Despite some scepticism from government ministers, talks about New Zealand’s role in China’s Belt and Road Initiative are forging ahead. But Covid-19 has put Xi Jinping’s broader goals at risk, Sam Sachdeva reports.

New Zealand and China are still hashing out plans to work together on the controversial Belt and Road Initiative, even as Chinese President Xi Jinping’s flagship foreign policy initiative has come under threat due to the coronavirus pandemic.

The two countries signed a “memorandum of arrangement” in March 2017 to develop a work plan for the Belt and Road Initiative (BRI) within 18 months.

However, a change of government in New Zealand later that year delayed the completion of the plan, with Foreign Affairs Minister Winston Peters expressing scepticism about the speed at which the National government had signed on to the deal, and concerns about Chinese-funded aid projects in the Pacific.

While Trade and Export Growth Minister David Parker’s visit to the Belt and Road Forum in Beijing last year seemed to augur a change of tack, there has been little public discussion from the Government about the state of talks.

However, heavily redacted briefings from the Ministry of Foreign Affairs and Trade (MFAT), released to Newsroom under the Official Information Act, show negotiations between Chinese and New Zealand officials on a work plan were still taking place late last year.

In October 2019, ministry officials wrote to Peters seeking his agreement for the next stage of talks, noting Prime Minister Jacinda Ardern’s commitment to progress the work plan “as soon as possible” during her visit to Beijing earlier that year.

The briefing noted that the BRI talks would exclude infrastructure cooperation, in line with previous comments from Ardern and others that such projects were not the right fit for New Zealand.

A number of briefings to ministers through 2019 said New Zealand’s participation was “carefully calibrated in line with our interests and values”.

Foreign Affairs Minister Winston Peters has shared his sense of scepticism about the Belt and Road Initiative in the past. Photo: Lynn Grieveson.

Exactly what projects remain in bounds is unclear, although some have highlighted climate change and environment initiatives as a less controversial area for cooperation, while Chinese officials are also believed to hold interest in the potential for New Zealand to act as a “Southern Link” between it and South America.

Jason Young, director of the New Zealand Contemporary China Research Centre at Victoria University of Wellington, said it was possible the NZ-China FTA upgrade – concluded in substance last year, but yet to be signed – could be held up by Chinese officials as a BRI-related win, even though the New Zealand side would likely not see it in that vein.

“When I look at the BRI, because it’s Xi Jinping’s signature policy, any type of foreign engagement success via commercial or diplomatic means can be subsumed as a win for the BRI project … whereas for New Zealand, obviously, that’s not how we would frame a free trade agreement negotiation, which we’ve been doing for many years with many countries.”

Young said one of the challenges regarding the Chinese initiative was whether cooperation required signing on to the entire vision, or whether countries could “pick off little things” like climate change and call them BRI projects.

The broader Chinese initiative is among numerous global projects to have taken a hit due to Covid-19, with domestic lockdowns and disruptions to international trade making it difficult for work to continue.

Repayment of the concessionary loans granted to developing countries for the projects is also in peril, with the New York Times reporting many nations were asking Beijing to forgive the debts due to their stunted economies.

Young said some critics in China had concerns before the pandemic about whether its government had overreached in its BRI commitments, while concerns about so-called “debt trap diplomacy” had been a part of the global debate about the initiative from the beginning.

While the project would not disappear given its status as Xi’s signature foreign policy initiative, there seemed to be awareness of the sensitivities around debt repayments. Any prolonged economic shock would also affect China’s ability to launch new projects, he said.

BRI and Five Eyes

In Australia, the Victoria state government’s 2018 decision to sign its own BRI memorandum of arrangement has come under renewed scrutiny due to increasingly strained relations between the federal government and Beijing.

Australian Prime Minister Scott Morrison has urged Victorian Premier Daniel Andrews to scrap the agreement, citing the different approach being taken at a national level.

“It is a programme that the Australian foreign policy doesn’t recognise … because we don’t believe it is consistent with Australia’s national interest,” Morrison told 3AW.

“It is not a programme that the Australian government has signed up to, it is not the Australian government’s foreign policy. And all states and territories should not be doing things that act inconsistently with the federal policy.”

United States Secretary of State Mike Pompeo suggested the country could “simply disconnect” from its Five Eyes partner if it felt Victoria’s BRI projects posed a security risk, although the US Ambassador to Australia Arthur Culvahouse later backed away from Pompeo’s remarks.

The Chinese government has issued warnings for any students and tourists heading to Australia, alleging an increase in racial discrimination during the pandemic, while it has also slapped tariffs or bans on the country’s beef and barley exports.

“It’s a question of reciprocity: you would never have, for example, the New Zealand government deciding to just go off and negotiate with Shanghai irrespective of Beijing and central China’s interests.”

Young said the Victoria stoush raised interesting questions about whether or not it was acceptable for the Chinese government to negotiate directly with a state or local government when its national counterpart had already indicated its opposition.

“It’s a question of reciprocity: you would never have, for example, the New Zealand government deciding to just go off and negotiate with Shanghai irrespective of Beijing and central China’s interests.

“One of the challenges of the BRI at the beginning was that it was everything and anything, and a lot of Chinese companies and Chinese institutions were wanting to call everything BRI even before central governments had had a chance to say what their view on it was and what they wanted, if anything, to cooperate with China.”

The shape of New Zealand’s future engagement with China, both on the BRI specifically and more generally, would be influenced by the responses of its partners and any plans for “decoupling” they had, Young said.

In a statement, an MFAT spokesman said New Zealand and China had last discussed a BRI cooperation plan in November, with further progress affected by the Covid-19 outbreak.

“New Zealand and China have yet to agree [on] a cooperation plan. New Zealand will hold further discussions with China on this issue when a mutually agreeable time can be found,” the spokesman said.

A spokeswoman for Peters declined to add to the ministry’s remarks.

Sam Sachdeva is Newsroom's national affairs editor, covering foreign affairs and trade, housing, and other issues of national significance.

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