Yeung framed China’s economic transition with a simple concept: a K‑shaped economy.
On the downward arm of one K-shaped slide, property investment in China is shown as sharply negative – a 14% drop.
Yeung noted residential construction has slowed. Retail sales have posted consecutive monthly contractions, as households digest the property slump.
Demographic realities are biting: births have fallen to around eight million a year, roughly half the level of a decade ago.
But on the upward arm, another China emerged.
“There has been a big shift of investment profile from a property‑led economy to a technology‑driven economy,” Yeung said.
Investment in equipment, robotics, automation and advanced manufacturing is surging.
Last year, by ANZ’s estimates, more than half of China’s GDP growth came from total factor productivity.
The robotic story is arresting. Yeung said China was now producing around two million industrial robots a month – some 24 million a year – versus seven to eight million babies.
“The problem of China is not GDP, because we have robots now,” he said drily.
“The problem is distribution: how to protect workers and support this economic transition.”
Visitors to Shanghai or the Greater Bay Area see this for themselves: hotel deliveries handled by machines, food carried to tables by robotic runners. And in factories, automated lines that even a decade ago would have been labour‑intensive.
ANZ’s Greater China chief economist Raymond Yeung spoke at the China Business Summit in Auckland this week. Photo / Annaleise Shortland
Arguably, China is becoming the laboratory for what an ageing, automated economy looks like in practice.
Yeung pointed out that China had been a giant disinflationary force in the global economy for four decades.
He put up a famous Volcker‑era United States inflation chart, then pointed out that behind the US central banker was a structural shock of another kind: hundreds of millions of Chinese workers entering global supply chains.
Now, he argues, China is reshaping the inflation story again, this time through technology and green capacity.
He showed how Beijing has responded to tariff walls and “de-risking” rhetoric by rerouting supply chains through Southeast Asia.
China’s share of the US market has dropped back to levels last seen in the early 1990s, while trade surpluses are increasingly booked through Southeast Asia as intermediate hubs.
On energy, another K‑shape slide: crude oil imports are still huge, but Chinese exports of solar panels and related equipment have exploded.
“Solar exports surged after the Middle East shock,” Yeung said.
“This is how the world reacted – by buying renewable energy capacity. China is now, in effect, an exporter of energy.”
China has become a net exporter of capital, says Raymond Yeung. Photo / Annaleise Shortland
But it was his capital story that should really concentrate New Zealand minds.
Japan’s government bond yield has crept up to around 3%, China’s 10‑year is hovering closer to 1.7%.
“China is heading towards a low‑yield environment,” Yeung said.
“That means China becomes a net exporter of financial capital, just as Japan was after its bubble burst.”
In other words, the cheapest large pool of funding is sitting in a country we already know extremely well.
Warren Hu, from the China Chamber of Commerce in New Zealand, hammered home the practical implications.
He began with a provocation: “New Zealand productivity has lagged the OECD for decades. The reasons are well known: infrastructure gaps, high capital costs, and a small, remote economy. The question is not what New Zealand can do for China, but what China can do for New Zealand – and what we can do together.”
Chinese banks can raise funds in renminbi much more cheaply than funding available in New Zealand wholesale markets, says Warren Hu, CEO of Bank of China in New Zealand. Photo / 123RF
His basic point was simple: China is the perfect “third party” to New Zealand’s productivity problem.
On infrastructure, Hu related that China had built more infrastructure in the past 30 years than any other country in human history.
That has produced world‑class engineering capability, full supply chains, and an ability to deliver complex projects on time and on budget.
He cited the Cook Strait ferry replacement, where a construction contract with a Chinese shipyard is estimated to save millions.
On finance, Hu – also CEO of Bank of China in New Zealand – was direct.
“China is on a different interest‑rate system,” he said.
“Chinese banks can raise funds in renminbi much more cheaply than funding available in New Zealand wholesale markets. The question is: why should New Zealand borrowers not benefit from that?”
He outlined two channels.
Cross‑border lending: Chinese banks can fund in renminbi (RMB) at low cost, swap into NZ dollars, and on‑lend to creditworthy Kiwi borrowers at lower rates than are otherwise available – particularly for long‑dated infrastructure and productive investment.RMB capital markets: New Zealand agencies and corporates could issue RMB‑denominated bonds.
There would need to be regulatory changes to allow this to happen.
“We already see other countries issuing billions in RMB,” Hu noted.
“There is no reason New Zealand cannot do the same, with the right structures and risk management.”
His conclusion was blunt: geopolitical tension comes and goes, but the need for productive capital does not.
I’m not making an argument here to open the floodgates to Chinese investment (internationally, China has withdrawn from sectors where it is not making a profit).
New Zealand has a legitimate interest in protecting sensitive assets, screening for strategic risk, and ensuring we do not undercut our security relationships or values.
But as the Prime Minister underlined, New Zealand has the tools for that. There are national interest tests, and the strength of the relationship with Beijing allows for conversations where red lines can be made clear.
Notably, other Western-aligned nations are now accessing cheaper Chinese capital.
It seems self-defeating to accept permanently higher capital costs, doing fewer infrastructure projects than we need, and talking endlessly about productivity while neglecting to explore one of the levers within our control.
Disclosure: Fran O’Sullivan curates and co-chairs the China Business Summit in partnership with the Auckland Business Chamber
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.