My two-day visit to Auckland and Wellington revealed that New Zealanders are conflicted as much, if not more than Australians, about the threats and opportunities of Chinese foreign direct investment (FDI). There are reasons to be wary, but the vast majority of Chinese FDI applications in New Zealand should be welcomed rather than shunned.

Ninety cents in every dollar of Chinese FDI is by state-owned enterprises (SOEs), even if the majority of transactions are by Chinese private domestic firms. Moreover, the relationship between SOEs and the Chinese Communist Party (CCP) is complex but intimate.

For example, of the 70 largest SOEs in China, 69 have a party member in at least two of the top three positions (chairman, president or party secretary). Almost half of the largest SOEs have a former government official in one of these top three positions. Appointment of all board members and senior management positions is done by the party’s Central Organisation Department and the State Council.

Importantly, the criteria for appointment and promotion within SOEs include the capacity of individuals to follow both economic and political directives issued by government agencies. Finally, all assets, including intellectual property and trade secrets, are formally vested in the party’s State-Owned Assets Supervision and Administrative Committee (SASAC), and can be accessed by various government agencies.

The upshot is that any prudent policy needs to assume that any investment by an SOE is to be considered investment by the Chinese state.

Even so, only very few instances of FDI applications by Chinese SOEs will bring up genuine issues relating to national and security interests. Purchasing assets that may create military or strategic vulnerabilities for New Zealand is the obvious exception. Intellectual property theft by Chinese entities (SOEs and private firms) is also of increasing concern, although these risks are a matter for individual firms to minimise rather than government policymakers to take the lead in.

But investment by SOEs in New Zealand’s agricultural land, for example, should be welcomed as long as there are adequate laws and regulations in place about environmental, labor, accounting and export practices. There would be no good reason or capacity for Chinese SOEs to abuse or misuse these assets. Any misguided paranoia – fuelled by sentiments of cultural or national pride in these sectors and in individual firms – will simply deny New Zealand much-needed foreign capital now and into the future.

Dr John Lee holds the Michael Hintze Chair at the University of Sydney’s Centre for Security Studies. This week he delivered lectures for The New Zealand Initiative in Auckland and Wellington.