Bradley Davies's men worked their way into an early six point lead thanks to the boot of Sale Sharks outside half Rhys Jones, who kicked a third minute penalty and struck a drop goal 10 minutes later, but the New Zealand response was emphatic as they rallied with three tries.
Strong running centre Tim Bateman grabbed the first Kiwi try which polished outside half Colin Slade converted for the first of his 13 points. Skipper and No.8 Victor Vito then plundered the first of two tries in a disastrous five minute period just before the break and Michael Hobbs' second made it 21-6 to New Zealand at the break.
The Welsh pack continued to take the game to their much vaunted rivals and their work was rewarded when hooker Ken Owens crashed over for a 52nd minute try. Jones then cut the gap to one score with his second penalty with 10 minutes left to play to set up a thrilling finale, but the New Zealander's had too much in the tank at the end and, having come under considerable threat, motored away with a second try from Bateman and another from wing Greg Tweddle.
Slade maintained his 100 per cent conversion rate to make it five out of five and also added a penalty.
Wales now meet Scotland on Sunday and finish their Pool assignments against Romania on Thursday, 13 April. They will need to take bonus points from both games if they are to reach the last four - and a possible re-match with New Zealand.
New Zealand: Colin Slade; Armyn Sanders, Timothy Bateman, Male Sa'u, Greg Tweddle; Michael Hobbs, John Legg; Shane Cleaver, Mason Pomare, Jonathan Direen, Chris Smith, Chris Middleton, Hoani Matenga, Carl Anderson, Victor Vito (Captain)
Replacements: Ben Afeaki fdor Direen 44; Adrian Briggs for Cleaver 65; Piula Faasalele for Matenga 58; Scott Fuglistaller for Anderson 53; Daniel Devereaux for Legg 63; Tane Puki for Hobbs 59; Tua Saseve for Bateman 70
Tries: Bateman 2, Vito, Hobbs, Tweddle
Cons: Slade 5
Wales: Martyn Thomas; Alec Jenkins, Jonathan Davies, Ashley Smith, James Lewis; Rhys Jones, Robert Lewis; Hugh Gustafson, Kenneth Owens, Jamie Corsi, Bradley Davies (Captain), Lou Reed, Joshua Turnbull, Daniel Franks, Lewis Evans
Replacements: James Down for Reed 65; Gareth Maule for Jonathan Davies 43; Darren Allinson for Rob Lewis 58; Samuel Davies for Bradley Davies 56
Pens: Jones 2
Referee: Dean Richards (England)