TL;DR:
- New Zealand’s exports to China, including dairy, meat, and timber, have declined by up to 20% due to reduced consumer confidence and increased local production in China.
- Despite economic challenges, China’s middle class continues to grow, maintaining demand for high-quality, trusted goods and services from New Zealand.
- The Chinese government is implementing economic policies to stimulate growth and consumer spending amidst concerns over deflation, the property market, and unemployment.
Despite facing significant headwinds, China remains a crucial market for New Zealand’s exports, thanks to the enduring fundamentals that have historically bolstered this trade relationship.
A report from New Zealand’s Ministry of Foreign Affairs and Trade (MFAT) highlights the ongoing economic transition in China, marked by decreased consumer confidence attributed to rising local government and housing debt, alongside high youth unemployment. These factors contributed to a decline in New Zealand’s exports of dairy, meat, and timber by up to 20% last year.
In the year ending last September, two-way trade between New Zealand and China was valued at $38.67 billion. The report underscores China’s continued potential as a market for New Zealand exporters, driven by a growing middle class with a penchant for high-quality, trusted goods and services, a robust demand for food and beverage, and significant economies of scale.
The dairy sector saw a 4% drop in exports to China in the 11 months to the end of November, still amounting to $6.1 billion. Red meat exports fared worse, with nearly a 20% decrease to $3 billion, reflecting lower beef prices and reduced volume and prices for sheep meat.
This downturn is attributed to weak consumption, high red meat inventory in the market, and increasing competition, especially from Central and South American suppliers.
The forestry and wood sector also experienced an 11% decrease in exports to $3 billion, largely due to the downturn in China’s property sector. Conversely, the value of kiwifruit exports increased by 4%, while apple exports saw a 17% decline.
China’s economy grew by 5.2% last year, surpassing the government’s target and indicating a recovery from the 3% growth in 2022, though still below the annual growth rates achieved between 2015 and 2019. Despite this growth, the report notes mixed economic indicators, with retail sales and industrial activity fluctuating and the property sector continuing to struggle.
The Chinese government has introduced several stimulatory economic policies to counter these challenges, including issuing sovereign bonds and encouraging banks to lend to property developers and private businesses.
Despite these efforts, economic growth is forecasted at 4% for this year, with stabilising the property market and boosting consumer spending highlighted as priorities.
This economic landscape presents a complex picture for New Zealand exporters, balancing the challenges of a transitioning Chinese economy with the opportunities afforded by a still-growing market hungry for quality products.
