Comment: 2024 was another big year for the world’s largest trading nation.
Global trade with the People’s Republic of China grew to 43.85 trillion yuan (about US$6.1 trillion), up 5 percent on 2023, according to data from the General Administration of Customs. China’s exports grew 7.1 percent to 25.45 trillion yuan and imports grew 2.3 percent to 18.39 trillion yuan.
China’s trade with most countries increased. The European Union and the United States saw increases and there was a significant rise in Southeast Asia and other emerging markets. Trade remains a key driver of China’s economic growth, even as the state attempts to shift to a new economic model and as trade with the United States faces obvious headwinds.
New Zealand also had a better trading year, though not by much.
According to Stats NZ, annual goods exports in 2024 were $71 billion, an increase of $2.4 billion on 2023. Annual goods imports were valued at $78.7 billion, down $3.6 billion. This resulted in an annual trade deficit of $7.7 billion, roughly half the size of the deficit in 2023.
New Zealand exports to the United States grew by 9 percent, making it our second largest trade partner. Exports held steady to Australia and Japan, and grew rapidly to the United Kingdom, European Union, and Southeast Asia.
Exports to the Republic of Korea dropped by a whopping 10 percent representing a loss of $243 million. Exports to China, New Zealand’s largest export market, dropped 3.2 percent, representing a loss of $582 million. Australia’s exports to China also experienced a slump.
This is the second year running that the real value of New Zealand exports to China has contracted. The share of total New Zealand exports destined for the Chinese market has also dropped from a high of 31.6 percent in 2021 to 25 percent in 2024.
New Zealand exports to China peaked at $20.1 billion in 2022. In 2023, they dropped to $18.4 billion and in 2024 they decreased again to $17.8 billion. Similarly, imports from China peaked at $18.2 billion in 2022, dropped to $17 billion in 2023, and dropped slightly again in 2024 to $16.9 billion.
The faster drop in export revenue compared with imports has narrowed the trade surplus New Zealand enjoys with China from $1.4 billion in 2023 to under $1 billion in 2024. This is far lower than the $4 billion surplus in the years 2019 to 2021.
Given the ongoing headwinds in the services sector, especially tourism and international education, the economic relationship is a long way off achieving the $6.74 billion surplus New Zealand enjoyed in goods and services trade with China in 2019. Regulatory changes, such as the slower and more expensive visitor visa application system, exacerbate these challenges.
New Zealand’s trade with China sits outside the general trend in New Zealand trade, which is slightly up overall, and outside the general trend of China’s growing trade with the world.
What then explains this aberration?
China has developed important relationships globally that compete with New Zealand’s narrow offerings of high-end primary products. New Zealand exporters face stiffer competition in China, increasing the costs of maintaining market share at a time when Chinese consumers are more price-sensitive. Few except the largest agribusinesses can manage these challenges.
Over consecutive years, the New Zealand Government has signalled to businesses the importance of maintaining a diversified portfolio of export destinations to minimise risk, including the type of political risk that impacted Australia’s exports to China. The Government has supported companies to seek opportunities in India and Southeast Asia and gone all but quiet on promoting the Chinese market.
Finally, the shine has come off the diplomatic relationship for good reasons, and New Zealand has more clearly signalled its alignment. This spills over into consumer and business perceptions, chilling the economic relationship further.
Whether the drivers are economic or political or a combination of the two, the result is the same, leading to the obvious question of whether this is a blip in the trade relationship or a longer-term trend.
Given the current headwinds, we’re unlikely to see a return to the frenzied growth of previous years. The uncertainties in the global economy and the shift to a more interest-based dog-eat-dog trading world suggest New Zealand businesses should be running fast to stand still.
A quarter of all New Zealand goods are exported to China. Lowering that share by growing other markets (the ‘China And’ strategy), is only a viable strategy if the China market continues to deliver. The above statistics show the real value of trade with China has been decreasing year on year.
This trend should be of concern to a government that has set doubling the value of New Zealand exports as an explicit target, at a time of massive change in the global trading system.
While it can’t wave a magic wand and fix the structural problems in the Chinese economy, nor can it influence how great powers approach global trade, it could visit Beijing and hustle to arrest the decline.
This article was originally published on Newsroom.
Jason Young is director of the New Zealand Contemporary China Research Centre at Te Herenga Waka—Victoria University of Wellington.