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Analysis
China-UK relations after Brexit

China-UK relations after Brexit

'Golden era' of trade loses its shine

by National University of Singapore authors

Mon 9 Oct 2017

Especially since 2010, when Prime Minister David Cameron and Chancellor of the Exchequer George Osborne took office, British politicians have used the clichéd term 'golden era' to describe the UK's relations with Beijing. Despite occasional political controversies, such as the Dalai Lama's visit to the UK in 2012, trade continued to grow. This was due, at least in part, to the UK's membership of the European Union.

Before Britain voted to leave the EU in June 2016, Beijing hoped the UK would act as a champion for Chinese ambitions in the EU by supporting its claim to market economy status from the World Trade Organisation. Additionally, the UK could provide a friendly access point for Chinese companies to enter the European single market. The EU is China's largest trade partner, with the latter sending €350bn worth of goods to the bloc in 2015. China has been urging Europe to recognise it as a market economy, to mitigate the application of EU trade defence measures.

EU trade restrictions on China could increase after the UK formally leaves the union. Even if Britain continued to support China, it would have to do so as an independent actor at the WTO. However, the UK's EU departure may expose it to vulnerabilities as it recalibrates its trade arrangements, and Britain's standing in relation to China is likely to weaken.

The most pressing concern is the possibility of British economic decline. Rising inflation and debt suggest the downturn is inevitable, which would contribute to increased UK urgency to secure trade deals. In such circumstances, Britain would probably have to grant greater concessions to partners like China to secure agreements.

Second, if the UK leaves the European customs union, Britain will be less competitive than the EU in winning business from China. Until now, the UK's expertise in services, including the financial, pharmaceutical sectors, made it attractive to Chinese businesses, but Britain runs the risk of being excluded from future services agreements with Beijing.

The third concern is Britain's weakened negotiating power. From a fragile trade position, the UK will have less influence to exert on issues like human rights. In Hong Kong, where the issue of civil liberties is reaching an impasse, Chinese sovereignty seems to have superseded any perceived authority that Britain held with regard to its former colony. In June China rebuked UK Foreign Secretary Boris Johnson for expressing faint concerns about Beijing's influence over Hong Kong's legal affairs.

In the event of a soft Brexit, in which the UK leaves the EU but remains a part of various economic mechanisms, Chinese investment into Britain would probably continue to flow. On the other hand, a hard Brexit would make the UK a medium-sized player in the world community and WTO.

After Brexit, the UK's 'golden era' relationship with China may lose its earlier shine.

This is an edited version of an article from Global-is-Asian, the digital platform of the Lee Kuan Yew School of Public Policy, and reproduced here with the permission of the National University of Singapore.

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