Vote poses trade ties challenge
Updated: 2016-06-27 03:08
By ANGUS McNIECE in London(China Daily)
The China-UK trade relationship — described last year as entering a “golden era” — is now mired in a web of challenges and uncertainties, but there are potential opportunities, according to analysts and business figures.
They were speaking after Britons shocked the world on Thursday by voting to leave the European Union, leaving markets in disarray, the British pound plunging, and the country’s trading partners asking, “What does this mean for us?”
In 2013, when British Prime Minister David Cameron — who said on Friday that he will resign — visited China, bilateral trade between the two nations had reached $70 billion.
Last year, President Xi Jinping agreed to more than 30 commercial deals worth a combined $57 billion during a state visit to the United Kingdom, which was hailed as a great success by both countries. Last year, bilateral trade reached $78.5 billion.
Klaus Schwab, founder and executive chairman of the World Economic Forum, said the UK-China trade relationship is strong, and he hopes Britain’s vote to leave will not change this.
“What happened in Britain is one more challenge for the global economy, but I believe we will find new solutions to respond to it,” Schwab said from the World Economic Forum in Tianjin. “I hope UK-China relations will continue to be intensive and friendly.”
Stephen Perry, managing director of the London Export Corp and chairman of the long-established China-UK business network the 48 Group, believes it is too early to tell what impact the referendum result will have on the UK’s trade relationship with China.
“It depends on how the UK and the EU settle their future relationship. That will be complex and take a long time and go through many different periods,” he said.
A major concern is whether China’s interest in the UK will cool if it no longer views the country as the best entry point into the EU’s single market.
The EU market has played a major role in China’s growth — Chinese imports into the EU have doubled over the past decade, reaching 350 billion euros ($389 billion) last year, while EU exports to China reached 170 billion euros.
Andy Clayton, chief executive of LNP China, which helps companies to do business with China, said that after the Brexit it will be in the UK’s interests to have negotiated some form of relationship with the EU when it eventually enters new bilateral arrangements with China.
“My sense is that the opportunity for the UK here is to negotiate and position itself in a way where it maintains enough access to EU markets and has some form of preferential bilateral agreement with China, whereby it is still able to present itself as some form of steppingstone to access European markets,” Clayton said.
When it does leave the EU, the UK will be able to agree free trade agreements with other economies, although it will no longer benefit from the EU’s free trade pacts with 53 nations.
Gaining the ability to form FTAs with China and other fast-growing economies was one of Leave campaigner Boris Johnson’s central arguments, although the prospect of agreeing a large number of new deals is something Jeremy Cook, chief economist at international payments company World First, calls an “onerous circumstance”.
Clayton believes negotiations over an FTA with China will likely start during the two-year disengagement period, although they would only reach completion after the UK agrees its new deal with the EU.
“I would say that maybe a period of three to five years is probably realistic,” he said of a time frame for a UK-China FTA.