Happy Saturday —

I have to confess I’ve spent a fair bit of the past week cheering on Canadian prime minister Mark Carney — one of the very few leaders willing to stand up to US President Donald Trump to protect his country’s interests (Mexico’s Claudia Sheinbaum and Xi Jinping of China are the other notable two.)

Carney had already gained quite a following around the world after he delivered a remarkable speech in January in which he called for “middle powers” to band together as the international order ruptured.

Now, he’s winning plaudits for being and in fact walk away from the increasingly outrageous conditions the Trump administration is trying to introduce to their lop-sided trade deals. The administration tried to restrict what trade deals Canada could do and interfere with how it promotes its French heritage, all while continuing to insult Canadians.

It’s a profile in courage. Carney, who has served as governor of the Banks of England and Canada, has been calm, clear and direct, saying simply that the Trump administration’s demands are “unacceptable.”

He hasn’t been histrionic or resorted to name calling (though Ontario premier Doug Ford has taken care of that.) He has laid out a detailed plan to support Canadian businesses through this, and has responded proportionately with tariffs.

As wrote in his Substack post Mark Carney Just Became The Most Important Leader In The Free World :

Every Western leader has been doing the same math for eighteen months. Do you take the humiliation and keep the market, or do you refuse the humiliation and eat the tariff? Starmer took the deal. Japan took the deal. The EU took the deal with a 15% tariff and a promise to buy American gas, and von der Leyen got booed in her own parliament for it. Everybody has been waiting for somebody to test whether “no” is actually an option.

Carney just tested it. And he didn’t do it with a cheap shot or a stunt. He offered the Americans everything reasonable, let them poison the deal themselves, and then documented exactly what they did and why it was unacceptable. He made the Americans the unreliable party on the record.

And Trump? Well he’s responded to Canada asserting its sovereignty by calling the prime minister “Governor Carney” and threatening to rename Lake Ontario “Lake America.”

This week for The Detail, I spoke to Jayme Poisson, the host of the Front Burner podcast from CBC. The Detail of Canada, if you will. She told me how all this is playing out in Canada — and that Carney is settling in for the long haul.

You can listen to the podcast on RNZ, Apple, Spotify or YouTube.

Finally, I don’t usually share AI-generated content but I have to make an exception for this video. Beavers playing the bagpipes? Boxing grizzlies? How could I not?

Have a good weekend

-anna

Happy Monday —

The ongoing efforts to get the Pacific to speak with one voice on China’s missile launch into the region in July will be back on this week, with Foreign Minister Winston Peters heading to Palau for the Pacific Islands Forum (PIF) ahead of the leaders’ meeting next week.

The previous efforts amounted to nothing — because Kiribati and Naoero (Nauru) wouldn’t agree and all forum decisions must be unanimous — and there’s little chance of any further progress when the leaders gather.

Still, Palau’s President Surangel Whipps Jr, who will host the forum, is remaining hopeful. He last week said he was hoping to achieve a “united front” against China’s missile test, which came with only a few hours’ notice to select countries.

“It’s important for us in the Pacific, especially being so close to China, that any activity that happens in the Pacific should be transparent, and we should all know about missiles flying overhead over our area. I think we have a right as countries to be notified,” he told the Sydney Morning Herald.

Alas I’m not going to Palau, but I’ll be keeping an eye on this in the coming days.

The meeting could be spicy because Palau has a Compact of Free Association with the US, which makes the US responsible for its security — and Palau is on the frontlines of any potential conflict between the US and China.

But also, Palau is one of only three Pacific states to have formal diplomatic relations with Taiwan instead of China. Beijing, a PIF partner country, could seek to throw its weight around.

Beijing contributed US$1.08 million to the PIF Secretariat in June and earlier this month warned the secretariat “to abide by the one-China principle and properly handle Taiwan-related issues”.

Beijing insists it is the sole Chinese government and views Taiwan as a breakaway province. It has increasingly used its political and economic clout to convince Pacific nations to recognise Beijing instead of Taipei.

Taiwan was barred from attending last year’s meeting, hosted by the Solomon Islands, following protests from China. Beijing appears to be trying to engineer the same result this year — a spokesman warned the secretariat “to avoid disrupting the sound and steady development of the relations between China and the PIF.”

This is something that could soon become a live political issue for New Zealand: We will host the next PIF leaders’ meeting as we are next in the rotation to chair the PIF.

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• Separately, The Spinoff asked me to write about my exit from the Washington Post, and that story — which included my fears about efforts to control or intimidate the media here — was published last week here.

• And I had a fun coffee meeting last week with founding ‘Between Giants’ member Josh, who regaled me with interesting stories about his work and gave me lots of encouragement for my writing. I am really enjoying getting out and meeting the founding members (as quickly as I can.)

Three recommendations

• Yes, I’m going to talk about the New Zealand International Film Festival again because I’ve seen some remarkable films this past week, including Fatherland about Thomas Mann’s return to Germany in 1949. Polish Academy Award winner Paweł Pawlikowski won the Best Director Award at Cannes Film Festival for this film. It was surprisingly funny (thanks to Erika Mann, played the wonderful Sandra Huller.)
  
  I also saw Seoul Guardians, a documentary made by journalists covering South Korea’s six hours of martial law at the end of 2024. I was editing Korea coverage for the Washington Post at the time and was shocked when a colleague in DC rang and woke me up for a South Korean crisis. I’d been woken up many times because of North Korea, but never South. I lived and breathed this story for many days, but it was still gobsmacking to see this film and just how ardently South Korean parliamentary staffers worked to protect their democracy, including by barricading the doors with office furniture so the soldiers couldn’t get in. The flashbacks to the 1980 Gwangju massacre made it extra moving. Highly recommended.
  
  But the one notable thing about both these films: They were each 70 minutes long. One hour and 10 minutes! What a treat to go in and have a rich cinematic experience in less than two (or often these days, three) hours.

• I have to confess I’ve been hoovering up stories about Natalie Harp, President Donald Trump’s executive assistant and the most sycophantic of all the aides in Trump’s coterie of yes-people. She’s been in the news because she was one of the few aides that Trump took on his clandestine exit from Turkey last month, a move seized on by a Democratic senator. Among all the other irregularities of the Trump administration, it emerged this week that Harp resisted going through a security check for one year — an extraordinary exception given the amount of top secret information she would have been privy to. Here’s a good, short podcast from the Guardian about Harp and the unique position she holds in Trump World.

• Canada’s Mark Carney is once again standing up to Trump, saying after walking away from the US’s maximalist trade demands that Canada was “at war” with the US. I thought this piece by David Frum in the Atlantic (gift link) was excellent for giving the context on how Canadian Prime Minister Mark Carney has much more political permission to accept pain from a U.S.-Canadian trade war than Trump does:

To read current Canadian polling is to see a country united under its political leadership—and energized by its dislike and distrust of Trump’s United States. A majority of Canadians view Trump’s America as a more immediate threat to their security than Russia or China. Two-thirds favor the government taking a hard line in trade talks; fewer than one-quarter regard the United States as trustworthy. Meanwhile, Carney is backed by the Canadian public, polling at about 60 percent approval, a remarkable figure in a multiparty political system.

The Canadian economy has definitely suffered because of Trump’s hostility. Exports were down last year, and growth slowed. But this year, Canada got an unexpected bailout: Trump’s Iran war and Trump’s inflation have boosted prices for Canadian oil, gas, minerals, and food products. Canadian incomes are rising again. Meanwhile, Canada’s low levels of public debt have kept inflation low. Whereas the U.S. government must pay 5.3 percent to borrow money for 30 years, Canada pays 4.2 percent.

By contrast, Trump is facing an omnishamble. “Trump’s Economic Challenge: $40tn Debt, 6.7% Mortgages and $5 Diesel.” That’s a headline in today’s Financial Times. The paper could have added one more: 33 percent job approval, and falling fast.

• Finally, did you see that a robot at the second World Humanoid Robot Games in China just beat Usain Bolt’s 100m world record?

That’s it for today. See you again later this week.

-Anna

Here’s my latest episode for The Detail — this time with video, especially for you here in the Between Giants community. You can listen to the edited podcast the traditional way: On RNZ, Apple, Spotify or YouTube.

Or you can watch the unedited videos below (with subtitles, even).

This week we’re talking about Southeast Asia and its importance to New Zealand, because there’s been a lot going on.

To hear about how Southeast Asian countries are trying to diversify their relationships amid growing great power rivalry, I talked to Damien Cave, who’s Vietnam bureau chief for the New York Times and often writes about regional dynamics.

For a New Zealand perspective, I spoke with Suzannah Jessep, the chief executive of the Asia New Zealand Foundation.

First, here’s the interview with Suz Jessep:

And my discussion with Damien Cave:

Thanks for listening or watching. Have a great weekend

- Anna

Mōrena subscribers — All 4,003 of you! Last week the number of subscribers ticked over the 4,000 mark, and I’m thrilled to have each and every one of you here as I continue trying to write stories about New Zealand’s place in the world, especially for a New Zealand audience.

Last week I gave two talks in the Wellington region — shout-out to U3A in Lower Hutt and Plimmerton Rotary — and one attendee, from South Africa, came up and told me an African proverb that encapsulated the ‘Between Giants’ concept: “When two elephants fight, it is the grass that suffers.”

I sure hope we don’t suffer, but I was tickled to hear the saying.

Also, I received a great response to my story about China’s efforts to set up a ground-based space monitoring station in New Zealand, including from this kind reader:

Anna, the story about the Chinese space institute and the monitoring station is the kind of reporting that used to require a foreign desk and now requires one person deciding it matters. Between Giants covers a position New Zealand is actually in, rather than the one commentary assumes.

I thought this was a really important angle to pursue because it shows in a very concrete way how Beijing is trying to gain a foothold in our part of the world — and how we’re wising up to it. Thanks for the feedback.

Also from last week, the visit of Vietnamese leader To Lam and his sizeable delegation to New Zealand (and Australia) was overshadowed by the National Party leadership circus. This was a huge deal and is being viewed very favourably by Vietnam. I’ll come back to this story.

Three things I enjoyed

• I love the NZ International Film Festival so much, as I mentioned last week. I went to the “surprise screening” on Saturday night and boy, was it a surprise. I was excited to see the Korean countryside in the opening scenes, but “Hope,” which was acclaimed at Cannes, quickly turned into the kind of movie I wouldn’t have chosen to see. Still, it was great for audience camaraderie and the stories after. I enjoyed Minotaur last night.

• I enjoyed this story about Gideon Haigh, a veteran journalist who — like me — has turned to Substack and is revelling in the freedom and reader connection it provides. As someone who’s worked in daily journalism for almost 30 years — many of them as a foreign correspondent, when I had to be on 24/7 — I am slowly discovering the joy of an evening where I don’t have to check my phone constantly. I’ll be talking about my Substack journey for the NZ Society of Authors on Thursday. Details here if you’re interested.

• Taiwan deliberately slowed mobile data to text-only speed last week as part of a simulated attack on its critical infrastructure. Every year, Taiwan holds drills — military and civilian — as preparation for a Chinese assault, but this is the first year it tested how the island would cope if Beijing disrupted its communications. For half an hour, there were no video calls, no streaming, no TikTok. From the New York Times (gift link):

The government of President Lai Ching-te has stepped up the publicity about this year’s civilian exercises, emphasizing the danger posed by China — which under Xi Jinping has expanded its multitudes of warships, landing vessels and missiles that could support an invasion of Taiwan. Mr. Xi says he hopes to absorb Taiwan peacefully but will not rule out using force.

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Three things I’m watching

• Will we hear more from Beijing following last week’s report from the NZ Security Intelligence Service that outlined Chinese espionage and interference attempts in New Zealand? The Chinese embassy in Wellington said the report “fabricates and hypes” and the state-affiliated Global Times called it “‘compensatory hawkishness’ aimed at demonstrating its reliability within the Five Eyes alliance.” We may not have heard the last of this.

  

• Cook Islands Prime Minister Mark Brown looks set for a second term, with his Cook Islands Party on track to secure a supermajority and lead the government again following elections last week, according to the Cook Islands News.
  Brown said he expected the Cook Islands’ diplomatic rift with New Zealand last year and a major reshaping of the country’s foreign partnerships to be on voters’ minds as the Pacific increasingly becomes a battleground for influence between Beijing and western powers. Brown told the Guardian last week that the diplomatic fallout “does have bearings” on voters, saying “our people are quite mindful and aware of what happens in the geopolitical space”.

  “For us in the Cook Islands, it’s important that these engagements are on our terms … and that their collaboration with us is on areas that we’ve identified as priorities for the Cook Islands,” he told the outlet.

  The question is how he manages these relationships in his second term.

• The Trump administration is set to impose a wide-ranging 50 per cent tariff on products from Canada on Wednesday, accusing it of engaging in unfair trading practices after provinces had halted the purchase of US alcohol, slapped tariffs on US cars and discriminated against American cheese. Negotiations are underway and Canadian businesses are bracing for impact, the Financial Times reports. Will the TACO theory apply here? And how will Mark Carney, champion of the Middle Powers, handle this latest affront?

Finally, last week I asked for suggestions about New Zealand’s best political speeches, and Emile Donovan told me on his Nights show on RNZ that Maurice Williamson’s “big gay rainbow” speech absolutely had to be on it. Which of course sent me to re-watch it. Absolutely golden:

I’m furiously finishing a feature story for you, so there will be no midweek post this week. I’ll have another episode of The Detail to share on Saturday.

-anna

Hundreds of thousands of people have been killed. Fourteen million have been displaced. It’s the world’s worst humanitarian crisis, according to the United Nations.

It’s not in Iran, it’s not in Ukraine, and not in Gaza. It’s happening in Sudan – and it’s barely making the news.

This week on The Detail, I talked to Tom Gardner, Africa correspondent at the Economist, who’s just returned from a reporting trip to Sudan. He explains the causes of the conflict, the immense suffering he witnessed — and why it’s gaining so little international attention.

The UN is now warning that another massacre, following last year’s in El Fasher, could be looming in the western city of El Obeid.

UN High Commissioner for Human Rights Volker Türk recently warned that civilians were at grave risk in El Obeid. “Let this be a stark warning to the world of an impending human rights disaster and worsening humanitarian situation,” he said. “The states with influence have the duty to exercise it now to stop this madness in its tracks.”

This was a sobering conversation. But even amid the heart-wrenching news of Ukraine, Gaza, the West Bank and Iran, it felt important to shine a small light on this overlooked human tragedy.

You can listen to our conversation on RNZ, Apple, Spotify or YouTube (click for links.)

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A Chinese space research institute tried to trick a New Zealand company into letting it install satellite monitoring technology that could be used to collect militarily-useful information, according to New Zealand’s spy service.

Purple Mountain Observatory, a research institution within the Chinese Communist Party that is particularly interested in Antarctica, was last year found trying to install ground-based space infrastructure in New Zealand.

They “worked with a local company that was likely unaware of the equipment’s capability to collect intelligence of military value and would have no idea who was receiving the data,” the New Zealand Security Intelligence Service says in its 2026 Security Threat Environment Report.

The report, published Thursday, outlines China’s “voracious appetite” for information it can use to gain an advantage either in New Zealand or against its partners. The efforts to get information about critical assets “cannot be described as benign,” it said.

Over the past four years, the spy agency has steadily stepped up its warnings about Chinese intelligence activity targeting New Zealand, including efforts to acquire information for political or corporate use, gain influence and repress Chinese communities in New Zealand.

In fact, New Zealand has called out China by name in its intelligence warnings so often that officials joke they’re tougher on Beijing than Australia is. The Australian Security Intelligence Organisation does not name China explicitly in his equivalent threat assessments.

New Zealand’s latest report was clear about Beijing’s growing interest in accessing information here: “There are several states that conduct espionage against New Zealand, but the People’s Republic of China (PRC) is the only country we have detected doing it at scale,” it says.

The New Zealand spy agency was able to disrupt Purple Mountain Observatory’s attempts to install ground-based space infrastructure in New Zealand.

But it was not the first time Purple Mountain had attempted to install its own ground-based space infrastructure in New Zealand and “is unlikely to be the last,” it said in its report.

“A foreign state illicitly exploiting our space industry in this way undermines New Zealand’s sovereignty, and the information gathered has the potential to be used against our interests, such as covertly informing another country’s military activity,” it concluded.

What is ground-based space infrastructure?

Ground-based space infrastructure, or GBSI, enables tracking and observation of things in space, and can include satellite dishes and radar systems, telemetry and other space surveillance systems, telescopes and sensors, and – increasingly – laser communications.

New Zealand has a booming space industry, incorporating companies like RocketLab, Dawn Aeropsace and Kea Aeropsace.

But it also has a growing number of monitoring facilities.

For example, SpaceOps, owned by the Southland Regional Development Agency, offers to host antennae at its Awarua Satellite Ground Station, based between Invercargill and Bluff.

The Awarua site is considered New Zealand’s most strategically significant commercial GBSI facility because it is one of the southernmost commercial ground stations in the Pacific. Its limited electromagnetic interference and fibre connectivity make it particularly useful for polar and other low earth orbit satellites, according to its website.

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Awarua “is an important location in the world that is great for supporting [low earth orbit] satellites, especially spacecraft in polar orbits,” SpaceOps says.

SpaceOps has international connections: It was built with European and French space agencies in 2004, but became a standalone company in 2021. This year, Awarua has been installing two 11-metre antennas for a new satellite positioning system, with Lockheed Martin Australia. A control centre is being established in Invercargill.

Concerns about foreign military-linked interest in New Zealand’s emerging space industry, the government last year hurriedly updated the Outer Space and High Altitude Activities Act, requiring GBSI operators to get authorisation to carry out regulated activities. They are also required to include annual reporting verifying that protective security and due diligence arrangements remain up to date.

What is Purple Mountain Observatory?

Purple Mountain Observatory is part of the Chinese Academy of Sciences, a state research institution within the Chinese Communist Party structures. It describes itself as focusing on astronomical research and “strategic high technology,” and working toward “national strategic needs”.

A recent notice about a recruitment drive said that the Purple Mountain Observatory will “consolidate its leading position in space astronomy and Antarctic astronomy; address major national strategic needs, break through key technologies in the fields of aerospace security.”

Purple Mountain Observatory planning documents explicitly state that it intends to build a Chinese Antarctic Observatory.

It is located atop Purple Mountain in Jiangsu Province and is known as the “cradle of modern Chinese astronomy.”

As an institution affiliated with the ruling Chinese Communist Party, its organisation structure includes a “Party Committee Office” to carry out “ideological and political work, and the development of socialist civilization.”

“It takes the lead in coordinating responses to public opinion, promoting Party conduct and clean governance, united front work, and work involving mass organisations,” its website says.

The United Front Work Department is the unit charged with managing the CCP’s external influence operations.

In June, the observatory celebrated the 105th anniversary of the founding of the Communist Party of China. Local Communist Party Secretary and Deputy Director Mao Ruiqing “led five new Party members in a solemn oath before the Party flag, while veteran Party members renewed their oath of joining the Party,” the observatory reported on its website.

“Guided by their oaths, the Party members pledged to always remember their identity as Party members and forever maintain the political integrity of Communists,” it said.

While links between the observatory and China’s military are not explicit, the observatory reported a research visit to the National University of Defense Technology, a Chinese military university associated with the People’s Liberation Army, in May this year “for a special exchange on scientific research and talent cultivation.”

The observatory has multiple research units devoted to technology that is “dual use,” or can be used for both civilian and military applications.

To Lam, the most powerful Vietnamese leader in decades, will arrive in New Zealand on Wednesday – the latest effort by both sides to diversify partnerships and hedge against an increasingly fractured world order.

This is the first state visit to New Zealand by a Vietnamese president since 2007, and comes after New Zealand and Vietnam last year marked 50 years of diplomatic relations by elevating the relationship to a Comprehensive Strategic Partnership. They’re expected to sign agreements on education, agriculture, trade and sustainable development.

Lam’s arrival, after first visiting Australia, is also a sign of Vietnam’s ambitions in the world under the leadership of a man unlike any the Communist state has promoted before: He spent his career in the police force and is now a four-star general in Vietnam’s powerful Ministry of Public Security, and has a doctorate in jurisprudence from the security services’ university.

But he’s also a pro-business reformer who’s reportedly partial to fine wine and schmaltzy saxophonist Kenny G. Unusually in a Communist system with Confucian roots – and like his counterpart in Beijing – he’s divorced from his first wife, and he has four children – double the number allowed at the time.

Lam is a new kind of leader who is charting a bold new path for Vietnam, which is still a Communist, one-party state. Here’s what to know about him, his ambitions, and New Zealand’s relations with Vietnam.

Who is To Lam?

To Lam, who is now 69, became General Secretary of the Communist Party of Vietnam in August 2024, then in April this year became president – a sharp change in the Vietnamese system, which has traditionally favoured collective leadership. This is the first time in four decades that one person has held both top posts.

Lam has declared that his task is to “act – and act correctly, decisively, and effectively.”

He has overhauled the way the Communist machinery operates, resulting in more than 100,000 civil service jobs being cut. His supporters say this has removed red tape and inefficiency, but critics accuse him of an unprecedented consolidation of personal power, including by stacking top positions with loyalists.

Since taking power, Lam also has embarked on a “blazing furnace” anti-corruption campaign, which has seen thousands of people prosecuted, including some 5,000 this year alone. (In China, Xi Jinping did the same thing – partly to deal with endemic corruption, partly to get rid of political rivals.)

Vietnam’s ranking in Transparency International’s corruption perceptions index has shot up from 113 in 2016 to 81 last year.

Human rights organisations have criticised Lam as having autocratic tendencies, saying he’s concentrating power, and stamping out dissent, independent journalism and civil society organisations.

Vietnam is in 174th place out of 180 countries in the Reporters Without Borders World Press Freedom Index. The group notes that independent reporters and bloggers are often jailed, making Vietnam one of the world’s biggest prisons for journalists.

Vietnam’s economic ambitions

Vietnam’s economy has been completely transformed since Vietnam’s Communist Party launched its “Doi Moi” economic and political reforms of 1986, laying out a plan to turn the country into a “socialist-oriented market economy”.

It had spectacular success: Vietnam has gone from one of the world’s poorest countries to a dynamic middle-income economy in a single generation, according to the World Bank.

Vietnam’s economy grew a phenomenal 47 percent between 2020 and 2025, and the Politburo has set a target of at least 10 percent annual growth over the next five years.

Lam has laid out ambitious economic plans for Vietnam, including for it to reach high-income status by 2045.

Many of his modernisation plans are reminiscent of those that powered China’s transformation into a cut-throat market economy. The Politburo wants to increase the private sector’s role in the economy, partly by encouraging large, globally competitive “national champions.”

Lam has also championed technology as the “golden key” to Vietnamese prosperity, hoping to make sure the digital economy comprises 30 percent of GDP by 2030 and half by 2045.

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What about Vietnam’s relations with the world?

Lam is a history buff who likes to recount tales of Vietnamese generals defeating China and Mongolia a millennium ago, the New York Times (gift link).

On foreign policy, he has expanded Vietnam’s long-standing “bamboo diplomacy” – the idea that its diplomacy is flexible and emphasises multilateralism, avoiding firm alliances with any single power.

When he gave the keynote address at the Shangri-La Defence Dialogue in Singapore in May, where China’s increasingly assertive role in the Asia-Pacific region was top of mind, Lam urged neighbours to “safeguard peace” amid uncertainty.

“While all nations continue to speak of peace, stability and co-operation, the strategic environment is marked by a growing lack of trust, fragmentation and unchecked competition,” he said.

He has proven adept at walking the geopolitical tightrope between China and the US.

Lam visited China within two weeks of becoming General Secretary in 2024, but then went to the US the following month, attending the UN General Assembly, meeting with President Joe Biden as well as leaders of tech companies including Meta and Google.

Vietnam became a founding member of US President Donald Trump’s “Board of Peace” to support post-war reconstruction in Gaza. Lam attended its inaugural meeting in Washington in February.

But he has also expanded ties with countries across the Asia-Pacific, visiting China, India, the Philippines, Singapore, Sri Lanka, and Thailand this year alone. The leaders of Japan, South Korea, the Philippines, China and Russia have all beaten a path to Hanoi since Lam rose to power.

Vietnam signed a Comprehensive Strategic Partnership with Australia in 2024, and a similar agreement with New Zealand last year.

These agreements are part of a multidirectional foreign policy through which Vietnam seeks to diversify its network of partnerships to reduce reliance on any one country, wrote Hunter Marston, director of the Southeast Asia program at the Lowy Institute.

“Strategic autonomy is the goal,” Marston wrote in a recent note. “Hanoi is averse to alliances and will continue to prioritise its relationship with China, with whom it shares a border and a complicated history.”

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Where does New Zealand fit in all of this?

Lam will arrive in Auckland (from Australia) tomorrow, and will see Governor-General Dame Cindy Kiro, Prime Minister Christopher Luxon and Foreign Minister Winston Peters.

The visit reflects Vietnam’s consistent policy of valuing its relationship with New Zealand, a friendly partner with great potential and many shared interests with Vietnam in the South Pacific region, says Vietnamese Deputy Minister of Foreign Affairs Nguyen Manh Cuong.

Cuong told the official Vietnamese News Agency that the visit comes as Vietnam enters a new development period, with priorities including high-quality human resources, high-value agriculture and green growth – areas in which New Zealand has strong expertise and international recognition.

Closer ties with Vietnam will also be good for New Zealand and “will support New Zealand’s prosperity and security,” Luxon said in a statement.

With few trade barriers, a population of over 100 million people and a growing middle class, Vietnam has been identified as one of the top export growth opportunities for New Zealand, the Ministry of Foreign Affairs and Trade says. Two-way trade hit $3.41 billion in the year to March – up 72 percent over five years.

“We want to build on that growth across food and fibre, education, tourism, technology, aviation and investment, supporting more exports and jobs here at home,” Luxon said.

When New Zealand and Vietnam signed their Comprehensive Strategic Partnership last year, Jim Rolfe, a senior fellow at the Victoria University of Wellington, said more could – and should – be done to deepen and broaden the relationship..

“Though Vietnam and New Zealand are quite different in their international relations, domestic politics, culture, economic structures and sizes, they have significant similarities in their national values — relating to the structure and processes of the international environment — and worldviews that open room for collaboration,” he wrote.

Both countries envision a cooperative and multilateral Indo-Pacific region supported by robust and wide-ranging bilateral relations. They could work together more in areas including agricultural research topics and climate change, and deepen cooperation in defence, security and maritime issues, Rolfe wrote.

Kia ora tatou —

There are just 89 days until the New Zealand election, and it seems like anything could happen. While foreign affairs is never top of the political agenda, I think we’ll be talking more about our place in the world over the next three months because New Zealanders have felt the tangible effects of Donald Trump’s misadventure in the Middle East. I guess that makes it a cost of living issue, but still. I’m beginning to think about how I write about the election so if you have ideas or requests, please let me know. Also feedback. I love feedback (especially constructive criticism.)

I’m very excited that the New Zealand International Film Festival starts this week and have a bunch of films booked, including a “surprise” one on Saturday night. I love being transported from Brazil to China to Estonia through this festival.

Here’s what I’ll be keeping an eye on in the meantime.

Things I’m watching this week

• Vietnam’s strongest leader in decades, To Lam, is now in Australia and will arrive in Auckland on Wednesday. He’s likely to sign several agreements while here. Prime Minister Christopher Luxon, hailing a big increase in bilateral trade, said: “We want to build on that growth across food and fibre, education, tourism, technology, aviation and investment, supporting more exports and jobs here at home.” I’ll have more on To Lam in my next newsletter.
  

• The Cook Islands hold elections on Wednesday, with Prime Minister Mark Brown seeking re-election and his Cook Islands Party fielding the highest number of candidates at 20. Here’s RNZ’s election preview. The Cook Islands News reports that the race is tight and Brown can’t be assured of getting back into office. Brown is the prime minister who signed a “comprehensive strategic partnership” agreement with China without disclosing the contents to New Zealand before ratification, leading Foreign Minister Winston Peters to cut off almost $30 million in annual funding. That funding was reinstated earlier this year when New Zealand and the Cook Islands forged a defence and security declaration. Cook Islands United Party leader Teariki Heather, who strongly opposed Brown’s deal with Beijing and lack of consultation with Wellington, is running against Brown.

• And an election of a very different sort: A by-election will be held in the British constituency of Clacton after Reform UK leader Nigel Farage resigned his seat and immediately stood again. The stunt came before parliamentary authorities could decide whether he should have declared a £5 million (NZ$11.5 million) gift from a cryptocurrency billionaire that he received before his election as an MP. The scandal has only widened since then. He’s asking the people of Clacton to decide in a vote that the other political parties are boycotting. That means Farage’s main rival is Count Binface, a self-proclaimed space warrior who wears a bin-shaped helmet. There are also three candidates from the Official Monster Raving Loony Party and several independents. Polls suggest the Count will get one-fifth of the vote. Results will be out Friday night NZT.
  

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Three things I enjoyed over the weekend

• Evan Osnos, one of the greatest journalists of my generation, has written excellent books on China and the United States (and his most recent one includes a chapter on New Zealand, based on his trip here to chronicle why the ultra-rich were buying up property.) He's just back from Beijing and has written this masterful piece in the New Yorker: The Future, Made in China. It looks at China's incredible technological advances, and the political calculations both Washington and Beijing are making in the race for the future. The piece implicitly warns, as Elon Musk did in 2011, about underestimating China:
  
  “In July, the Chinese firm Moonshot released an A.I. model that performed comparably to its American competitors, at a fraction of the cost. Microchip stocks plunged, on fears that China will dominate A.I., much as it now dominates hardware. China produces at least seventy per cent of the world’s drones, electric vehicles, lithium-ion batteries, and solar cells. It deploys more industrial robots than the rest of the world combined, and, in medicine, it has surpassed the United States in the number of registered clinical trials. Its shipbuilding capacity is roughly two hundred times that of the U.S., and some observers in Washington worry that American stockpiles of munitions would not match China’s in a war over Taiwan.”
  
  It’s long but I highly recommend this piece for its big-picture context framing the technologies that will shape much of our future. (Pro-tip: You can read

  the New Yorker through the Libby app, connected to your local library.)

• Last week I moderated a webinar for the Helen Clark Foundation, following Helen's recent trip to the West Bank. Her descriptions of what's happening on the ground were chilling: Benjamin Netanyahu's far-right coalition is dramatically stepping up support for illegal settlements across the West Bank that are clearly designed to deprive Palestinians of their ability to go to school and work, to make a living and have any kind of dignity. A negotiated two-state solution seems so far away, and people listening were clearly hungry for some kind of hope (as was I.)
  
  Two glimmers: Helen talked about the Israeli civil society groups trying to bring about change from the inside, and the polls for the Oct. 27 election are pointing to a very difficult race for Netanyahu. What comes next is another question. So I really enjoyed this piece by , the former editor of the Guardian: Inside Haaretz, Israel's voice of dissent. He writes about how the liberal newspaper has arguably become more leftist as the country has moved further to the right, including reporting on the huge increase in violence in the West Bank. But Rusbridger asks whether it can continue in this vein — not least because devoting pages to Palestinian suffering is hardly the way to commercial viability. I tip my hat to the journalists of Haaretz for telling Palestinian stories when (almost) no one else in Israel is.

• This was an electrifying listen: Richard Flanagan on heresies and hope, talking to on ABC Saturday Extra. The Tasmanian author (who lists Albert Camus as his favourite Tasmanian writer!) is so compelling in his commentary about climate change, journalism, politics and this moment we find ourselves in. I am always looking for reasons to be positive (see above) so I really appreciated his call and reasons for hope at the end.

In defence of independence

Finally, this made my week: In my latest column in The Listener, I argued we need to become more resilient if we are going to get back to have an independent foreign policy. A lovely reader sent me this clipping from the Waikato Times in 1973, after Norman Kirk delivered an address to the United Nations General Assembly, in which he criticised nuclear testing and offered New Zealand troops as peacekeepers.

The overall picture which Mr. Kirk left General Assembly delegates with was one of a small nation, speaking on its own and other small nations' behalf, which is becoming increasingly resentful of being “pushed around,” which is demanding a greater say in the affairs of the international organisation.

These sentiments are still salient today (and the world has pretty much given up on the UN being able to make good on them.) But the first line made me laugh: “No one expected Mr. Kirk to bring the house down.”

James Curran, a professor of modern history at the University of Sydney who has written about great Australian political speeches, recently asked me about the best political speeches in New Zealand history. I immediately said David Lange’s “uranium on your breath” speech, and thought of Jacinda Ardern’s “they are us” speech after the Christchurch mosque shootings. Peter Fraser probably gave an important speech or two, I thought.

Are there speeches you think belong in a New Zealand compendium of great political speeches? I’d love to know.

That’s it from me for now

-anna

Good morning —

I got back late last night from Suva, where China’s missile launch into the South Pacific last month was top of the agenda at the Pacific Islands Forum foreign ministers’ meeting. Australia and New Zealand condemned the launch of a nuclear-capable missile into the waters off Tuvalu, and leaders of some Pacific nations, including the Solomon Islands and Papua New Guinea, said launch was not the action of a “friend.”

Representatives from 16 of the 18 countries at yesterday’s agreed that the group should issue a statement.

“We don’t want to be intimidated by any powers," Tuvalu’s permanent secretary for foreign affairs, Pasuna Tuaga, told New Zealand reporters gathered at the forum. "It’s not about what the Chinese had done, putting these dummy warheads; that’s not the way we want to be treated. That’s why we want to send a very strong statement from the Pacific as a collective.”

But forum decisions must be unanimous — and Kiribati and Naoero (Nauru) would not agree. Not even to the most watered-down of statements that ministers recommend leaders consider issuing a statement before their meeting in Palau early next month. Australia’s foreign minister Penny Wong and New Zealand’s Winston Peters were furious — and Peters was blunt in the closed session.

But still, all the group could agree was to kick the can down the road.

Naoero received more than $1bn from China last year after switching diplomatic relations from Taiwan to China, while relations between Kiribati and China have been steadily been developing stronger ties over several years.

(More on the meeting from RNZ’s Lauren Crimp here.)

To find out more about what China wants in the Pacific — and the wider world — my episode of The Detail this week is about exactly this: China’s global ambitions.

I talked to Sam Chetwin George, a senior fellow at the Asia Society’s Center on US-China Relations in New York. Sam is a Kiwi: he was a New Zealand Prime Minister’s Scholar, learning Mandarin in Taiwan, and he also studied at Oxford and Stanford. He recently published an excellent piece in Foreign Affairs magazine about how Beijing is making the most of this “age of anarchy”. (I highly recommend reading the whole thing.)

But to hear Sam and I talk about China’s ambitions, and how New Zealand fits into them, you can listen to it on Apple, Spotify, or YouTube. Or on RNZ.

Have a great weekend, I’ll be back on Monday

-anna

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You can read the original here.

New Zealand Foreign Minister Winston Peters, a wily politician whose populist NZ First party gained traction 30 years ago when he stoked fears of an “Asian invasion”, has unleashed perhaps his most controversial racist attack yet.

It happened during a debate last week in the House of Representatives about New Zealand’s Covid-19 response. Chinese-born, Green Party MP Lawrence Xu-Nan called out “Are you vaccinated?” to Peters, who has expressed concerns about Covid vaccine safety and called for inquiries into vaccine injuries.

Peters responded with a tirade that was noteworthy even by his standards.

He told Xu-Nan, who came to New Zealand in 1994 as a child, to “go back to your own country”.

“I noticed you came here five minutes ago,” Peters shouted across the House. “Go back to your own country – that’s where they lie like a flatfish, but they don’t lie like that here, all right? This is called a democracy.”

The outburst has ignited a diplomatic firestorm with China at a time when relations between Beijing and Wellington were already growing more tense, and is threatening the very foundations of the right-wing government.

Prime Minister Christopher Luxon has faced mounting calls – including from his predecessor, Helen Clark, who also led a coalition in which Peters was foreign minister – to fire Peters. Clark told RNZ that Peters’ actions “invite a sacking and the consequences that flow from that”.

But to do so would almost certainly precipitate the collapse of the National-led government, which is in coalition with NZ First and the libertarian Act Party, at a time when National’s support is declining.

The government is hoping for a boost before the general election, scheduled for 7 November – although with inflation and unemployment rising, it’s not clear where that boost is going to come from – and certainly doesn’t want to call an early election that could go either way.

“I don’t think anyone would thank us for breaking up the coalition,” Finance Minister Nicola Willis, and the politician most likely to succeed Luxon as National Party leader, said on Tuesday.

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After Luxon had a “conversation” with him about the “racist” comments, Peters doubled down and refused to apologise. The Labour, Green and insurgent centrist Opportunity parties have all said they would not have Peters as foreign minister if they form a government in November.

It’s the damage to New Zealand’s international reputation that is ringing the most alarm bells.

Relations had already been growing more tense amid a foreign policy reset to more closely align New Zealand with traditional security partners, namely Australia and the United States, and sharper condemnation of China’s actions in the South Pacific. In June, Beijing put a travel ban(Opens in new window) on four backbench MPs for visiting Taiwan – visits that are a long-established practice.

The Chinese Embassy in Wellington said last week it had lodged “solemn representations” with the Ministry of Foreign Affairs and Trade over the “negative China-related remarks made by a certain politician in the New Zealand Parliament”.

This opens up another source of tension in the relationship with Beijing, which successive New Zealand governments have been careful to handle with kid gloves for fear of upsetting the economic relationship. China is by far New Zealand’s largest trading partner – at NZ$22.8 billion last year, exports to China exceed those to Australia and the United States combined – and is particularly important for primary industries including dairy, meat and timber.

Peters’ outburst follows another racist tirade from his party about another key economic partner. As the government was negotiating a free trade agreement with India – partly to reduce New Zealand’s economic dependence on China – NZ First deputy leader Shane Jones warned that increased Indian immigration would cause a “butter chicken tsunami”.

Peters has long acted as a populist at home while projecting the image of statesman abroad, and governments have become accustomed to seeing his two sides over his many decades in politics. The increasing bite in his rhetoric in the lead-up to a tough election will be expected by many.

But Peters, who is now 81, is inviting scrutiny at a time when New Zealand is trying to navigate an increasingly fragmented global order.

The government in which he serves has tilted towards a United States led by an unreliable and unpredictable president who has shown little interest in continuing to guarantee the security of the Indo-Pacific. Meanwhile, the government has – rightly – been more willing to criticise China’s encroachments in the South Pacific, including efforts to forge a security alliance with the Cook Islands, a New Zealand realm country, and the recent launch of a missile into the South Pacific.

New Zealand, like many other countries around the world, and in particular in Southeast Asia, is now figuring out how to manage these two tricky relationships and hedge its bets. That’s tough when both the US and Chinese leaders have shown a proclivity for retaliating economically against political decisions they dislike.

Peters’ outburst hasn’t caused the friction in the relationship – but it sure hasn’t helped keep tensions either.

It’s Monday again (how did that come around so fast?) which means it’s time for my recommendations and a preview of the week.

This week is going to be an interesting one for me because I’m heading to Suva on Thursday for the Pacific Islands Forum foreign ministers’ meeting. It’s coming at a very sensitive time given China’s decision to launch a nuclear-capable missile into the nuclear-free waters of the South Pacific, and amid a new frenzy of diplomacy in the region as China pays more and more attention to it.

More on what to expect from that below. But first.

Three things I enjoyed this past week:

• This is a wild story, from the great team at Rest of World: People in China can now get paid US$15 to US$700 to license their faces for AI-generated entertainment production. It’s an attempt at a legal solution to what Chinese internet users are calling “face theft” — when ordinary people discover traits of their faces used in AI-generated content without permission.

  A growing number of online platforms are paying people anywhere between $15 and $700 to license their likeness for AI-generated content. The platforms have created catalogs of images — either uploaded by users or taken at designated studios — where producers can browse faces by gender, age, or category such as “girl-next-door,” “rugged,” or “supermodel.” They can also filter candidates based on the genre they are casting, whether it’s a thriller, comedy, or romance.

  The story also describes the Chinese-born trend of “micro dramas” — very melodramatic episodes of soap operas, usually featuring terrible acting and crazy cliffhangers, shot vertically for phones and lasting only a minute or two per episode. These are now becoming more popular around the world. If you ever see them, you’ll probably wonder (like me) why.
  

• I also enjoyed this piece from ABC’s Media Watch about Sudan’s “forgotten war” and the lack of coverage about it. About 14 million people have been displaced and between 150,000 and 400,000 people killed. The siege of El Fasher in Darfur could have been the largest mass casualty event since World War II, rights advocates say. More than 33 million need humanitarian aid. And still the atrocities continue. Watching this clip made me feel embarrassed as a journalist. Of course we should be paying attention to Ukraine and Gaza and Iran — but we should also be devoting journalistic time and resources to this horrific event.

  The New York Times’ editorial board wrote last month (gift link):

  There are many reasons that Sudan’s war is often overlooked, despite being bloodier than conflicts that receive far more attention. Sudan does not fit into larger global political debates in the ways that the wars in Ukraine and the Middle East do. Africa too often is ignored by those on other continents, a reflection of both racial and economic double standards. Sudan has been so long ravaged by war that efforts to bring peace can seem pointless.

  None of these explanations are acceptable, and they feed the terrible costs of the continuing conflict.

  Those double standards were illustrated this past week when the Trump administration released a map that mislabelled every single country in Africa it cited.

• Finally, I’m obsessed with Kiwi ultra runner Sophie Woods’ incredible journey in the Alps. She’s on track to become the fastest person to complete the 2000km Via Alpina, which stretches across eight countries, from Italy to Monaco. And in a heatwave, no less. Over that course, she will climb more than 120,000 metres — the equivalent of climbing Mount Everest from sea level more than 13 times.

  The current record is held by Jake Catterall, who completed the course in 35 days and 21 hours in 2014. Sophie is on course to smash that. What an astonishing feat of human endurance and ambition.

  

Pacific foreign ministers to meet in Fiji on Friday

Foreign ministers from around the Pacific will meet in Suva on Friday. Winston Peters is probably counting down the days until he leaves the country after the firestorm he ignited last week with his latest anti-Asian remarks.

The nuclear-capable missile that China launched into the waters off Tuvalu, into an area declared by the Treaty of Rarotonga to be a nuclear-free zone, is likely to dominate the agenda.

Australia and New Zealand both criticised the launch but the reaction across the Pacific was more muted, with Solomon Islands prime minister Matthew Wale saying the launch was “not the act of a friend” and Papua New Guinea’s James Marape “appeal[ing] to our Chinese friends that this be the last such missile test conducted in Pacific waters”.

But the forum has so far failed to collectively condemn because decisions require consensus. China is a dialogue partner of the forum and is expected to send representatives to the forum.

Professor Steven Ratuva of the University of Canterbury told Pacific Mornings that he expects ministers to remain split on how to respond to the missile test, with Australia pushing for a strong statement against China while many smaller Pacific states favour a more cautious approach.

"It's quite a complex issue here, particularly given the broader context of geopolitical contestation, China on one hand, Australia, and the US," he told Pacific Mornings.

China has become a major development partner across the Pacific through aid and infrastructure investment, as well as security agreements signed with countries including Solomon Islands.

It has also been steadily picking off Taiwan’s diplomatic allies in the region, meaning there are now only three Pacific states that have formal links with Taipei instead of Beijing: The Marshall Islands, Tuvalu and Palau, which will host the leaders’ meeting in September.

Underscoring China’s resolve to do more in the region, Beijing contributed US$1.08 million to the Pacific Islands Forum Secretariat in June under the China-Pacific Islands Forum Cooperation Fund.

The funding would support the forum’s priorities aligned with the 2050 Strategy for the Blue Pacific Continent, providing critical resources to advance regional development objectives and strengthen economic cooperation across forum member countries, the secretariat said.

I’ll report back from the forum later this week.

-anna

Happy weekend! Here’s my latest episode of The Detail podcast.

You can listen to it on Apple, Spotify, or YouTube. (It also played on RNZ at 6:30 this morning but I was still asleep, despite my cat’s best efforts.)

This week I talked to my old colleague, David Lynch, who’s the international economics correspondent for the Washington Post — and he did similar roles for the Financial Times and Bloomberg before that. So he knows his stuff.

David told me that the 12.5 percent tariffs that the Trump administration imposed on New Zealand this month are more likely to survive legal challenges than the previous levies.

That’s because they’ve been imposed under Section 301 of the Trade Act of 1974, which allows the Office of the US Trade Representative to impose levies for unfair foreign trade practices, intellectual property violations, or forced labour concerns.

Plus I asked David why, despite all the tariffs and the oil crisis caused by Trump’s Mideast misadventure, the global economy is holding up ok.

I enjoyed making this episode, and hope I’m getting into the swing of this podcasting business. I even had training this week with Grant Walker, whose voice you might know from Sale of the Century, Dancing with the Stars and Lotto. Let me know how I’m getting on!

Have a good weekend. I’ll be back in your inboxes on Monday

-anna

New Zealand and the Philippines last week signed ‌a comprehensive partnership agreement that marks one of Wellington’s most significant diplomatic upgrades in Southeast Asia in recent years.

While the agreement received relatively little attention here, it reflects broader regional shifts and the growing web of middle-power cooperation: New Zealand is deepening engagement with Southeast Asia, while the Philippines is building a wider network of partners to navigate an increasingly contested regional order.

“New Zealand and the Philippines are close friends and trusted partners on the world stage – and today we turn this friendship into concrete action,” foreign minister Winston Peters said in Manila when inking the deal on the sidelines of the ASEAN forum. “Elevating our relationship to a comprehensive partnership signals the importance we place on working together to support a stable, rules-based Indo-Pacific.”

But it’s also a reflection of the closer cultural ties between the two countries, with 109,000 Filipinos now calling Aotearoa home – making them our eighth biggest ethnic community.

Here’s what you need to know about the agreement and the broader forces at play.

First, what’s in the comprehensive partnership?

Relations between Wellington and Manila have grown stronger in recent years, but the comprehensive partnership that Peters and Philippine Secretary of Foreign Affairs Maria Theresa Lazaro signed last week gives the two sides a more formal basis for cooperation and ensures it will be more structured.

The two sides laid out a road map containing four key areas of cooperation, including:

• the development of political engagement, including a policy exchange mechanism on export capabilities in the Philippine agricultural sector, and to develop a framework for climate cooperation within the next two months.

• defence, security, and maritime cooperation, including professional exchanges and training, to build on last year’s SOVFA, which allows joint exercises on each other’s soil.

• trade and economic ties, supported by the establishment of a Joint Economic Commission that will identify new opportunities for investment and commercial collaboration. They signed an agreement to achieve a 50 per cent increase in two-way trade by 2030 and New Zealand pledged to support the Philippines’ goal to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

• and people-to-people links, including in education, migrant worker cooperation, culture and visa facilitation.

It also included agreements on education and geothermal energy.

Carla Teng-Westergaard at Asia NZ’s Media Centre has a more, ahem, comprehensive rundown here.

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How does this fit into NZ’s strategy in the region?

New Zealand has been trying to diversify its relationships across the region, and Prime Minister Christopher Luxon has talked about the economic opportunities of Southeast Asia, while also noting that economic prosperity and security are becoming inextricably linked.

Last year, an upgraded AANZFTA – a free trade agreement between ASEAN member states and Australia and New Zealand – was upgraded to further reduce barriers and boost trade in the region.

During his trip to Manila last week, Peters called the Philippines, home to 113 million people, a “dynamic partner in Southeast Asia” and “one of the region’s fastest-growing economies.”

Although it is still very much a developing economy, the Philippines is considered an emerging market.

But, just as the government is building on the Free Trade Agreement with India and deepening broader cooperation with a “strategic partnership” with the country, it is trying to move relations with the Philippines beyond the transactional field of trade.

The two countries have been steadily improving their ties over the past decade, especially on the military front, with a Status of Visiting Forces Agreement (SOVFA) cementing those ties.

In April, New Zealand took part in the Philippines’ biggest-ever military exercise, the Balikatan drills. It was the first time New Zealand participated, and the same too with Japan, Canada and France. It was the first time Tokyo had sent combat troops to Philippine soil since World War II. Australia and the US, both regular participants, were also there to practise strikes.

What else has the Philippines has been up to?

Understanding why this partnership matters also requires looking at how the Philippines has been reshaping its foreign policy.

An archipelago of 7,600 islands, it has been locked in territorial disputes with China over islands in the South China Sea that both stake a claim to, including the Scarborough Shoal and the Second Thomas Shoal.

Beijing has been claiming reefs and building military bases on some of them, and the Chinese Coast Guard ships routinely harass Philippine vessels with water cannon or similar intimidation tactics around other reefs.

Manila won a landmark victory in 2016 when the Permanent Court of Arbitration unanimously ruled that China’s sweeping claims in the South China Sea had no legal basis under international law.

But Beijing has refused to acknowledge the ruling and has continued to stop the Philippines – often through aggressive harassment – from enforcing its territorial claims over the Scarborough Shoal and beyond.

Since Ferdinand “Bongbong” Marcos Jr, the son of the late former dictator Ferdinand Marcos Sr. and Imelda Marcos, became president in 2022, he has significantly strengthened ties with the US.

At the same time (and like many countries in the region), the Philippines has grown increasingly concerned about the unpredictability of the Trump administration and fears that the US will no longer guarantee the security of the region. The Marcos administration increased defence spending by 12 percent in its latest budget, but still devotes only 1.37 percent of GDP to its military, and laid out ambitious plans to buy more warships in particular.

The Philippines’ exposure to geopolitical currents was further reinforced this year, with the Strait of Hormuz crisis, which led Manila to declare a national energy emergency.

Closer ties across the region

Manila has been steadily building up its own military capacity and has also been forging closer ties with like-minded countries – in addition to its formal security treaty ally, the United States.

It signed its first comprehensive strategic partnership, with Japan in May, pledging to work more closely on defence and security, with Manila buying five Japanese frigates and light utility aircraft that will enable the Philippine Navy to boost regional maritime surveillance.

The two countries form key links in the First Island Chain, a string of islands stretching from Japan, down between Taiwan and the Philippines, to Indonesia and Vietnam. This chain has long been considered a vital maritime boundary that restricts China’s ability to project power into the Pacific.

Just this week, the Philippines, Japan and the US concluded a series of joint maritime exercises involving warships, coast guard vessels, and surveillance and fighter aircraft.

The Philippines is set to buy more than a dozen KF21 fighter jets from South Korea between 2027 and 2029, giving them significantly more air power in the region.

Manila has also been quietly ramping up both formal and informal engagement with Taiwan, a significant departure from its conservative approach toward the self-governed island, which China claims as its territory.

The Philippines is entitled to negotiate its relationship with Taiwan in response to regional changes, Defence Secretary Gilbert Teodoro told the Washington Post last year. This may anger China, but, in Manila’s experience, previous attempts to appease its powerful neighbour have gone nowhere, he said.

Earlier this month, Marcos and Canadian Prime Minister Mark Carney pledged to pursue a Canada-Philippines free trade agreement, deepen defense and maritime cooperation in the Indo-Pacific, and strengthen economic ties supported by Canada’s one million-strong Filipino community.

And Australia signed an enhanced defence cooperation framework with the Philippines last year, expanding links on maritime domain awareness and search and rescue, and increasing interoperability between the two militaries. It is now looking to turn it into a comprehensive relationship like Japan has.

How does NZ fit into all of this?

The Philippines’ widening security partnerships with Japan, South Korea, India and Australia are all designed to show its pulling its weight in the region.

“The Philippines is feeling both more comfortable in progressing its modernisation programme, which had been lagging,” said Hunter Marston, director of the Southeast Asia programme at the Lowy Institute in Sydney. “At the same time, it’s seen as an outlier within Asean so it wants to show it’s a proactive security player and is embedded in the region, that it’s not relying exclusively on the US.”

New Zealand, while small, can help with that by providing even more diversification and forging a closer relationship with another maritime country that depends on the international rules-based order.

“The SOVFA and the logistics pact of 2024 show that the Philippines is really intent on adding more defence partners to its security network,” Julio Amador, a foreign affairs commentator in the Philippines, told the South China Morning Post.

“In a practical sense, it may not mean much right now, but it does bring additional counterweight; having more countries on your side is really helpful should contingencies arise,” he told the Hong Kong-based paper.

New Zealand could help Manila grow its intelligence capabilities and enhance its maritime domain awareness and surveillance capacities through its ties with Wellington, said Chester Cabalza, president of the International Development and Security Cooperation. “Despite its modest military size, Wellington is a core member of the elite Five Eyes intelligence alliance,” Cabalza told SCMP.

This could be helpful as the Philippines needs better monitoring capabilities, including cyber-intelligence expertise, to counter Chinese intimidation efforts, analysts said.

The inclusion of New Zealand in these efforts can be seen as part of Manila’s long-term efforts to grow multilateral ties, Marston said.

“They’re not exclusively relying on the US to be the hub in regional security, the spokes are stepping up,” he said. “Middle powers are working together and Southeast Asian countries are looking beyond the US and China to find a middle path.”

Hello and Happy Monday.

This week, we mark an unfortunate anniversary. When he ordered attacks on Iran on February 28, President Donald Trump said the conflict would last “four or five weeks.” Well, tomorrow marks five months of unnecessary war — and the US is mired in a mess of Trump’s own making (with a lot of help from his erstwhile friend, Benjamin Netanyahu.)

At the end of last week, it looked like the ceasefire was well and truly dead, and in fact the situation was getting worse with the Houthis attacking Saudi Arabia and threatening to blockade the Red Sea. Oil markets are in turmoil. And that’s without mentioning the significant damage Ukraine has done to Russia’s oil infrastructure.

After 13 consecutive nights of attacks, there has been a lull in hostilities, reviving hopes of a return to negotiations. Mike Waltz, who’s been the US ambassador to the United Nations since he was sidelined for adding a journalist to a Yemen war group chat, said Donald Trump had paused attacks in Iran and was “giving talks some space.”

But the New York Times (gift link) reported that the pause is also based on concerns that intensifying the war could dangerously drain the Pentagon’s already diminished stockpile of Patriot antimissile interceptors and other air defence munitions in the Middle East.

This week we will get more data about how Trump has caused a global economic crunch with his attacks — not to mention the ongoing human toll.

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Three things I’m watching this week

• This week, the US, EU and Canada will issue GDP numbers for the second quarter, which will give a good indication of how the Iran war is affecting these big economies. As I reported last week, China has already released its Q2 growth figures: 4.3 percent, tracking lower than the government’s 4.5-5 percent target for the year, which was already the lowest target in decades. Statistics are highly political in China and should be taken with a grain of salt, but this shows the impact the war is having on the world’s second biggest economy.
  
  The US will report its GDP figure on Thursday, with economists predicting the annual expansion holding steady at 2.1 percent. If anything, it’s a surprise that the global economy isn’t tanking. I found this story from the Grist encouraging because it describes the accelerated push towards renewable energy (even if it said it wouldn’t last.)

  

• The right-ward tilt in Latin America continues this week with the inauguration in Peru of new president Keiko Fujimori. In 1994, at the age of 19, she became Peru’s first lady when her parents divorced and her father, President Alberto Fujimori, needed to fill the role. Now, after four attempts, she is poised to become president herself. But her critics joke she is so unpopular that she would lose if her rival were a loaf of paneton, the sweet Italian bread at Christmas, Al Jazeera reports. (This story is reminiscent of the rise of Park Geun-hye in South Korea — she became first lady after her mother was shot, and then went on to become a very controversial president, ending up in jail.)
  
  Fujimori will be the latest addition to a host of ideologically aligned, right-wing leaders in Latin America who have assumed power in recent years, often unseating left-wing governments — many of whom have been supported by libertarian firebrand and Trump proxy, Javier Milei of Argentina. Milei will be at Fujimori’s inauguration in Peru on Tuesday, then Abelardo de la Espriella’s inauguration in Colombia on 7 August, from where he will travel to Ecuador to meet president Daniel Noboa, another Trump ally. In fact Brazil just denied visas to two Trump administration officials seeking to travel there ahead of the October presidential election. Luiz Inácio Lula da Silva, now the region’s predominant left-wing standard-bearer, is facing the son of convicted former president Jair Bolsonaro, and there are concerns that they will “politically exploit the situation and undermine the electoral system,” Reuters reported. Bolsanaro Sr was sentenced to 27 years in prison for his Trumpian, Jan. 6-style efforts to storm Congress after losing the 2022 election to Lula.
  

• Finally, I’m adding this book to my stack: Annie Jacobsen, who wrote the breathtaking reads-like-fiction thriller Nuclear War, has a new book coming out this week: Biological War, about how a lab accident or a biological attack could spiral into a global pandemic and societal collapse. Maybe not one to read if you’re looking for a break from the gloom. Luckily I’m only halfway through the new Ann Patchett.

Three things I enjoyed over the weekend

• On how to end the war in Iran, I enjoyed this sober piece in the Atlantic (gift link through my subscription) by my old DC friend, Andrew Exum, who served as assistant secretary of defence for Middle East policy in the Obama administration: “The sooner we acknowledge that the United States has lost the war with Iran and stop fighting, the better. Because we now have a lot of work to do.”

• Gosh it’s wonderful to see taking off here on Substack. This latest piece was a cracker: Housing, Fonterra, cement: the crisis of predatory delay: “The term ‘predatory delay’ was invented by climate activist Alex Steffen in 2016. He used it to describe the way big polluters, while fully aware of the damage they cause, find ways to postpone structural or systemic change so they can keep on profiting from their destruction of the environment.”
  

  Hopetown by Simon Wilson

  Housing, Fonterra, cement: the crisis of predatory delay

  “Predatory delay,” said Auckland councillor Julie Fairey last week, and she might have been lobbing a hand grenade into the meeting, except by that stage, early in the evening, most of her colleagues seemed too exhausted to care. One councillor denied it, quietly, and that was that. They were debating housing density and…

  Read more

  a month ago · 76 likes · 13 comments · Simon Wilson

• Finally, I’ve interviewed maybe 100 escapees from North Korea over the past 20-something years, but the tales of their courageous escapes never fails to get to me. I found this story from the New York Times (gift link) incredibly moving — not just because of their escape but also the challenges the family, and almost all North Korean families, face in the South. We hear so little about actual North Koreans these days because very few have managed to escape since the covid lockdowns as Kim Jong Un used the pandemic as an excuse to further fortify the border with China. This story charts a rare defection by sea. People often ask me if North Koreans are brainwashed. I say almost all of them have seen media from the outside world and know the propaganda they’re fed is lies. Here’s a great line from this story, which I commend to you:
  
  “Il-hyeok idolised K-pop groups like Girls’ Generation and styled his hair in a mohawk like BigBang’s Taeyang. He was arrested for “capitalist delinquency” and released only after paying a bribe, his hair razored. He and his friends once secretly watched “Valkyrie,” the Tom Cruise film about the plot to kill Hitler. When the conspirators failed and were executed, his friends wept.”

I’m scurrying off now to write an explainer for you later this week and to work on my next episode of The Detail. But I also have two reported features in the works that I’m excited about.

Thanks for all your comments and feedback, keep it coming

-anna

Happy Saturday! Here’s my second Saturday episode for The Detail.

Or you can listen to it on Apple, Spotify, or YouTube.

This week I talked to Stephen Dziedzic, the ABC’s indefatigueable foreign affairs correspondent, about Australia’s extraordinary diplomatic flurry in the Pacific.

I also spoke to Anna Powles, an associate professor in the Centre for Defence and Security Studies at Massey University and an expert on the Pacific, about what New Zealand is doing in the region.

The common thread: China’s increasing interest in the Pacific and fears it will set up a military stronghold in our part of the world.

China’s economy is moving in a K shape, with one part pointing up, the other part veering down: Advanced manufacturing sectors including AI and green energy technologies like batteries and electric vehicles are booming, while the housing market remains mired in a prolonged slump, dragging down household consumption and consumer confidence.

Worse, economists say, it looks like it’s structural, not temporary.

“China’s economy has a shape problem,” Joe Peissel, senior macroeconomic analyst at Trivium China, wrote this week.

“For years now, we have highlighted the structural imbalances at the heart of China’s economy – weak consumption, over-reliance on exports, and a persistent supply-demand mismatch. In recent months, those imbalances have well and truly come to a head – welcome to the K-shaped economy.”

New Zealand exporters selling to Chinese consumers — hello dairy, meat, timber producers, also hi to tourism outfits and universities — should be taking notice.

Our biggest export market is undergoing enormous structural changes that could reshape our trading relationship.

For almost 20 years, our economic growth has been underpinned by demand from China’s huge and growing middle class. New Zealand exported nearly $20 billion worth of goods to China last year – double the combined value of exports to our next two biggest markets, Australia ($10.1 billion) and the US ($9.4 billion).

But what if Chinese demand for our products flatlines, or even starts to fall?

The diverging fortunes in the world’s second largest economy were made clear with GDP numbers showing growth of just 4.3 percent in the second quarter as strong exports could no longer offset the domestic malaise — even though exports grew at an astonishing annual rate of 27 percent in June. Excluding the three years of zero-covid restrictions, this was the lowest reading since records began in the early 1990s.

At its July meeting, China’s central bank formally named “structural divergence” as a challenge facing the economy for the first time.

The overall effect: meant growth in the three months to June is tracking lower than the government’s growth target of 4.5–5 percent for the year — already the lowest in decades. (I’d bet money on it coming in bang on target though).

Here are five things that would worry me right now if I were a New Zealand company exporting to China.

The property market is in a stubborn slump

China has grown richer – almost 800 million people have moved out of poverty in the last few decades, and several hundreds of millions into the middle class. Along the way, home ownership has become the main vehicle for middle class investment.

Chinese ploughed their savings into property, buying apartments in the enormous complexes going up around the country – often on spec – considering this a safe way to build wealth.

But a property market crash led to the collapse of big real estate developers before they could finish the complexes, creating “zombie towns” across the country as apartment towers stand half-complete.

Chinese property prices have now been falling for five full years. In fact, Chinese property values have fallen almost twice as far in percentage terms as American house prices did in 2007-2008, causing the global financial crisis.

This has been the key driver of the internal slowdown and is the main reason the domestic economy inside China hasn’t bounced back from the zero-covid years. The flip side of such rapid wealth accumulation: People remember what it was like to be poor, and are saving their yuan as a result.

Beijing has proven it won’t unleash the kind of bazooka stimulus it provided after the global financial crisis.

“The lack of new measures to support the property sector so far this year suggests that the government is increasingly resigned to allowing supply and demand to come back in line gradually, rather than attempting to engineer a faster recovery,” Leah Fahy, senior China economist at Capital Economics, wrote in a recent note. “That’s a process that will take many more years.”

This is affecting consumer confidence.

Frugality reigns

For years, policymakers in Beijing have been trying to boost consumption at home to try to create more of an internal engine of economic growth. They have failed, as the latest official data underscores.

Retail sales of consumer goods fell 0.6 percent in May – the first outright contraction in over three years, since the end of the Covid era – although they recovered a little last month thanks to online shopping festivals.

This is partly because Beijing offered a generous subsidy program during 2024 and 2025 if people upgraded their washing machines, part of an effort to boost consumer demand. But even in China, there are only so many washing machines households can trade in.

The data has shown broad weakness, underlining the fragility of consumer confidence, squeezed by surging energy prices thanks to the closure of the Strait of Hormuz.

While China’s AI and renewable energy export boom has been underpinning export growth, Peissel points out that these industries “employ relatively few workers and channel less of their revenue into household incomes than the labour-intensive sectors that drove China’s earlier growth phases.”

The ‘involution’ problem

Involution (内卷) has become a buzzword in China, usually used to describe the feeling that young people have when they’re trying ever harder to get ahead -- but everyone else is too. That makes it feel like they’re going around in circles.

But economists increasingly talk about industrial involution, a form of hyper-competition where companies are producing goods but there are fewer domestic consumers for them: That leads them to cut prices to the point their margins are razor-thin and even expand production so they can maintain market share.

Banks keep these “zombie” companies alive by rolling over loans and and local governments want to protect local champions. All of which keeps overcapacity entrenched, according to Eurasia Group

This means companies turn to export markets to offset weak domestic demand, a contributing factor to the concerns across Europe and Asia that China is dumping goods in their markets at artificially low prices.

Overall, this persistent overcapacity puts downward pressure on prices, leading to deflation.

Deflationary spiral

Industrial overcapacity – combined with the property collapse and weak consumer demand – has depressed prices in China to the extent that some economists have warned that the world’s second-largest economy might be entering a Japan-style era of deflation.

Japan suffered several “lost decades” after a debt-fuelled property bubble burst and persistent deflation, combined with a rapidly aging population.

Last year China’s consumer price index was flat, missing the government’s official inflation target of “around 2 percent.” Producer prices chalked up 41 straight months of declines.

Consumer prices rose only 1 percent in June from a year ago, according to data released by the National Bureau of Statistics earlier this month. This was slower than in May and lower than economists estimated.

If companies are selling less in China, they might cut prices and consumers may hold off making big purchases in the hope of further price cuts. Company profits fall so they limit investment and hiring. Fewer jobs lead to weaker demand. This was the kind of deflationary spiral Japan entered in the 1990s — and stayed there for three decades.

China is not there yet, but it’s something that New Zealand exporters should be aware of — especially if it means squeezed Chinese consumers substitute cheaper products for premium New Zealand goods.

Demographic time bomb

Next: China is shrinking – fast. The country is experiencing population decline on a scale and at a speed the world has never seen, as couples opt to have only one baby – if they have any at all – a decade after the one-child policy officially came to an end.

Births last year totalled 7.9 million, less than half of the number a decade ago, while at the same time the population is aging rapidly. The total population started declining in 2022 for the first time in six decades.

Over the next decade, China will lose nearly 60 million people – roughly equivalent to the population of France.

By 2100, China’s population could halve from 1.4 billion now to 767 million, and a staggering 52 percent will be aged over 60.

This will have an obvious impact on household consumption. China may say it can rely on robots to make up the shortfall when it comes to workers, but robots won’t be eating New Zealand cheese or lying in apartments made by pouring concrete into New Zealand wooden casings.

None of this is going to happen overnight. China will remain an essential market for New Zealand, but it is becoming a fundamentally different economy. The opportunities of the next two decades are unlikely to look like those of the past two.

My first episode of The Detail came out at the weekend: We have heard so much about the economic opportunity of India, but very little about PM Narendra Modi’s view of the world. I talked to two experts about the changes he’s making at home and in foreign relations. You can listen and read here.

I really enjoyed learning how to podcast from this A-team, and am already psyched for this Saturday’s episode (which will be focused closer to home.)

Three things I’ve enjoyed this past week

• I saw Christopher Nolan’s take on The Odyssey (on the big screen at the Embassy Cinema, where my seat was shaking with the volume) on Friday night. It was epic in every sense of the word and I would recommend it, although I — like the Guardian’s columnist — didn’t love the way the women’s characters were downplayed.
  
  This pre-dates the movie but young people in China are describing the drifting years in their twenties — switching constantly between jobs, cities, and studies, delaying marriage and children, and often still relying on parents for financial support — as their “Odyssey Years,” per Sinica:

  Invoking Odysseus makes the drifting feel less depressing, and offers hope that eventually a destination will be reached. But unlike Odysseus, China’s young people today might have no Ithaca waiting for them. So this new label is a way of romanticising that decade of confusion, tinged with resignation and a little bitterness.

  This phrase encapsulates the feeling of hopelessness many young Chinese feel and is likely to become even more widely used when the movie opens in China on Aug. 14.
  

• Sticking with China, I’ve been trying to get my head around Kimi 3, the Chinese AI model that has erased the United States’ lead in one fell swoop and left Silicon Valley agog. Here’s a helpful explainer from the Wall Street Journal (gift link) if you’re also trying to understand this next technological leap.
  

• Crying Myself to Sleep on the Biggest Cruise Ship Ever: Seven agonising nights aboard the Icon of the Seas, by Gary Shteyngart, in the Atlantic (gift link).
  I’ve been a big fan of Shteyngart’s writing since he came out with The Russian Debutante’s Handbook in 2002. I particularly loved Absurdistan and his Martini Tour of New York City for the New Yorker (what an assignment!) So I was eager to read his acerbic take on my idea of hell: a cruise ships. This piece doesn’t disappoint.

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  Coming up

• Andy Burnham is due to enter 10 Downing Street as the UK’s prime minister today (Monday). He’s not known for his strong foreign policy positions and is likely to continue the same approach taken by Keir Starmer.

• Expect more harsh language from China (and North Korea) this week. The week-long biennial Rim of the Pacific (RIMPAC) military exercise — the world’s largest drills — start on Friday in Hawaii. Militaries from 31 countries, including New Zealand, will be participating. There will be about 40 surface ships (including HMNZS Aotearoa HMNZS Te Mana), five submarines, 140 aircraft and more than 25,000 personnel. Beijing always views these drills as an effort to contain China, while North Korea has already denounced the exercises as a “war rehearsal” that will trigger a “chain of countermeasures” from countries in the region.

• The US is beginning its ninth night of strikes on Iran, with Bahrain, Syria, Kuwait and Jordan all reporting strikes from Iran or intercepting missiles. Three American service members were killed on Friday. The interim deal aimed at ending the war appearing to have all but collapsed. This week marks five months of a war Trump said would be done in four or so weeks. Here’s with Ten Reasons the War with Iran is Going From Bad to Worse.

Finally

Welcome to all the new subscribers in Masterton, where I spoke about how we get back to having an independent foreign policy at the Wairarapa branch of the New Zealand Institute of International Affairs. (If the setting looks a little unusual, it was: The branch meets at a funeral home!)

I’ll be back in your inboxes soon with a new piece on China’s domestic economic challenges.

-anna

This post below shows how Europe is dealing with de-industrialisation, reported on my recent trip to Brussels and Berlin, arranged by the Friedrich Ebert Stiftung, to show how Germany is dealing with the hollowing-out of its industrial sectors. The reasons are very different — for one, New Zealand’s exports are complementary to China’s production, while Germany now finds itself in competition with China across key sectors — but I hope you find this illuminating. We’re all having to adapt to and deal with China’s rise in different ways.

BRUSSELS — For almost two decades, Europe viewed China as a land of opportunity, a market with nearly unlimited hunger for its handbags and aeroplanes, chemicals and cars – punctuated by occasional tensions.

But that framing has now collapsed, as a consensus forms across European countries – including the biggest, the industrial powerhouse of Germany – that China poses an existential challenge. Europe is now experiencing China Shock 2.0 (“China Shock 1.0” permanently hollowed out towns in the American midwest, costing about one million blue collar jobs) and at the same time as trying to manage with an increasingly hostile American president.

Talking to officials, experts, parliamentarians and representatives of both business and unions over a week in Brussels and Berlin, a clear message emerged: There is now a near-universal consensus across Europe that China’s industrial overcapacity, helped by state subsidies and an artificially low currency, is hastening Europe’s deindustrialisation.

The economic threat has been reinforced by a growing political consensus: China’s support for Russia’s war against Ukraine is prolonging the energy crisis that is weighing on European economies at the same time as forcing them to channel more spending to defence.

What remains unresolved, and is becoming an increasingly urgent question, is what Europe should do about China, its third biggest trading partner. As one recurring line in our discussions, however, was this: The least defensible option now is simply continuing as before.

The numbers behind the shift

When it became clear that China was making progress towards its “Made in China 2025” ambitions to transform the low-end manufacturing economy into a global leader in technologies including in robotics, automated machine tools, biopharmaceuticals and new-energy vehicles, the European Union acted. In 2019 it adopted a “three-pillar” strategy to deal with China, calling it a partner, a competitor and a systemic rival.

By Beijing’s deadline of 2025, the achievements were clear: The value of its manufacturing output has risen from US$3.2 trillion in 2015 to US$4.85 trillion last year, meaning China now accounts for around 30 percent of global manufacturing output.

China has moved decisively up the value chain, exporting far more sophisticated products across nearly every industrial sector: commercial shipbuilding, robotics, agricultural machinery, biopharma, lithium-ion batteries, solar panels and EVs. BYD overtook Tesla last year as the world’s top EV seller.

The impact of China’s progress is clearly seen in European statistics. The European Union's goods trade deficit with China hit a record €360 billion (US$410 billion) in 2025, or a record €1bn a day, according to official trade data.

The EU and China agreed to enter three months of formal consultations to try to avoid a trade war over the imbalance, with EU trade commissioner Maroš Šefčovič and Chinese commerce minister Wang Wentao issuing their first joint statement in seven years. They will hold their next meeting in Beijing in October.

A study by France's High Commission for Planning published earlier this year estimated up to 55 percent of European manufacturing output could be threatened over the medium term if current trends persist. But this figure varies sharply by country: it reaches about 70 percent in Germany, 60 percent in Italy, 50 percent in Spain and 36 percent in France.

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The German conundrum

Germany remains the central and most conflicted actor in Europe. The country built decades of prosperity on exports to China — led by cars, chemicals and machinery — and firms like Volkswagen, BMW, and BASF still earn substantial profits from Chinese operations, even as direct exports from Germany to China decline.

But sentiment is shifting. Chancellor Friedrich Merz – while sometimes giving mixed messages in public, like his invoking of a “comprehensive strategic partnership” while he led a large business delegation to Beijing earlier this year – is said to now be convinced that Chinese overcapacity accounts for a large proportion of Germany’s deindustrialisation.

German employer associations estimate 400,000 industrial jobs have already been lost over the past three years, roughly 300,000 of them attributable to Chinese competition, with another 500,000 projected to be lost by 2030.

Germany as a whole is estimated to be losing 10,000 to 15,000 industrial jobs a month, a trend tied to both the energy shock following the loss of Russian gas and the competitive pressure from Chinese imports.

Chemicals firms like BASF have also become more supportive of trade restrictions, while generic drug manufacturers and biotech are similarly pushing for more protection, people here say.

The auto sector, while moving, remains the most reluctant to support protectionist measures: It is still deeply reliant on China for both sales and technological learning around electrification and autonomous driving.

But the threat at home is clear: Chinese EV exports to Europe rose 26 percent between 2024 and 2025, despite EU tariffs introduced the year before. Business leaders are so worried about hollowing out that they’re openly discussing whether Stuttgart will become the next Detroit.

At the same time, there is real acknowledgment that Germany cannot blame China for everything. Loss of domestic productivity, high energy costs, and regulatory slowness have compounded its problems.

Politically, the stakes are high. Germany faces a difficult election environment in which the far-right Alternative for Deutschland is a serious contender, fuelled in part by industrial job losses tied to the changing relationship with China. One of the states holding elections in September is Saxony-Anhalt, a major hub for the chemicals, automotive and machinery industries. If AfD wins there, it could fundamentally change Germany.

What to do about China

Representatives from the European Union’s 27 member states met at the end of June to discuss “global macroeconomic imbalances and their implications for Europe’s competitiveness and prosperity” – code for China.

Almost all of them now accept that the nature of the competition has shifted: China is now selling high-tech products that are both cheaper and higher quality than European alternatives.

China's edge is not simply about innovation or ambition – it's structural. China is estimated to hold a 50-60 percent cost advantage over European manufacturers in some sectors, with currency undervaluation accounting for 20-40 percent of that gap, layered on top of lower labor costs and lower environmental standards.

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Furthermore, Chinese industrial clusters can simply move faster: Innovation cycles that would take years in Europe happen in months in China, aided by a regulatory system that can introduce measures – such as outbound investment rules – far more quickly than Brussels can respond.

The leaders did not agree on a tougher, coordinated stance. Instead, they gave the European Commission a mandate to design new trade-defence tools and instructed it to pursue further dialogue with Beijing.

While the result was something of a damp squib, Europe is now swinging into action.

The questions now are what instruments Europe should use to tackle this challenge, and how much economic pain Europe is willing to risk in response.

There is broad skepticism that Europe can or should adopt a single, blunt instrument akin to the US Section 301 tariffs targeting “unfair” foreign trade practices, which the first Trump administration unleashed against China since 2017.

Not only would this be too blunt, it would take too long – as long as two years – for the European Commission to develop, with no guarantee of political mandate at the end.

Instead, the preferred approach inside the Commission is often described as “a thousand small cuts”: Using existing anti-dumping, anti-subsidy, procurement, and market-standard tools more quickly, more flexibly, and without waiting for lengthy investigations before acting.

“Instead of looking at one big push to counter Chinese imports, we have to use the instruments we have faster, better and more flexibly,” said one representative for German industry. “This basically comes down to not having a year-long investigation first then coming up with one instrument for the problem.”

The centrepiece of the more structural response is the Industrial Accelerator Act (IAA), a regulation the Commission proposed in March to both revive Europe's manufacturing base and speed up industrial decarbonisation. Essentially it would focus on Europe’s internal market to boost its industrial competitiveness.

Key components:

• “Made in EU” procurement rules: requirements for low-carbon and/or EU-made steel, cement and aluminium in public procurement, plus origin requirements for EVs and certain net-zero technologies.

• Foreign investment controls: conditions apply when an investment is in manufacturing, exceeds €100 million, and is in a sector where more than 40 percent of global production capacity is controlled by the investor's home country — effectively targeting Chinese-linked investment.

• Faster permitting: a “one project, one procedure” single access point, with permitting for energy-intensive and clean-tech projects capped at 18 months.

• Industrial acceleration zones: member states must designate areas with site-level permitting already completed, so companies can focus purely on building

Though not named as a China-specific measure, everyone involved understands the target of the legislation, which is expected to be finalised in October or November.

Even German unions say this kind of industrial policy would have been written off as a communist idea five years ago, but the China shock has focused minds.

German companies know the moves could bring blowback, but even the German auto industry is warming to the idea of taking action – or at least acknowledges that Germany needs to stop hampering the European Commission.

Disagreements within Europe – France is leaning into protectionism while Spain is resisting confrontation – stand to weaken Europe’s main source of leverage: Its unity.

That could be an additional complication as the Commission tries to build consensus faster than China can move.

Time is of the essence in Europe too. In addition to the looming regional elections in Germany, France will next year hold a presidential election – which the far-right National Rally has a decent shot of winning, meaning there is a very short window of opportunity for Europe to act.

Beijing, which prefers working with member states rather than the EU institutions, has signalled it will retaliate if the IAA takes effect, although the talks are an effort to prevent that.

“There’s more and more of a consensus on how to deal with the China challenge,” said one person who works for the European Commission president, summing up the approach. “But a willingness to apply tools and show resilience only works if we have a dialogue. We have to engage from a position of strength.”

Happy Monday after Matariki. I hope everyone in Aotearoa had a lovely long weekend, even though we couldn’t see the stars here in Poneke Wellington.

I spent Matariki morning with my incredible friend whanau, where we had a big feast and established a new tradition: We jumped over a log (it was not on fire as it was in the middle of Ingrid’s living room) and made wishes for the year ahead — a mash-up of Scandinavian and pagan rituals, with a hint of Persian Nowruz. This year, however, we broke with our Matariki tradition of a swim in the sea — mostly because of the red LAWA warning, even in the harbour. I confess I was relieved as I was already wavering on account of the icy weather.

Geopolitics episode coming to The Detail

Over the past five years or so, podcasts have become my preferred medium for news and entertainment, and I love going on the radio (as regular listeners to Radio NZ will have gleaned.) In fact, I’ve often wondered why I’m still 100 percent print when I’ve become such an audio person.

Well this week, that changes. I’m delighted to tell you that from this Saturday, I will be joining the award-winning team at The Detail, a Newsroom-Radio NZ co-production, to host a weekly episode about geopolitics with a New Zealand lens. Just like what I’ve been doing here on Substack, but with jingles and clips and production values.

I’ll be recording my first episode tomorrow, and it will air on Saturday morning at 6:30am on Radio NZ and appear in your podcast feeds the same morning. I really enjoy listening to The Detail for their deep dives into a single issue each day, and I’m really excited to turn my hand to broadcasting and learn from the best. (Literally the best — they’ve won best News and Current Affairs podcast at the Radio and Podcast awards three years in a row.)

My work for The Detail is made possible thanks to a grant from the generous trustees at the Peter M. Acland Foundation.

You can follow The Detail and listen to all their excellent episodes here.

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Three things I enjoyed over the long weekend

• Beyond cricket and the Taj Mahal, Modi visit reveals reality of NZ ties with India. This excellent piece by Asia New Zealand Foundation CEO Suz Jessup argues for deeper links with India, outside the transactional trade relationship. “Part of the challenge is that New Zealand’s relationship with India has historically been warm but relatively shallow,” she writes.

• There have been some alarming developments concerning nationalist leaders this past week (and no, I’m not talking about Turkish President Recep Tayyip Erdogan giving vintage revolvers, along with live ammunition, to NATO leaders.) I’m talking about Reform UK leader Nigel Farage’s electoral stunt, and Marine Le Pen’s announcement she’s running for the French presidency next year after a reduction in the election ban imposed after she was convicted of embezzling public funds. In this FT podcast, Gideon Rachman and former Paris bureau chief Victor Mallet, who’s written a book about France’s far-right, discuss her chances, and the implications for France and the EU: What would a far-right government in France look like?

• Why America has fallen for Erling Haaland, football’s most likeable superstar. I have paid hardly any attention to the FIFA world cup, but even I’ve heard of Erling Haaland. This fun piece charts his rise from kid who missed the goal to endearing personality of this world cup — even if Norway lost to England at the weekend. From The Athletic via the New York Times (gift link.)

One thing I’ll be watching this week

• Smaller trading nations that are stepping up to defend the rules on which New Zealand’s prosperity relies, with Trade Minister Todd McClay preparing to chair the second meeting of the global Future of Investment (FIT) Partnership in Auckland on Friday, according to in the New Zealand Herald.
  “In effect, this small economies club is endeavouring to build something the WTO is not delivering: a practical mechanism for countries that still believe trade rules matter,” she writes.
  Let’s hope they can make some progress — since the existing global trading regime is looking increasingly fragile.

Thanks again for reading — and I hope you’ll tune in to The Detail this weekend. Let me know how I do!

-anna

BERLIN — For some four decades, Volkswagen led the auto market in China, which at one stage accounted for more than half its annual profit. Its boxy Santana became the first major mass-produced German car in China in 1983, and became the standard taxi and even police car.

As China grew richer, government officials began riding around in black Audis, while the nouveaux riches took to VW’s flashier brands, like Porsche and Lamborghini.

When, in 2015, Beijing unveiled its “Made in China 2025” strategy to become a global leader in industrial sectors including cars and machinery – inspired by Germany’s “Industry 4.0” plan – VW and other German companies doubted that China would be able to compete on quality or technology.

Fast forward to today: VW is in a deep crisis. Its market share in China, the world’s largest car market, fell to less than 10 percent last year. It has been usurped by BYD, the “Made in China 2025” powerhouse that overtook Tesla last year as the world’s top EV seller, and another Chinese automaker, Geely.

It’s no longer worrying about technology theft. It’s investing in China so it can access China’s cutting-edge technology.

The consequences are now showing up in Germany’s labour market.

German employer associations estimate 400,000 industrial jobs have already been lost over the past three years, roughly 300,000 of them attributable to Chinese competition, and Germany continues to lose 10,000 to 15,000 industrial jobs a month.

VW announced last month that it would lay off 100,000 people and close four assembly plants – the largest restructuring in automotive industry history.

Across a week of conversations in Brussels and Berlin with officials, experts, parliamentarians and representatives of both business and unions, a clear message emerged: There is now broad consensus across Germany, and Europe as a whole, underestimated China and its ability to make good on its ambitions.

Food as a security issue

The German experience raises a question – and offers a lesson – for New Zealand: What happens when Beijing decides it no longer wants to depend on foreign suppliers in sectors it’s been assumed it always will?

There are many differences between Germany (and Europe as a whole) and New Zealand when it comes to trade.

For one, the European Union runs an enormous trade deficit with China: It hit a record €360 billion (NZ$719 billion) in 2025, or a record €1bn a day, according to official trade data. The EU now exports more to Switzerland than it does to China.

New Zealand, on the other hand, ran a trade surplus of more than $1.5 billion with China last year.

Second, cars and dairy clearly aren’t equivalent. But New Zealand could face reduced demand even if China never becomes a world-class dairy exporter. It only has to substitute some imports with domestic production.

China is now pursuing food self-sufficiency, and it views this as a national security issue.

Leader Xi Jinping, who comes from a generation with a living memory of famine, has repeatedly declared that the rice bowls of China’s 1.4 billion people “will always be firmly held in their own hands.”

Xi doesn’t want China caught short on food if the political winds change or other factors disrupt food supplies.

In fact, pork is so socially and politically important in Chinese diets that Beijing maintains a “strategic pork reserve” so it can manage prices in times of disruption, like swine flu outbreaks.

Now it’s attempting to ensure food security across other crops and products, and this isn’t just aspirational. Crop yields have been steadily rising.

The structural challenges to achieving this goal are real and significant. Expanding production of land- and water-intensive practices like dairy farming is an enormous challenge for a country with relatively little arable land.

But the lesson from VW’s experience in China is that no one should underestimate China’s ability to do difficult things when Beijing sets big targets.

“They’ve done lots of things in the past that were considered impossible,” said Jacob Gunter, head of the economy and industry programme at the Mercator Institute for China Studies in Berlin.

The EV playbook

That ambition is now showing up in the same institutional playbook China used to build a global EV champion: five-year plans, state investment, and a willingness to absorb years of losses to get there.

Beijing last month laid out a plan not to eliminate food imports but to make them a choice rather than a necessity. It plans to do this by modernising dairy farming, raising productivity, improving quality and food safety – much of it by using technology.

China has a long way to go, and it’s not like it’s going to stop buying New Zealand dairy products overnight.

Its dairy industry is not as efficient as New Zealand’s dairy sector and it has not been performing particularly well: China’s domestic dairy production surged by 27 percent between 2018 and 2023 – part of the self-sufficiency drive – but this contributed to a glut, which depressed prices and forced smaller farms out of business.

Rather than abandoning domestic production, Beijing is doubling down and issuing instructions to consolidate and strengthen the industry rather than let the market correct on its own.

At the same time, it’s diversifying suppliers to avoid depending on any single trade partner in the event of disputes or climate shocks – the same hedging strategy it used with other commodities.

Take soy beans. Beijing’s progress here has been visible: It has dramatically boosted domestic production of soy beans – which are used for pig feed – and invested in Brazil and Argentina so it has a variety of suppliers. As a result, the US’s market share has fallen from 41 percent in 2016, at the start of the Trump administration and the first trade war with China, to 18 percent last year.

New Zealand’s exposure to changes in the Chinese market is huge. China doesn’t have to become New Zealand – it only has to become a little less dependent on New Zealand.

New Zealand remains heavily dependent on China as an export destination for primary goods – China buys about one-third of New Zealand dairy exports, underpinned by strong Chinese demand for premium food commodities.

Other countries also export dairy products to China (including Germany), but New Zealand’s advantage has never been simply producing milk. It’s been producing food that Chinese consumers trust.

New Zealand still has a brand advantage in China, where consumers associate the yellow butter and cheese produced by grass-fed cows with high quality – as opposed to the lighter dairy produced by China’s grain-fed cows. And Fonterra is focusing more on higher-value products like cream, cream cheese, butter and cheese.

Fonterra’s China chief executive Teh-han Chow has suggested China will still need to import about 30 percent of its dairy needs through 2030, even if domestic milk production keeps growing around 6 percent a year.

But what if the models are wrong? What if China moves up the quality and safety scales? What if New Zealand’s dairy industry leaders are giving themselves the same reassurances that German auto executives were a decade ago?

The German carmakers weren’t ignorant: Beijing had clearly and publicly signalled its ambitions, and set out the policies and created the investment needed to achieve it.

Their mistake was complacency. They’d been so successful for so long and they didn’t believe a competitor from a low-end-manufacturing-dominant economy could rival German quality and technology. They thought their brand and their legacy would endure.

The question for New Zealand now isn’t whether China will eventually need to import less dairy. It’s whether New Zealand will recognise the change before it shows up in the export statistics.