Despite long-term uncertainties, Brexit offers a treasure trove of potential opportunities for China-U.K. and China-European Union (EU) relations in the future, with China eyeing a potential free trade agreement with the U.K. for wider world market entrance and RMB internationalization, Chinese experts said.
The U.K.’s breakaway from EU membership opens the door to freer trade with China, currently the U.K.’s sixth largest export destination and third largest source of imports. Reciprocally, it could allow Chinese products that meet U.K. standards to enter a vast swath of Commonwealth nations in Africa, Latin America and South Asia, according to Wei Jianguo, vice chairman of Beijing-based think tank China Center for International Economic Exchanges (CCIEE) on Friday.
Existing China-U.K. mechanisms are “poised to accelerate,” Wei said, citing the 1.7-billion-pound ($2.12 billion) Royal Albert Docks project. In May 2013, Chinese developer ABP sealed the mega deal with London to turn its historic dock into a 3.5 million-square-foot office complex, making it a bustling Asian business port and London’s third business district. In October 2015, witnessed by Chinese President Xi Jinping and U.K. then-Prime Minister David Cameron, China’s CITIC Construction signed a deal to become the project’s general contractor. On Nov. 10, 2016, four major Chinese banks agreed to follow up on its financing.
Refuting reports that some Chinese enterprises view Britain as merely a springboard to enter the wider European market, and that Brexit would jeopardize this effect, Wei said that is not the case based on what he observed during recent visits to Jiangsu and Zhejiang provinces, both strongholds of private companies with global reach.
“I met people from Huawei, Geely Auto and many more private enterprises. They said they don’t see any investment as a stepping stone to another, because each new market is different,” Wei said.
Wei expressed optimism about the future of China-U.K. relations, citing, among other factors, the so far mild nature of the U.K.’s departure from the EU. The economy of the U.K. has maintained good momentum after the Brexit announcement. In 2016, its GDP increased by 1.8 percent, the highest rate in Western Europe and second fastest in the G7 group after Germany.
U.K is a main hub for the offshore trading of Chinese currency. The two countries will continue to benefit from their highly complementary economies, with China in need of help with green finance and the U.K. wanting Chinese exports of mechanical products, textiles, raw materials and high-speed rail investment, said Zhang Yansheng, chief researcher at CCIEE.
“A China-U.K. free trade agreement will establish Sino-British relations as an example of China’s ‘new form of great-power relationships’ with developed countries. It might also pave the way for a China-EU bilateral investment treaty (BIT)”, said Ding Yifan, an economist at the State Council’s Development Research Center.