Prime Minister Christopher Luxon and Chinese Ambassador Wang Xialong after the Ambassador followed the Prime Minister out to the hotel foyer at the conclusion of the Prime Minister's speech to the China Business Summit.

New Zealand’s relationship with China is becoming harder to define, and with that comes a worry that a deteriorating political relationship could spill over into the economic relationship.

It is about more than whether New Zealand will join Pillar Two of Aukus, though the Chinese Ambassador, speaking tol the China Business Summit more or less, suggested yesterday that was a red line.

But he was followed by the head of the Asia Foundation, who spelled out a long list of issues that New Zealand now has with China.

In his speech, the Prime Minister tried to separate the economic relationship from the political relationship, but few people bought that.

And what he said contrasted with a subtly different take on the relationship from Trade Minister Todd McClay.

He implied that politics mattered when it came to China

“Whether it’s London or Washington or in Delhi, Singapore or Beijing, we need to be respectful and open with all of our trading partners and talk to them directly,” he said.

“And New Zealand, with an independent foreign policy, has the ability to do that publicly. But we must also do so directly.”

POLITIK Fonterra CEO Miles Hurrell

Fonterra CEO Miles Hurrell presented an upbeat report on how Fonterra’s business with China was going.

But he, too, warned of the importance of politics.

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“I just think we need to keep an eye on the geopolitical situation,” he said.

Prime Minister Christopher Luxon’s speech was, in many senses, unremarkable saying that our trade and economic relationship with China remained central to our prosperity.

But that was only half his story.

“When New Zealand and China disagree and have different views, we will always aim to preserve, to protect and to promote our national interests,” he said.

“It is clear that as China’s power and influence have increased so too have the areas of difference that we’ve had to navigate.”

Just as his predecessor, Chris Hipkins, had at the same summit last year, Luxon raised concerns about regional security and the South China Sea.

However, unlike Hipkins, he added comments about the Taiwan Strait.

“We are therefore concerned about rising regional tensions and increasing incidences that threaten peace, stability and prosperity closer to home, including in the South China Sea,” he said.

He said New Zealand expected all countries, including China, to comply with international agreements, particularly the United Nations Convention on the Law of the Sea.

“We must be clear that New Zealand’s interests and prosperity are directly at stake. Taking another example of serious escalation in the Taiwan Strait would have profound consequences for New Zealand, our region and the world,” he said.

Hipkins, in his 2023 speech, set out a definition of what the country’s independent foreign policy meant.

“New Zealand has a long and proudly independent foreign policy, but, as Foreign Minister Mahuta said recently, an independent foreign policy does not mean isolation, neutrality, or a fixed pre-determined view of how we will act on a particular issue,” he said.

“Nor does it mean “going it alone.”

“It’s clear that in this complex and interconnected world – one where New Zealand’s geographical remoteness will not shield us –- charting a way forward through many of the most pressing regional and global issues often requires working together with others.

“Where we share a common view with our partners, we will act to protect and preserve what is important to us.

“That New Zealand’s approach will often align with that of our most likeminded partners, with whom we share many common interests and values, should not be a surprise.

“This includes countries like the United States, the United Kingdom, the European Union, Japan and others.”

This is where he and Luxon differ.

In answering a question at the summit, Luxon picked up on a line previously used by Winston Peters and was almost dismissive of what former National Prime Minister Sir Bill English,m called a “truly independent” foreign policy.

“I’ve seen some of that kind of commentary around the fact that we have an independent foreign policy, but so do  195 other countries,” he said.

It is this multiplicity of voices, seemingly all pulling in different directions, that makes it hard to define the current state of the China—New Zealand relationship.

For the Chinese, there may be some satisfaction with that situation since at least it means the debate here is still alive, and New Zealand has yet to fall over completely into the Anglo world’s confrontational attitude toward China.

Although Taiwan is a “red line” for China, the real test of the relationship between New Zealand and China will be this country’s decision on whether to join Pillar Two of AUKUS.

Immediately after Luxon’s speech, Ambassador Wang Xialong got up from his seat and followed the Prime Minister out of the conference and had a brief conversation with him in the hotel foyer.

POLITIK Chinese Ambassador Wang Xialong

That appeared amicable, but the Ambassador was forthright in his view on what joining AUKUS could mean.

“You may have noticed that top US diplomats have stated that the purpose of AUKUS is to preserve US primacy, and they have openly linked AUKUS nuclear submarines with the situation in the Taiwan Strait,” he said.

“This confirms that AUKUS is a nuclear-based military-nature alliance clearly and unabashedly designed to maintain US hegemony and contain other countries’ development.

“Joining such an alliance will not make any country more secure or make the Asia-Pacific region more stable.

“The sole purpose of its “second pillar” is to serve and support nuclear-related military cooperation under the “first pillar”, rather than being an innocent platform for technology sharing.

“Many people in New Zealand and beyond believe that joining such an alliance in whatever form is taking sides.

“China has always respected the sovereignty of other countries, which naturally includes the making of their foreign policies.

“However, it is one thing for a country to develop relationships with countries that are not alike or even don’t like each other; it is quite another to join a military alliance openly targeting other countries.”

Luxon was both equivocal and ambiguous about what New Zealand might do.

“We think it’s a positive development to give stability and security in the broader Pacific region,” he said.

“Our position is no different from the previous Government, which was saying, we’re open to exploring New Zealand’s involvement in what’s called Pillar Two.

That pillar has been undefined largely as to what it actually is or isn’t.

“And that still needs to be discussed in quite a lot of detail, so I think that’s some time away, but our officials will be starting a process of understanding and trying to explore whether there is an opportunity or is there, not an opportunity for New Zealand to be, involved in some way or another.”

A Beehive source has told POLITIK that the Government may not even make a decision before the 2026 election.

But what was clear yesterday was that “official” Wellington is hardening up its attitude toward China.

Suzannah Jessep, the CEO of the Ministry of Foreign Affairs and Trade-funded Asia Foundation, listed a series of things she said about China that concern small and medium-sized countries.

“They are concerned about trade coercion and how China might be using its economic heft to create political outcomes,” she said.

“Arbitrary detainment, particularly of media; state-sponsored cyber interference and hacking; debt control of strategic assets such as ports; misinformation, disinformation, grey zone tactics, or what’s often called in the Chinese context the Three Warfares approach.

“And in the Philippines, we have seen lasers ramming, water cannoning and announced this weekend also detentions.

“So now the Chinese coastguard can actually detain Filipinos.

It’s helpful to mention those specific concerns in this context.

“I know trade is great. Trade is going well and ought to continue. People-to-people contact should continue.

“But that in the geopolitical context is what’s keeping small and medium-sized countries awake at night.”

However, how long trade relations can be “great” while political relations deteriorate is a real question.

The Ambassador said that the thriving economic ties between New Zealand and China could not have grown in a vacuum.

“Rather, they are intimately related to the sound development of our overall relations,” he said.

“It is fair to say that the leap in our economic and trade cooperation would not have been possible without the steady growth of our broader relationship.”

And that is now the challenge: to maintain the dialogue with China respectfully, as Todd McClay suggests.

The alternative could be disastrous for the New Zealand economy.