A visitor tries a piece of kiwifruit in front of a Zespri stall, at an international fruit and vegetable exhibition in Beijing.

The Prime Minister's own department was warned the Chinese were threatening reprisals against New Zealand kiwifruit, dairy and wool exports.

Last week it was revealed that Beijing officials associated with the Chinese commerce ministry, Mofcom, had contacted Zespri and Fonterra, who had relayed the threats back to New Zealand trade officials.

It seems John Key was blind-sided by the revelations: he insisted the Government had received "no indications" of Chinese concerns about possible anti-dumping duties on cheap steel, or potential retribution.

SAM SACHDEVA/Stuff.co.nz Prime Minister John Key says he has heard nothing about potential retribution from China if we impose sanctions on them dumping steel into the New Zealand market.

Today's news comes after both kiwifruit exporter Zespri and trade minister Todd McClay executed big about-turns. After initially denying New Zealand exports had been threatened, they eventually confirmed the reported approaches.

READ MORE:

* Inside Zespri's plans to grow 'Kiwi' kiwifruit in China

* Kiwi steelworkers and dairy farmers fear Chinese trade threats

* China threatens reprisals on NZ dairy, wool and kiwifruit

Zespri is fighting on two fronts in China. Today, we report it is setting up its own kiwifruit plantations in China to compete with new Chinese-owned plantations.

Director-general of management of the Bureau of Fruit Industry of Shaanxi Province, Wubin Gao, signs a memorandum of understanding with Zespri chairman, Peter McBride.

A spokesman for the Department of the Prime Minister and Cabinet said Key was not alerted to Mofcom's threat to initiate "industry consultation" – the first step towards measures to hold up exports at the border – because it was unsubstantiated.

The government of China, the world's biggest trading nation, was angry that New Zealand had seemingly followed the lead of the United States by conducting preliminary inquiries into cheap and sometimes substandard Chinese steel allegedly dumped on the local market. The steel has been used in major infrastructure projects like the Waterview Connection and the Waikato expressway extension.

Fairfax has confirmed Key's foreign affairs adviser Taha MacPherson was kept in the loop on the issue.

JOHN BISSET / FAIRFAX NZ Prime minister John Key was blindsided by his own department, which failed to tell him about Chinese threats against dairy, kiwifruit and wool exports.

The department spokeman said MacPherson was copied in on Ministry of Foreign Affairs correspondence on July 8 "that related to an approach by a Chinese industry body to a New Zealand exporter".

"DPMC did not brief the Prime Minister, or his office at this time as MFAT was following up to assess the veracity of the claims made – specifically around whether there had been any industry consultation and whether China was planning any trade measures against New Zealand."

After the assessment over the following days, including contact with relevant Chinese authorities, it became clear that the claims were unsubstantiated, the spokesman said. "Given this, the matter was not brought to the Prime Minister's attention until it became clear the claims would be made public."

Last week Trade Minister Todd McClay at first said he had not been briefed on the matter but later back-tracked and said he had been told about the contact with Zespri while he was in China.

Zespri also at first denied any knowledge of the matter. But less than an hour after McClay's u-turn it said its local staff had received "unsubstantiated information" about a possible move by China to retaliate against an anti-dumping complaint against Chinese steel imports.

Fonterra, however, is continuing to dodge questions about its trade policy manager Jenny McGregor contacting the Ministry of Business, Innovation and Employment, which had received the complaint from NZ-based Pacific Steel. She advised the commerce officials that Fonterra's Beijing office had been contacted by Chinese commerce officials.

The officials had advised China would take "retaliatory measures" against NZ exports if NZ were to put in place penalties, or even investigate putting in place penalties, against Chinese steel.

But despite McGregor being publicly named as the Fonterra executive who relayed the threats to the government, Fonterra has continued to deny knowledge.

In a statement Fonterra said: "Fonterra has not received any threats, has not been approached by the Chinese Government, and does not have any information related to the rumours which includes the source of the initial speculation."