Reading the Tea-leaves of Chinese Politics – NZCC Chair op ed

New Zealand China Council Chair John McKinnon wrote the following article for Stuff / The Post, published on 11 March 2025.  The original article can be viewed here.

For those with an interest in Chinese politics, early March is always significant as the timing of the annual gatherings of two top-level bodies: the National People’s Congress, which is the country’s legislature; and the impressively titled Chinese People’s Political Consultative Conference, a senior advisory body.

Chinese know the event as “lianghui”, simply “the two sessions”. These meetings will signal the Chinese government’s core policy directions for the coming year, in all areas.

China has been much in the news of late. The slow-down of the Chinese economy, trade tensions with the United States, controversy over the visit of the premier of the Cook Islands to Beijing, the status of Taiwan, Chinese naval exercises in the Tasman Sea, and allegations of interference by China in New Zealand affairs involving both individuals from China and New Zealand delegations travelling there.

How should we interpret all that we are seeing?

First on the Chinese economy. Yes, that economy is facing strong headwinds. Housing, local government debt and demographic changes are all presenting challenges for China’s leaders. Growth forecasts have dropped, officially, to 5%; some external commentators would judge that the growth is as low as 2+%.

Whichever figure is correct, it is certainly a far cry from the years when the economy was growing by 9 or 10%. And given the place of China in the global economy that change has an impact.

But even if growing at only 2%, given the size of the Chinese economy (US$18.52 trillion in 2024) that still means it would add an economy the size of South Africa to the world each year.

Many have argued, both within and outside China, that the country needs to boost consumer demand, and rely less on exports to fuel its growth. That’s easy to say, harder to achieve when demand for Chinese goods and services outside China is so strong.

Many argue that China tilts the playing field through pricing and state subsidies. That may be so in some instances. But the quality of what China produces is such that it is often still a preferred source.

The reality for the world is that China, into the foreseeable future, will be a competitive and attractive supplier of goods and services, including some world-leading emerging technologies. Those who seek to decouple themselves from China may find themselves paying a premium as a result. There may well be national security considerations to justify that premium, but not always.

China’s demographic transition is real, and not dissimilar to what has occurred in many other east and north Asian countries. But China has one tool which others do not: its very young retirement ages – 50 for blue collar women workers, 55 for white, 60 for men.

Measures are now underway to progressively lift those ages (to 55, 58 and 63), which means that the proportion of those of working age to those retired will increase. This is not a long-term solution, but it does mean that China can adjust responses to its demographic challenge in ways which other economies do not.

China’s education system, its infrastructure, and its track record of innovation and invention should also caution us against too gloomy a prognosis of its future.

Second, China is now a “great power”, whatever that term means. On grounds of population, area, cultural heritage and military power, it cannot be ignored. But being a great power also means that it will at times act in ways which rub up against the way New Zealanders see the world, preserving to itself the sole right to protect its interests when it sees those interests (as defined by itself) being threatened.

In these circumstances it is important that we are very clear as to what New Zealand’s interests and values are. There will be times when we disagree with China. A country such as ours, which relies heavily on the international rules-based order, will never be comfortable when any larger countries transgress that.

China is ruled by the Communist Party of China, and has been since 1949. We are in a period when the role of the party in China is being promoted as it has not been since the first decades of the People’s Republic.

“No Communist Party, no new China” shout the slogans, and it is hard to argue otherwise. Party members are ubiquitous and unavoidable in China.

China’s is a very different political and legal system from ours. But equally the China of 2025 is not the China of 1955, 1965 or even 1975. It is challenging to predict the China of 2035, 2045, or 2055. Only the people of China can make that determination.

[John McKinnon is chair of the New Zealand China Council, and served twice as New Zealand’s ambassador to China. The views expressed are his own.]