China's slowdown exaggerated: NZ Trade Minister

WELLINGTON - The slowdown in China's economic growth and its effect on global economy has been "over- hyped," New Zealand Trade Minister Tim Groser told business representatives from the Asia-Pacific Economic Cooperation (APEC) nations on Wednesday.

Groser said he was more optimistic about China, which is hosting this year's APEC forum, moving forward than many political commentators as China's new political leadership had set out a clear agenda of economic reform.

"Yes, it will be a challenge to shift from an investment to a consumption focus. But I would not bet against the new political leadership achieving its strategic objectives," Groser said in a published speech to the APEC Business Advisory Council business leaders meeting in Auckland.

Some slow-down in China's growth was "all but inevitable," and all other countries that had achieved sustainable growth from the first countries to participate in the Industrial Revolution, through to Japan and the Republic of Korea in the post-war era had experienced slower growth after earlier explosive growth, with the exception of Singapore.

"Is China becoming a 'rich' country? Well, on a per capita basis there are 92 countries richer than China, according to IMF (International Monetary Fund) and World Bank data. There is a lot of scope left for catch up with the current economic frontier represented by OECD levels of wealth," said Groser.

"In any event, what matters to Chinese businesses, to Chinese people and to countries like our trading with China is the additional increment of growth and thus new opportunities year by year," he said.

"If China in the next few years grows at 'only' 7 percent, the additional increment of growth the following year will be far larger than the increment of growth 10 years ago, when the Chinese economy was growing at 10 percent, but was half its current size: 7 percent of $10 trillion is far larger than 10 percent of $5 trillion. Do the math."

Groser said New Zealand would continue to push for trade liberalization as it had historically faced "huge barriers and massive unfair subsidization" in its traditional European and North American markets.

"New Zealand is no longer totally dependent on what happens in Europe and North America and thus access to their middle class customers. Today, the middle class of Asia is emerging. It is estimated today around 500 million and as soon as 2030 will be some 3.5 billion. This is simply a phenomenal opportunity and what is driving New Zealand trade policy," he said.

Free trade agreements such as that between New Zealand and China generated a dynamic that encouraged trade and could not be measured by economic modelling, he said.

"While I could never prove it, it is inconceivable that two of China's largest dairy companies would be investing the thick end of half a billion dollars in new 'greenfields' dairy processing companies in New Zealand without the FTA, even though the investment could in theory have taken place had there been no FTA, " he said.

"One could say a similar thing about Fonterra's decision to invest in 33 giant dairy farms in China - very hard to believe that would have happened without the huge expansion of trade in the FTA, which has stimulated commercial players' interest in investment."

Models drawn up before the FTA was signed in 2008 predicted annual New Zealand export gains of NZ$180 million to NZ$280 million ($149.76 million to $232.96 million).

"Last year New Zealand exports to China grew NZ$3 billion ($2.49 billion), some 11 times higher than the upper bound prediction and an astonishing 17 times higher than the low end model prediction of export gains."