New Zealand has strengthened its commitment to combat bribery following the London Anti-Corruption Summit.
In May 2016, Police Minister, Hon Judith Collins, addressed the London Anti-Corruption Summit, outlining New Zealand's 'no tolerance' approach to corruption. In the statement, New Zealand committed to exposing corruption domestically and off-shore, punish the corrupt, support disadvantaged creditors and drive out the culture of corruption where it exists. One of New Zealand's key commitments was to nominate a representative to the International Anti-Corruption Coordination Centre. New Zealand also committed to assisting international efforts to prevent illegal money flow across multiple countries caused by high level corruption and to undertake effective enforcement action against those involved.
It is intended that the commitments outlined by the Police Minister will build on the work New Zealand has done in recent years and will help to maintain its reputation as one of the least corrupt countries in the world.
What does this mean for New Zealand's 'high risk' export markets, such as China?
With annual growth at a little over NZ$900 billion, China's economy is relatively well placed. However, it is a far cry from the high growth rates experienced in the 1990s and 2000s. Many, like former policy maker at the People's Bank of China, Dr David Li, consider that the government's anti-corruption drives are to blame.
In 2012, China launched a high-profile campaign dubbed the Anti-Graft drive which targeted government, military and state-owned company officials suspected of corruption. The campaign led to the investigation and prosecution of hundreds of officials across the country.
Historically, Chinese business has been sustained by 'guanxi'. Guanxi refers to close, clandestine business relationships that can even override law and as one Chinese businessman noted "in China, relationships are the law". Inevitably, guanxi can lead to nepotism and corruption and as a result, the Anti-Graft drive has started to displace it.
Given that guanxi has long been considered to be the bedrock of the Chinese economy, the effect that the crackdown on corruption will have on the Chinese economy is self-evident. As Dr Li candidly observed, "corruption was helping the economy grow, to be very honest."
Nonetheless, even Dr Li had to concede that the Chinese had grown wary of the crooked, cloak and dagger nature of the guanxi system. In addition, the shady nature of business was hampering the entry into the Chinese market by foreign businesses, which feared being caught up in corruption and facing prosecution under their local, more stringently enforced, anti-corruption legislation.
What could this mean for New Zealanders doing business in high risk countries such as China?
Business in China is a double-edged sword. While the crackdowns on corruption mean that the legal risk of doing business in China has reduced, the economic risks have increased as a result of the unstable economy. Dubious Chinese government growth forecasts, sharp drops in the stock market, erratic currency movements and unpredictable and unreliable economic policy responses from Beijing are presently considered to be some of the biggest global economic risks facing the world’s economic policy-makers.
Undeniably, however, China remains an exceptionally profitable market for New Zealand businesses. The appetite of the Chinese consumer for quality western products is growing. As a result, New Zealand's opportunities in China - including tourism and education, exports of premium food and beverage products, dairy, meat - continue to develop.
But one thing is clear, New Zealand and China are focussed on the fight against corruption. Even if it may temporarily act as a road block to China's economic growth, long term, a safer trading environment can only be good for New Zealand businesses.