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Impact of coronavirus having significant effect on NZ's trade relationship with China

The impact of the coronavirus is having a significant effect on New Zealand’s trade relationship with China.

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New Zealand will be affected if China’s economic growth takes a hit. Source: 1 NEWS

China is the country’s biggest trading partner, with a two-way trade worth $28 billion in 2018 and growing.

That year, New Zealand exported nearly $17 billion worth of goods to China, more than to Australia and nearly double the sales to the United States.

The big sellers are dairy products like milk powder, butter and cheese, an important market for companies like Fonterra.

Forestry products, logs and wood is another top export worth nearly $3 billion in trade.

China also overtakes the United States in meat sales.

This week log exports from Gisborne port were put on a six-day hold as the coronavirus spooked exporters, as the Chinese economy was brought to a standstill.

The coronavirus and its fallout highlights just how integral China is to global supply chains.

Many international companies now rely on its factories - The Warehouse for example gets 60 per cent of its goods from China.

"China's become a massive powerhouse globally it's gone from four per cent of the global economy last decade to 16 per cent now. New Zealand has grabbed that opportunity with both hands," says Westpac Chief Economist, Dominick Stephens.

The bid to contain the coronavirus has restricted the movement of about 56 million people in China.

Shopping malls are deserted and retailers Apple, Nike, Ikea and Starbucks have temporarily closed stores.

"Well, on China, I think, the effect is going to be very serious in the short run. You've got areas that produce about two thirds of China's GDP that have already extended their holidays for a couple more weeks,” says David Dollar of the Brookings Institution.

Westpac is forecasting a one per cent knock to China's economic growth. The bank says that will mean a short, sharp hit for New Zealand.