Dairy to spur growth of $17.1b China-New Zealand trade

The rise in milk prices could further strengthen China’s dependence on New Zealand’s exports.

The two-way trade between China and New Zealand is set to grow in the coming years, driven by the strengthening ties of the two countries after hitting an an all-time high of NZ$25.1b (US$17.1b) last September, according to Fitch Solutions.

The rise of the two-way trade is attributed to the increased consumption of dairy products from China’s growing middle class whereas New Zealand makes up of 90% of China's milk powder imports and 21% of exports.

Fitch also mentioned that average milk prices will rise from US$14.50 per centum weight in 2018 to US$15.50 per centum weight in 2020, which will further push China’s dependence on New Zealand’s exports.

The potential approval of the Regional Comprehensive Economic Partnership (RCEP) free trade agreement whereas China and New Zealand are both members could also boost the trading conditions between the two countries.

China also ranks second to Australia in terms of being the highest source of visitor arrival for New Zealand which drives growth for the latter’s services sector. The number of Chinese visitors in the country had in 2018 has increased by 11.9% from the past eight years.

Fitch also added that China’s growing interest interest in the South Pacific and Antarctic areas could also be a main reason for their close relationship with New Zealand.

The New Zealand government is looking after the foreign affairs and defence departments the Cook Islands, Niue, and Tokelau and is also performing minerals exploration and research activities in Antarctica.

“China possesses a long-term strategic agenda in Antarctica, in conjunction with its larger goal of expanding its maritime interests and defence capabilities in the Asia-Pacific region, and will require the cooperation of established Antarctic claimant states such as New Zealand,” Fitch concluded.