, Mark Patterson, is currently opposing the proposed takeover by the huge Chinese dairy company, Yili, of the Westland Co-operative Dairy Company. 

“With the upcoming tranche of changes of the Overseas Investment Act, the Government has to prioritise the retention of key strategic commercial assets in Kiwi ownership,” he said last week.

“As a country, we need to get serious about the repercussions of losing control of processing companies for our agricultural exports.”

Even if Parker wants to loosen controls on foreign investment, he will have a battle to get NZ First to agree.

But what if the Chinese then refuse to accept any improvement in access for dairy products, forestry or horticultural products?

The Government may though find it easier to ease tensions over Huawei.

Foreign journalists based in Beijing are watching the New Zealand case closely. They believe that China will regard any permission by New Zealand as a huge boost to get Huawei into Europe.

That permission may not need to be for all the equipment for the network but possibly just parcels.

Ultimately Ardern looks likely to face a hard choice — say no to NZ First on foreign investment and risk the breakup of the coalition but at least be able to offer the dairy, forestry and kiwifruit industries trade concessions into China.

Or she could concede to NZ First and risk a backlash from business.