25 November 2015

LSE: The golden age of Sino-British relations has begun – quitting the EU could halt it

Apart from a gliding pageantry and the reddest of the red carpets, the state visit made by the Chinese President Xi Jinping sealed several mega-deals that upgraded the bilateral trade ties between the UK and the People’s Republic of China (PRC). Yet, Mr Xi has joined other world leaders including the US President Barack Obama, who have openly voiced that they would prefer the UK to remain in the EU. A statement made by the Chinese Ministry of Foreign Affairs saying that “China hopes to see a prosperous Europe and a united EU, and hopes Britain, as an important member of the EU, can play an even more positive and constructive role in promoting the deepening development of China-EU ties” only reinforced that message.

There are three crucial reasons why Beijing fears a potential Brexit and would prefer the UK to remain inside the EU. First and foremost, market access to the European Union is vital to sustain a slowing Chinese economy. As echoed by several Tory ministers, such as George Osborne and Philip Hammond, Britain wants to be “China’s best partner in the West—a gateway to Europe”.

However, a Brexit would only diminish the hope of both the British and the Chinese in placing the UK as an entry point to the European market. The UK is currently ranking as the most popular investment destination for the Chinese (greenfield investments and M&A activities) among the 28 member states of the EU. Chinese enterprises, regardless of their ownership, have a long-term involvement in the well-regulated, safe and robust investment environment in the UK. The UK’s membership within the EU is a vital component of that milieu.

[...] The Chinese would definitely seek alternatives to London in their RMB business should Britain leave the EU. This would certainly result in grave financial losses for the UK. [...]

Secondly, the UK’s continued EU membership could help China in dealing with trade disputes between Beijing and Brussels. China and the EU have long been at odds with each other over trade and Market Economy Status (MES) issues. In particular, the MES has remained a perennial obstacle to furthering EU-China relations. The UK, under both Labour and Tory governments, has long been a strong advocate for China in Brussels.

Thirdly and most importantly, much policy discussion and media coverage on the UK-China relations have been focused on trade and investments. Despite championing their bilateral ties as a “Comprehensive Strategic Partnership”, it seems that the strategic geopolitical element of these relations has not explicitly been on the agenda of David Cameron and Xi Jinping. Both China and the UK are permanent members of UN Security Council, and are gravely affected by common transnational challenges such as global warming and Islamic extremism. Beijing does not constrain the partnership to trade and investments. Rather, it seeks more international cooperation, and wants to use this cooperation for its global influence. [...]

Both the UK and China believe they have entered a “golden era” of their bilateral partnership with an unprecedented growth in trade and investments. Yet the uncertainty over the UK’s continued membership of the EU is casting a shadow over the relationship. From the perspective of Beijing, only a partnership with London that is firmly rooted in the European Union can allow China to play a greater role in the international arena in this age of turbulence.

Full article on London School of Economics

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