Brad Olsen says China's 'sluggish' economic recovery from COVID-19 is having impacts on New Zealand

A leading economist says China's economic recovery following the COVID-19 pandemic has been sluggish and is starting to affect New Zealand. 

China is an incredibly important export partner for New Zealand, with them being our largest goods partner - exporting a third of our exports. 

The Chinese economic recovery slowed in the second quarter of 2023, with a growth of 0.8 percent in the June quarter, which came after a 2.2 percent growth at the start of the year.

China also saw youth unemployment touch a new record of 21.3 percent, underscoring worries about the strength of the Chinese economy. 

Retail sales were up 3.1 percent, behind expectations, as spending remains restrained, which has also limited the strength of New Zealand exports. 

Infometrics Principal Economist Brad Olsen told AM Early on Monday China's recovery has been "sluggish" and hasn't seen any sustained growth, despite the economy expecting to be bolstered by the easing of COVID-19 restrictions earlier this year. 

Olsen told AM Early host Michael O'Keeffe China hasn't been able to crank up its economic motor at a particularly fast rate, following the easing of restrictions. 

"In the month of June, Chinese economic data suggests that exports from China to the rest of the world... fell, I think, around 12 percent, that's the largest fall in about three years," he said. 

"More concerningly for New Zealand was that imports into China, including the likes of some of our goods, fell around about 7 percent over the last year, again reflecting there's not as much demand in the Chinese economy and of course that's challenging news if you're trying as a New Zealand business to sell into the Chinese market. If there are not as many sales to be done, makes that export revenue a lot more difficult to achieve." 

Olsen said this comes at a time when prices for a number of key New Zealand exports, particularly agricultural exports, have been at a "lacklustre" position. 

"You've seen global dairy trade option prices in a softer position and we're not making nearly as much for our forestry exports as well," he said. 

"It's not just limited to the Chinese domestic economy, we are very much seeing that lack of demand or that lower level of demand in China is starting to have economic consequences in other parts of the world, including for New Zealand exporters."

Olsen told AM Early how China's economy develops has major implications for New Zealand. 

"I think importantly, and we've seen this time and time again, how the Chinese economy develops does hit big influences on not only New Zealand, but a number of our trading partners," he explained. 

"It's us, it's how Australia's trade moves, it's how parts of the US trade will move and others into Europe and similar. 

"We are a small island nation at the bottom of the South Pacific and these sort of events don't make it easy. We know, for example, that New Zealand's current account balance is near its worst in decades. 

"That goes to show that at the moment New Zealand is spending more on the rest of the world than we're earning in and that's an uncomfortable place for our exporters to be." 

Watch the full interview with Brad Olsen in the video above.