Key: China currency deal a boost

HAMISH RUTHERFORD IN BEIJING
Last updated 05:00 19/03/2014

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New Zealand has become one of the first countries in the world to be allowed direct currency trading with Chinese, a move aimed at reducing the cost of business in the economic superpower.

Prime Minister John Key announced the deal after a meeting with Chinese Premier Li Keqiang at the Great Hall of the People in Beijing last night (NZ time), the first day of his state visit this week.

The deal would "make doing business with China easier by reducing the costs of converting between the two currencies, and will stimulate trade and investment", Key said.

The announcement was a sign of "how close the relationship is growing". Since he became prime minister, exports had quadrupled to $10 billion, he said.

"You can sort of pick any metric you like but it's a remarkable relationship and one gets the feeling we're only part way through it in terms of the potential for New Zealand."

Work to allow the direct trade began in April last year, shortly after an announcement that Australia had been granted a similar deal.

While China is emerging as a global economic superpower, its currency remains tightly controlled by Beijing, with the exchange rate allowed to rise in value only slowly and trade allowed only through approved currencies.

This means currency trading has generally had to be conducted indirectly, usually through US dollars, even though New Zealand's exports, of $10b in 2013, exceed that of Australia.

New Zealand is only the sixth currency in the world to be granted direct convertibility with China. HSBC, ANZ and Westpac have been granted licences to operate as market makers between the kiwi and China's renminbi.

The announcement appears to back up the Government's claims that the botulism scare last year, which caused unrest across the world, especially in one-child China, has caused little lasting damage with officials here.

Key's trip this week is based around visits with China's political elite to explain the findings from investigations into the scare, which concluded that New Zealand's food-safety system was world class.

The status of New Zealand's relationship with China was boosted yesterday when the Prime Minister's Office announced that Key had been invited to a small, private formal dinner with President Xi Jinping in Beijing this evening.

Earlier yesterday, Key met the mayor of Beijing at the headquarters of Beijing Automotive to witness a $75 million deal between the carmaker and Hamilton's Pacific Aerospace, to build a 10-seat aircraft for the Chinese market.

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Pacific chief executive Damian Camp said China was expected to be the fastest-growing general aviation market, and the deal was likely to create "dozens" of jobs.

- BusinessDay

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