Discussion paper

Uncertain opportunities: Chinese investors establishing investments in New Zealand

19 Jun 2013

Abstract: Despite the signing of a comprehensive free trade agreement between New Zealand and China and significantly deepening trade relations, there exists a discernable lag in the investment relationship between the two countries. This paper identifies that the operation and interaction of the two legal instruments governing the conditions of entry of Chinese foreign direct investment (FDI) into New Zealand – the New Zealand–China Free Trade Agreement (NZCFTA) and the New Zealand Overseas Investment Act 2005 – partially explain this disparity. These legal instruments offer an interesting illustration of the way in which international investment agreements (IIAs) interact with domestic law, managing the contention between investor rights and host state public interests. However, it is clear that the rights and obligations created by these legal instruments are not well understood by Chinese investors and New Zealand commentators alike, as illustrated by the recent Crafar farms saga. This paper seeks to clarify those rights and obligations, arguing that greater transparency and predictability in the operation of the legal instruments is necessary in order to encourage higher levels of Chinese FDI in New Zealand. This is particularly important in the New Zealand– China relationship as Chinese investors are still relative newcomers in the establishment of overseas investments and face in New Zealand a culturally different regulatory scheme from that operating in China.

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