OMFIF: China-UK relations after Brexit

09 October 2017

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

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 In Hong Kong, where the issue of civil liberties is reaching an impasse, Chinese sovereignty seems to have superseded any perceived authority that Britain held with regard to its former colony.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. [...]

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