Brexit and economy loom over Sino-UK relations

By Kyle Calandra
0 Comment(s)Print E-mail China.org.cn, January 25, 2017
Adjust font size:

Attorney General Jeremy Wright (L, front) arrives at the British Supreme Court in London, Britain, Jan. 24, 2017. The British Supreme Court on Tuesday ruled on that Prime Minister Theresa May must consult Parliament before triggering formal negotiations on Britain leaving the European Union. (Xinhua/Han Yan)



In light of the recent inauguration of Donald Trump, many people still feel as though they are living in the shadow of 2016. And in the U.K., the Brexit continues to haunt the horizon.

Almost seven months after the U.K. voted to leave the EU, there's a sense of foreboding, like a deep breath before the plunge, with everyone wondering what to expect when the Brexit actually happens.

According to Wei Qi of the South China Morning Post (SCMP), "With the country splitting from the EU, Theresa May's administration will have to negotiate trade deals with individual states. Among them, China will likely be one of their top priorities."

In an interview with SCMP, Angus Knowles-Cutler, China services group chairman for Deloitte, acknowledged that "the British government is very keen on building links with China."

May's administration has much to gain from their relationship with Beijing, and with many analysts and writers, including Wei Qi, suggesting that leaving the European Union could give the U.K. greater flexibility to garner mutually beneficial deals with China, a closer look can shed light on Sino-U.K. relations in the post-Brexit era.

Enoch Yiu, writing for the SCMP, quoted London Stock Exchange chief executive Xavier Rolet regarding the planned London-Shanghai stock link as saying, "The stock connect scheme is considered an important project for both China and Britain, both governments are very supportive of the link-up."

"Since the referendum," says Rolet, "Chinese buyers continue to close deals here and, if anything, the U.K. looks like a more stable bet than many other advanced economies," due in part to the stock connect and the U.K.'s "friendly" attitude toward Chinese investment cited by Knowles-Cutler.

According to Enoch Yiu, Knowles-Cutler's organization, Deloitte, revealed that "Chinese dealmakers have completed 171 acquisitions across Europe throughout 2016 with a disclosed value of US$88.4 billion," admitting that "activity has not slowed down because of the Brexit, with 11 deals completed in the U.K. since the referendum."

The possibility of a U.S. trade war with China spearheaded by President Trump represents another point of interest for future Sino-U.K. relations, with Louis Tse Ming-kwong, a director of VC Brokerage, saying, "If there are more restrictions imposed by the U.S. on Chinese investors and traders, then it may lead China to move more towards Britain and Europe."

Given the groundwork mentioned above, the anticipated trend in Sino-U.S. relations and the current trend among Chinese investors in the U.K., there seems to be hope for future Sino-U.K. relations, when taking the overall economic situation as a bellwether.

However, Tse did issue a warning: "Britain can no longer play the role as a gateway for Chinese companies to invest in Europe… European countries want to use Brexit as an opportunity to increase their linkages with China. Britain is going to have tough competition ahead."

This could be a spot of bother for the U.K. on their end of the spectrum. However, domestic trends might signal uncertainty for China in the coming years as well.

In an article for the SCMP entitled, "Top China issues to watch in 2017," Frank Tang discussed the overall state of China's economy, saying that the country "held growth steady at 6.7 percent throughout the first three quarters of 2016, but is still facing big challenges as the economy continues to slow," revealing that "Beijing is trying to keep the country's gross domestic product growth above 6.5 percent."

According to Richard Harris, an investment manager, writer, broadcaster and financial expert witness writing for SCMP, for China throughout 2017, "life is likely to get harder. Trying to keep the currency stable in the face of difficult economic conditions," is perhaps "tightening liquidity (in the Chinese domestic market)," a trend that could increase stress on China's economy and eventually influence the country's overall economic policies.

Still a point of uncertainty, these factors may not be wholly discouraging. "While Beijing's recent tightening of capital controls is likely to slow down outgoing investments," says Harris, "analysts say it won't stop large state owned enterprises getting approval because investing globally is still a national policy for the central government."

As long as this policy remains, Chinese investors could reap the benefits of the U.K.'s "friendly" investment environment, with the devaluation of the sterling seen as another incentive.

Despite the lingering shadow of 2016, 2017 promises to be an eventful year in global affairs. With China looking to maintain stable economic growth despite of economic downturn threatening to create a sense of urgency and tightened control, and the U.K. looking to maintain the surety of its investment environment despite increasing competition from Europe, relations between the two countries are likely to remain one of the many pillars of their respective overall economic policies.

Having previously lived in Beijing working as a journalist and editor, Kyle Calandra is currently based in America reporting on Sino-U.S. Relations as a contributor for China.org.cn.

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

Follow China.org.cn on Twitter and Facebook to join the conversation.
ChinaNews App Download
Print E-mail Bookmark and Share

Go to Forum >>0 Comment(s)

No comments.

Add your comments...

  • User Name Required
  • Your Comment
  • Enter the words you see:   
    Racist, abusive and off-topic comments may be removed by the moderator.
Send your storiesGet more from China.org.cnMobileRSSNewsletter