China Daily (Canada) - - ANALYSIS -

bi­lat­eral re­la­tions to flourish.

Chi­nese in­vest­ment has flooded into Bri­tain over the past decade, and UK ex­ports to China have more than dou­bled since 2010. Cameron led a busi­ness del­e­ga­tion to China in 2013 when he spoke of lift­ing the “bam­boo cur­tain” of Euro­pean trade bar­ri­ers to China. Pres­i­dent Xi’s visit her­alded deals worth £40 bil­lion ($57 bil­lion).

As of Novem­ber, the last set of of­fi­cial fig­ures avail­able, UK ex­ports to China were worth £18.7 bil­lion, with Chi­nese im­ports run­ning at £38.3 bil­lion. Al­though Bri­tain had a sur­plus with China in the ser­vices sec­tor, this was coun­tered by a deficit in the trade of goods.

Both sides of­fer com­pet­ing nar­ra­tives on what will hap­pen to the Bri­tain-China “spe­cial re­la­tion­ship” should the pub­lic vote to leave the EU.

The line from the Leave camp is that Bri­tain would greatly ben­e­fit from a bi­lat­eral free trade agree­ment with China, some­thing the Euro­pean Commission has so far been un­able to reach.

John Zai, founder and CEO of Co­coon Net­works, a Chi­na­funded pri­vate eq­uity com­pany in Lon­don, is among the Chi­nese busi­ness­peo­ple who said they be­lieve the idea of Bri­tain leav­ing the EU is bad. He said it would harm the prospects for Chi­nese in­vest­ment Euro­pean com­pa­nies.

Co­coon’s busi­ness in­cludes buy­ing eq­uity stakes in Euro­pean busi­nesses that mar­ket their ac­tiv­i­ties through Lon­don-based net­works to at­tract in­ter­na­tional in­vestors.

“This process may be­come more dif­fi­cult if Lon­don stops be­ing seen as the deal ne­go­ti­a­tion cen­ter for merg­ers and ac­qui­si­tion ac­tiv­ity for Euro­pean firms,” Zai said.

In ad­di­tion, he added, the lack of a free flow of re­sources be­tween Europe and Bri­tain will re­duce the UK’s com­pet­i­tive­ness, which in turn would make Bri­tish firms less at­trac­tive as eq­uity in­vest­ment tar­gets for Chi­nese com­pa­nies. Oth­ers hold a dif­fer­ent view. “I think we would do a good deal with China in a rel­a­tively short amount of time,” said Ge­of­frey Clifton-Brown, a leg­is­la­tor who is chair of the Con­ser­va­tive Friends of the Chi­nese.

“Rather than EU bu­reau­cracy get­ting in the way, I think our trade with China is likely to go from strength to strength.”

“I ac­tu­ally think it would be both in China’s in­ter­ests and the UK’s in­ter­est if we came out of the EU. We should do a trade deal that suits both of us, and suits our busi­nesses.”

Clifton-Brown pointed to China and Bri­tain work­ing to­gether to es­tab­lish Lon­don in as the big­gest trad­ing cen­ter out­side Bei­jing for the ren­minbi as an ex­am­ple of the kind of moves Bri­tain would be able to make as a stand­alone na­tion.

“This had noth­ing what­so­ever to do with the EU,” he said. “If we can do colos­sal deals like that, there is no rea­son why we should not go on do­ing other deals.”

Andy Clay­ton, chief ex­ec­u­tive of LNP China, which helps com­pa­nies do busi­ness with China, said if Bri­tain were to leave the EU, then the coun­try would have to rely on fi­nan­cial ser­vices as its most po­tent lever­ag­ing tool.

“The dis­par­i­ties (be­tween the Bri­tish and Chi­nese economies) are on sev­eral lev­els, and within that lie both an op­por­tu­nity and a chal­lenge,” he said, ex­plain­ing that ne­go­ti­a­tions would in­evitably be one-sided.

“Typ­i­cally, the na­ture of FTAs is that they re­flect the rel­a­tive strengths and weak­nesses of the two economies, and I think the op­por­tu­nity for Bri­tain is to some­how lever­age our po­si­tion in the fi­nan­cial ser­vices.”

Those who sup­port the Re­main cam­paign, how­ever, fear that China’s in­ter­est in Bri­tain would cool, as the Chi­nese seek out an al­ter­na­tive gate­way into the Euro­pean sin­gle mar­ket. “We would be im­mea­sur­ably weakened,” ar­gued Lord Cle­ment-Jones, a Lib­eral Demo­crat peer and deputy chair or the All Party Par­lia­men­tary China Group.

“There’s an el­e­ment of sus­pended dis­be­lief — the idea that we are go­ing to leave a trad­ing bloc of 500 mil­lion peo­ple is a lit­tle bit in­cred­i­ble as far as (the Chi­nese) are con­cerned. They think of us as be­ing firmly rooted in the EU. They talk about Europe a heck of a lot of the time, not about Bri­tain.”

Philippe Le Corre, a pol­icy an­a­lyst in China-Europe re­la­tions and a fel­low at the Brook­ings In­sti­tu­tion think tank, echoes this sen­ti­ment. “The UK mar­ket is just not big enough or in­ter­est­ing enough for China. What is in­ter­est­ing for China is the whole of the EU.”

Fredrik Erixon, an econ­o­mist and for­mer ad­viser to China’s com­merce and fi­nance min­istries, said the idea that Bri­tain would be able to lever­age mar­ket ac­cess re­forms in China in any trade agree­ment as a stand­alone na­tion is a “naive propo­si­tion”.

“The op­por­tu­ni­ties are scarce (in the event of a leave vote). What I rec­om­mend if (Bri­tain) did leave is to be­come the Hong Kong of Europe,” he said. Erixon added that it would be “ex­traor­di­nar­ily dif­fi­cult” for Bri­tain to reach a re­cip­ro­cal ex­change in trade op­por­tu­ni­ties with China given the dis­par­ity in size be­tween the two economies.

Clifton-Brown brushed this line of rea­son­ing aside. “This is an ar­gu­ment of­ten put by the (Re­main cam­paign). It is ab­so­lute non­sense. I think it is an aw­ful lot eas­ier to do (deals) be­tween two coun­tries that have got their in­di­vid­ual in­ter­ests to look af­ter rather than one coun­try like China do­ing it with 28 coun­tries, all with 28 dif­fer­ent in­ter­ests, all with 28 dif­fer­ent vetoes. So you are ac­tu­ally driv­ing the thing down to the low­est com­mon de­nom­i­na­tor to try and make sure that all 28 agree.”

Nigel Evans, an MP and vicechair­man of the All Party Par­lia­men­tary China Group, who sup­ports the Leave cam­paign, pointed to an ab­sence of free­trade deals with some of the world’s largest economies as a strike against a re­main vote in terms of trade.

“It is just star­tling that the EU does not have trade deals with three of the big­gest or fastest grow­ing economies in the world — China, In­dia and the United States. I be­lieve, post-Brexit, we have the op­por­tu­nity to forge new al­liances, to forge new trade deals, and I think China will be very high on the shop­ping list.”

Evans be­lieves Bri­tain would be more dy­namic in the ab­sence of what he iden­ti­fies as sti­fling lev­els of bu­reau­cracy in­her­ent to the EU.

“The UK with­out all of this un­nec­es­sary red tape will forge deals more quickly, speed­ily and re­ori­en­tate those ar­eas where we do have strength to­ward the Chi­nese mar­ket in a much bet­ter way,” he said.

“Post-Brexit, where the doors of the EU have been firmly shut to­ward China, Bri­tain will be open for busi­ness with China on a much greater ba­sis.”

How­ever, Kerry Brown, direc­tor of the Lau China In­sti­tute at King’s Col­lege Lon­don, be­lieves the Chi­nese gov­ern­ment has sig­naled that it sees a de­ci­sion to leave the EU as a reck­less one.

“They would think the log­i­cal thing to do for any coun­try of any size is to make friends and groups around it­self, op­ti­mize its in­flu­ence and im­pact, and that it is ex­tremely per­verse to walk away from the world’s largest trad­ing group,” he said. Brown added that a Brexit would re­move Bri­tain’s sta­tus as a “launch pad” for Chi­nese in­vest­ment in Europe.

These com­ments are some­what at odds with re­marks made in 2014 by Wang Hongzhang, chairman of China Con­struc­tion Bank, in a BBC in­ter­view.

“Whether the UK will stay in the EU or not will not do any harm to trade and eco­nomic ties or fi­nan­cial re­la­tions be­tween the UK and China.”

Lord Cle­ment-Jones be­lieves that these com­pet­ing nar­ra­tives from lead­ing Chi­nese fig­ures, and the diplo­matic phras­ing of the Chi­nese For­eign Min­istry’s state­ment on the EU ref­er­en­dum, are born of a dual im­pe­tus to both make clear that China would pre­fer Bri­tain to re­main in the EU and to em­pha­size that re­la­tions would not be dam­aged be­yond re­pair in the event of a vote to leave.

“What Wang is try­ing to do is re­as­sure peo­ple that life will not end, and of course life will not end, but it will be much more dif­fi­cult,” he said.

Jiang Ji­axi, a se­nior part­ner with Jursino Law Group in Bei­jing, said Chi­nese busi­nesses would pre­fer Bri­tain to re­main in the EU, to al­low them to ben­e­fit from us­ing the coun­try as a bridge for their prod­ucts and ser­vices to en­ter the Euro­pean mar­ket.

Whether the UK will stay in the EU or not will not do any harm to trade and eco­nomic ties or fi­nan­cial re­la­tions be­tween the UK and China.” chairman of China Con­struc­tion Bank

Ce­cily Liu in Lon­don con­trib­uted to this story.

Con­tact the writer at an­gus@ mail.chi­nadai­


Stu­dents gather at the launch of the “Brighter Fu­ture In” cam­paign bus at Exeter Uni­ver­sity in Devon. Prime Min­is­ter David Cameron at­tends the ac­tiv­ity.

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