By Lucy Craymer

WELLINGTON (Reuters) – As New Zealand Prime Minister Chris Hipkins prepares to lead a trade delegation to China seeking greater access for both the country’s primary exports and emerging sectors such as gaming, producers are diversifying away from their biggest market.

Beijing’s attempts to punish neighbouring Australia through trade for perceived intransigence over issues from the origin of COVID-19, to spying and human rights, has been noted in New Zealand. The percentage of New Zealand’s goods exports going to China dropped to 29% in the year to April from 31% in 2022, the first time since 2015 that the share of exports to China has dropped.

Wellington has historically taken a more conciliatory approach towards China than Australia or its other Five Eyes security partners. It signed an upgraded Free Trade Agreement during the pandemic and when former Prime Minister Jacinda Ardern met with President Xi Jinping in November last year, the Chinese leader noted New Zealand’s independent foreign policy.

But in recent years, New Zealand has become increasingly vocal on issues including human rights, the international rules based order and potential militarisation of the Pacific.

This month, it signed a joint statement of Western allies condemning economic coercion through trade.

“The heightened implication of the geopolitical landscape is huge,” said Mathew Talbot, general manager for Alliance, one of New Zealand’s largest beef and sheep meat exporters.

“Building of North Asia (markets) and the building of Southeast Asia (markets) is really, really crucial because it’s de-risks that dependency,” Talbot said.

After New Zealand signed on to a joint statement condemning economic coercion, without citing the agreement directly, Chinese Ambassador to New Zealand Wang Xiaolong tweeted: “More often than not, those that seek to sanction other countries to stunt their progress to no avail have only hurt themselves.”

He did not respond to a request for comment.

CALLS FOR DIVERSIFICATION

There is no expectation that New Zealand will stop selling to China. China needs the food and fibre that New Zealand produces and is prepared to pay for it.

But calls for diversification are growing, driven on two fronts. Firstly, fears the market could become more challenging if geopolitical challenges heat up, but secondly, by a growing number of small companies that see markets in Australia and North America as offering better opportunities as they will pay for premium and sustainable products.

Hipkins, who heads to China on a trade mission for six days on Sunday, is aware of the need to seek new buyers.

The government has signed seven new or upgraded free trade agreements as “part of our really concerted effort to diversify our overall market shares,” Hipkins told media last week after announcing the trip.

At the same time, he said China was a valuable partner.

Twenty-nine businesses leaders from a range of sectors will accompany Hipkins, who also has visits with the President Xi Jinping, Premier Li Qiang, and the Chairman of the Standing Committee of the National People’s Congress Zhao Leji, on his visit.

“I think we’ll have a fairly broad ranging conversation (with Xi Jinping) … It’s an opportunity for me to underscore the importance of the New Zealand-China relationship,” said Hipkins on Monday at his weekly press briefing.

A Chinese embassy spokesperson said in an email the bilateral relationship has come a long way with many firsts created, greatly benefiting the two countries. They hoped the Hipkins visit would result in a deepening of mutual understanding and trust between the two countries.

“China is going to be a really, really fundamental trading partner for this country for the foreseeable future,” Pete Chrisp, chief executive of government funded international business development agency New Zealand Trade and Enterprise.

“But there is some hedging around other markets…The market diversification is driven by both the need to find premium consumers who are going to pay for sustainability credentials, but also they’ll be making their own geopolitical assessment and they’ll be doing the ‘China And’ not “China Or’ (strategy).”

(Reporting by Lucy Craymer; Additional reporting by Martin Quin Pollard in Beijing; Editing by Lincoln Feast.)

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