Brexit and China: issues beyond economics

By Eugene Clark and Sam Blay
0 Comment(s)Print E-mail China.org.cn, June 29, 2016
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In a historic vote on June 23, Britain voted to leave the EU -- a shocking result to many, but perhaps predictable in a year when populism reigns and normality seems to have flown out the window. There were many predictions as to the likely outcome of the referendum. Now that we know the results, the stage is a set for new predictions. What does the exit of Britain mean for China?

The answer according to most pundits is: not that much. But let's make no mistake about it; it is clearly in China's interest for Britain to have remained in the EU. China has had and maintained a fruitful relationship with Britain in recent times. With Britain being a member of the EU, China's relationship with Britain gave it an influential ally, so to speak, in the EU and ensured smoother diplomatic relations with Brussels.

Being in the EU also ensured that dealings with Britain came with the "EU stamp" and enhanced economic activity between China and the EU. For instance, for almost two decades, Britain has been the principal EU destination for Chinese foreign direct investment, with a cumulative investment of $16.6 billion. Through London, China had a partnership with roots in the EU, which allowed China to play its desired role in the European economy more effectively. For instance, London was the world's first international yuan trading platform, with Chinese treasury bonds issued in RMB. This facilitated China's engagement with the EU economy. All this may well come under pressure with the Britain's exit from the EU.

But this is not to say that it is all gloom and doom for China. For one thing, dark clouds do not always signal bad news. They may bring rain to break a drought. The exit could well mean a good opportunity for exporters to review and rethink their arrangements with the EU. Secondly, China is a resilient nation with diversified economic and strategic interests and options. China's trade with the U.K. is but a small percentage of its overall trade, and thus China is well poised to take Britain's exit in stride. However, the substantial investments made by China into the U.K. will lose some of their appeal. At the same time, London will most certainly maintain its role as one of the world's key financial centers.

It is fair to say that economically, and indeed politically, the exit is not likely to be a major blow to China in the long run. But there are more complex issues beyond economics and politics that have not received sufficient attention and that China needs to be mindful of. One needs to examine the motivations that have driven almost 52 percent of British people to vote to leave the EU. On a wider and more long-term scale, the Britain's decision to exit the EU signals fears of unchecked immigration and loss of control over one's own destiny. Some see the EU as the gateway for too many foreigners and immigrants in Britain. While it may be an overstatement to say that the leave campaign was anti-migrant, one cannot ignore the sentiments expressed by many leave voters at their dissatisfaction with EU's liberal immigration policies.

An estimated 200,000 Chinese visited the Britain in 2015 as tourists. It is unlikely that Britain will introduce visa restrictions of any kind in the immediate future because of the exit, but one should be mindful of possible adverse developments that may impact long-term stays for foreigners, including Chinese visitors. One other factor to be mindful of may be any new visa requirements that may be introduced in the EU itself.

Finally, perhaps most disturbing of all is the symbol that such an exit represents -- a world which much needs the leadership that Britain would have given in re-shaping and reforming the EU as one of the world's major economic and political blocks.

Prof. Sam Blay is from Sydney City School of Law.

Eugene Clark is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/eugeneclark.htm

Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.

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