26 March 2018

Financial Times: Brexit adds friction to UK’s China ambitions

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. [...]

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