Potential Economic impact of Free Trade Agreement between NZ and China

Published in NZBusiness Magazine: With strengthening relations between China and New Zealand and evidence for strong economic benefit – we take a closer look at the NZ-China Free-Trade Agreement, the rise of service industries and their possible economic impact. Julia Charity investigates.

The NZ-China Free Trade Agreement is the treaty that facilitates trade in goods and services, promotes cooperation between the two countries and seeks to improve the business environment in a broad range of economic areas. New Zealand became the first developed nation to sign a free trade agreement with China in 2008. More than six years on, the agreement is being hailed as a success, as China and New Zealand agreed to expand their burgeoning trade relationship during a state visit in late 2024 by China’s President Xi Jinping.

New agreement signed by nations leaders.

Xi signed 10 agreements with the National Party government mostly related to trade and investment. They re-affirmed an agreement to increase annual two-way trade by 50 percent to $30 billion by 2020.

"The New Zealand-China relationship shows that countries with different political systems, history and cultural traditions and at different stages of development can constructively cooperate together," they said in a joint statement. Seventeen other commercial partnerships and agreements with NZ companies were also reached by the Chinese business leaders in Xi’s delegation.

The majority of New Zealand’s exports to China are primary products. China is the largest destination for New Zealand exports of dairy, forestry, seafood, and wool, and the second largest destination for meat products. China has now displaced Australia as New Zealand's largest export market with two-way trade between the nations almost NZ$22 billion in the year to June 2014.

Service industries like Tourism on the rise

Services comprise a relatively low share of New Zealand’s exports to China, at about 13 percent, however they have increased by 83% over the past five years. The two-way trade in services is currently dominated by tourism and education, but the range of exported services has diversified. Until recently, education was New Zealand’s largest service export to China although this market appears to have stagnated.

Short-term visitor arrivals from China, however, have grown rapidly over the past decade. For the last few years China has been New Zealand’s fastest growing visitor market. With an estimated 35, 000 passenger arrivals from China in 2000 - by December 2014, more than 250,000 Chinese visitors had arrived, second only to the number of visitors from Australia. It is predicted the number of Chinese visitors will reach one million by 2020.
 
Chinese tourists also spend a relatively large amount of money per visit, at about $4,000 per person, compared to the average of slightly under $3,000 per person. By September 2014, Chinese tourists spent $979 M in New Zealand, an increase of 33% from the same period last year.

Reality TV show filmed in NZ

Clues for Tourism and other future growth industries may come from Xi's visit which focused on broadening the 2008 agreement in key areas, including encouraging television co-productions between the two countries.

"(It) will allow programmes co-produced by New Zealand and Chinese companies to be officially broadcast on Chinese TV, where potential viewing audiences are huge," Key said. Impetus for this agreement was likely to have come from the popularity of Season two of Chinese reality show ‘Dad, where are we going?’

Tourism New Zealand and Air New Zealand pitched for the rights to host the production in 2014, with New Zealand becoming the first international destination to ever feature in the show.

More than 404 million viewers across China watched two episodes featuring 217 minutes which follows five celebrity fathers and their children (aged from 3 - 8) as they undertook various challenges in New Zealand.
Produced by Hunan TV, Executive producer Xie Dikui chose New Zealand because they wanted to film in a country where the people have strong connections with the environment. “We love New Zealand, it’s so beautiful. We wanted our families to encounter animals in the natural environment,” he said.

NZ Homestays  plays a central role

With the show’s focus on family life, Producer Xie Dikui thought the best place to experience the ‘real’ New Zealand would be in family homes.

The celebrities were home-hosted in Rotorua so the celebrity children could interact with typical kiwi kids.  The Homestay families were perfect ambassadors for New Zealand, involving their celebrity guests in eeling, mountainbiking, playing rugby, shopping and cooking.

Kelly and Vanessa Hemana hosted Huang Li and 8 year daughter Duo Duo.  “It was awesome. We loved being involved in the show. Our guests were intelligent, well-educated and polite. We couldn’t believe how quickly our girls bonded with Duo Duo. It’s completely changed my view of Chinese people.”

Tourism New Zealand Chief Executive Kevin Bowler says the magnitude of the potential impact for the New Zealand tourism industry is hard to comprehend. "This was an unmissable opportunity for us.”  

The value of all the coverage achieved from this activity is estimated at NZD $169 million, were we to buy that same level of advertising – it would be more than the entire year's budget for Tourism New Zealand."

A new global world record

Online versions bring the programme’s total reach beyond 1.4 billion viewers; making this even more significant than the Hobbit for the Chinese-speaking world.  On Sina weibo (Chinese Facebook), the discussion of hashtag #DWAWG is beyond 20 billion, a new world record.

Since the episodes aired a marketing campaign has gone live in China promoting New Zealand as a holiday destination, featuring some of the experiences and regions visited by the celebrities.

Even if only 0.1% of the 1.4 billion global ‘Dad, where are we going?’ viewers came to New Zealand, the additional 1,400,000 visitors could bring an estimated $5.6 billion (based on an average expenditure of $4000).

Kevin says, "In a market like China, the profile this show has given New Zealand as a family friendly, desirable visitor destination, is unprecedented. It paves the way for future film and Tourism Industries to capatalise on the broadening scope of the NZ-China FTA and realise significant returns for New Zealand’s economy. 
 
Dr Julia Charity was Project Lead for the filming of ‘Daddy, Where are we Going’, in New Zealand and Founder of NZ’s Homestay Network – Look After Me Ltd. She is the grand-daughter of Rt. Hon Mik Connelly who as the Minister of Customs was involved in the first New Zealand Parliamentary Delegation to the People's Republic of China in 1977.

Article published in NZBusiness Magazine March 2015