Brexit adds friction to UK's China ambitions
BUSINESS

Brexit adds friction to UK's China ambitions

Offshore Technology International -
No bigger test of the government's strategy will come than in relations with Beijing

For Theresa May and her colleagues, the case for Brexit rests to a large extent on the assertion that the UK, unshackled from the EU, will flourish by expanding relations with the world’s most dynamic economies. This is what is meant by “Global Britain”, the government’s foreign policy catchphrase. 

No bigger test of the government’s strategy will come than in the UK’s relations with China. 

Like their counterparts in Japan, China’s political and business leaders have little reason to welcome Britain’s decision to leave the EU. As Philippe Le Corre writes, they view the UK as a highly useful entry point into the lucrative single European market. 

If Britain were outside the EU’s single market and customs union, as the Conservative government wants, then China would review its European trade and investment policies. At present, the UK is the EU’s largest recipient of Chinese foreign direct investment. But it might not look so attractive if Chinese access to the EU market from the UK were no longer frictionless.

Rana Mitter, director of the University of Oxford China Centre, says a hard Brexit might put the UK at a disadvantage by making it more of a supplicant than an equal partner in search of a trade deal with China. 

In 2016, Chinese exports to Britain were worth £42.3bn. British exports to China were worth £16.8bn. This made China the UK’s fourth-largest import partner and eighth-largest export partner. Trade and investment relations have increased steadily since 1999, but there is plenty of room for growth.

Andrew Cottey of University College Cork contends that Brexit may deprive the UK of strong cards to play in negotiations with China. “Unless Britain is willing to offer significant concessions to China, it is difficult to see the Chinese government offering the UK a trade deal better than those that may be on the table for the EU, the US and Japan,” he writes.

For the UK, making concessions to China could come at a price. The Trump administration is ramping up the pressure on Beijing over its trade and intellectual property practices. It would surely take a dim view of any British efforts to exploit US-Chinese differences by offering China favourable commercial arrangements.

US disapproval of Britain’s wooing of China precedes the Trump era. In 2015, the Obama administration criticised the UK for “constant accommodation” of China, after London broke ranks with its allies and became the first western country to sign up to the Asian Infrastructure Investment Bank.

When Mrs May visited Beijing two months ago, the official Chinese news agency Xinhua published a commentary that threw light on how China’s rulers view Brexit. It struck a positive tone by observing that the UK-Chinese relationship “has been considered an exemplar for China-West ties in terms of putting aside differences and seeking the largest possible common ground”.

However, the article went on to criticise Mrs May for having delayed approval of the Hinkley Point nuclear plant, a UK energy project funded by Chinese investments. Xinhua’s writers called the prime minister’s action an example of “China-phobia” and said it was “detrimental not only to China-Britain relations, but to the British leader’s much trumpeted image of a ‘Global Britain’”.

It was a reminder that China would not hesitate to take a firm line with the UK when it saw fit.

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