Brexit, China and more

Sino- British relations in a changing world of Brexit, TPPA, TPP and more

The decision of the British people, in a referendum, to leave the European Union is not a clear cut decision. It will take time to work through and resolve what it might mean, and to see if that end product is what the British people voted for.

It is a complex set of issues which relate not only to British interests but also to European interests, and in some cases beyond that.

So it is not possible to make any clear comments on the impact of this issue on the broad Sino-British relations. Those who influenced British voters to vote to leave made many statements which will now be tested in the negotiations.

For example they suggested we could stay part of the European Single Market while not being part of the European Union. However, European nations which have Free Trade Agreements with Europe all commit to freedom of movement of people and to contributing to the income of the European Union. These last two points were key reasons why people voted for Brexit – to curtail immigration from Europe, and beyond, and to stop paying funds into Europe.

 

It would appear these two key issues will only become clear during the negotiations. It is distinctly possible that the people of the UK may find they made choices that were not really available. The new British Prime Minister will have very hard work ahead.

 

So the UK in or out of Europe is not an easy statement to make. This referendum probably shows that it is not a suitable way to make complex and major decisions, and reduce them to a simple yes or no. The UK is a representative democracy, where the Parliamentarians make the final choices. This was referred, partially, back to the electorate and they appear to have made a confused decision on a very small majority on the basis of unregulated, and unproven, claims.

The UK is one of the main immigration targets for good reasons, but it leads to some of our regions experiencing difficult crises in housing, education and access to healthcare. This is not something easy to address unless there is some sense of balancing out benefit and cost.

For the moment it appears that European principles and a small majority of the British who voted have contradictory positions. The UK may have a brave new world and be the pioneer of change to meet the challenges and opportunities of globalisation.

What does this mean for the key aspects of Sino-British relations for the next 3-5 years, while all this is being negotiated and resolved into a clear document that the British and Europeans can agree on?

 

The global basis of the UK-China relationship starts from the fact that both nations are members of the Security Council of the United Nations and have global responsibility to manage global and regional flash points. Syria and many others come to mind. They all happen against the increasingly tense relationship between NATO and Russia. The disruption to people and nations from the conflagration in the Middle East is terrible and costly. Such flash points have existed for over 1000 years and it is clear that sustainable economic development can only occur within the context of peace , and that requires a change in the ways of the world.

The UK and China cooperated in helping to achieve a major global breakthrough in Iran, where a peaceful solution was promoted by China and the UK from the time of David Miliband’s tenure as Foreign Secretary and Dai Bingguo as State Councillor for Foreign Affairs. President Obama and John Kerry  were convinced and a peaceful settlement was reached with some strong pressures on Iran.

There is reason to believe that the UK and China can build broad agreements with other nations to use pressure and negotiation to create solutions. Nothing changes here.

 

The internationalisation of the RMB was the big changer in UK-China relations. China needed the UK and London needed China. Chancellor Osborne secured this for London. Is it being lost to Frankfurt and others? This is the golden egg for both. Huge bond issues are to come for the benefit of both. Major IPO opportunities exist as well as substantial trading of the increasingly global RMB. London and Beijing should be encouraged to work together to protect this hugely important area. This needs joint confidence building.

 

Global financial challenges also benefit from UK- China cooperation. China is the world’s second largest economy and the UK the fifth. Both nations benefit from a global financial structure that is safe , fluid and well supervised, and is able to change and adapt with changing times. Both nations have different interests but, in general, as shown by AIIB, cooperation can harmonise their different interests to common goals.

The reluctance of the Bretton Woods institutions to change formally is overtaken by the new informal changes that have taken place and will result in a developing global financial architecture which, with green bonds, will increasingly focus on sustainable development.

This need to manage systems to ensure the financial sector does not create excessive crises, is matched by a desire to allow innovation in financial concepts to support the changing world, especially the New Silk Roads. The UK and China can work together to help create managed change that enables progress without over-challenging the existing institutions. Nothing changes.

 

The UK provides an open economy for China to invest its funds into as it builds a global presence. While the UK may lose some access to the European market, which was an attraction, that may be reflected not in a lack of interest from China but in the value and therefore the price. However, access may be maintained. It is a place where China can showcase its advanced infrastructure capaibilities, of which High Speed Trains and Nuclear are two current examples. Nothing changes.

 

The UK as an entree to the european market. That could change. It depends on the outcome of negotiations betweeen the UK and Europe. Other European nations have access agreements to the EU. Instinctively one knows they need each other. Change is possible.

 

The UK is an important part of the power structures of Europe and has been a positive force for positive relations with China. China highly values this and it is at major risk.

 

The UK has many attractions to Chinese wishing to invest abroad, with its English language, British Chinese, and the Rule of Law to name but three. Nothing changes.

The UK as a centre for learning for Chinese will continue and many Chinese will come here for that, and many Chinese universities and companies will want to attach themselves to British universities’ research capabilities, to build new businesses together. Nothing changes.

 

The New Silk Roads are the greatest transformational development through to the 22nd Century. It is in this area where the UK needs to step up its offering and work to be the partner of choice for Chinese and Central Asian and West Asian nations in landing key infrastructure contracts. There will be major new financial centres where we can cooperate, and many new towns and cities in this $50trillion potential project. It is where the low hanging fruit is if we organise ourselves efficiently. Positive change is possible.

 

The UK and China have much in common and can find more than just Hong Kong as a common interest, although that is in itself a major binding force.

I am sure that our new government will show a commitment to working with China and the Chinese will respond to that. But the complexities of the British – European situation will take time to resolve. Whilst it would be nice to sort it all quickly this is going to take time to unravel. Words of reassurance are the order of the day but both Governments are now in uncharted territories and outcomes depend on the US and China finding common ground now more than ever, and that will be tested shortly.

The UK is managing a clash between those who would sit in larger grouping for safety and opportunity in a globalising world where power is increasingly focusing – Asia, the EU, SCO, ASEAN and NAFTA on the one hand. On the other hand are those who want to return to the times of UK independence and entrepreneurship and create a global trade setting that is unique to the UK and manages globalisation through independence. Key relations with the USA, China, Europe and the Commonwealth will be tested and managed. The outcomes of those will determine the route of the United Kingdom.

 

We should not fear change. For one thing is constant – change.

 

 

 

 

 

 

Stephen

 

 



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