Why Brexit Should Matter to Chinese Economy


“A week is a long time in politics”
– British Prime Minster (1964), Harold Wilson.


In a single day, on the 23 rd June 2016 under a typical British overcast sky, the voters in Britain marked one of the biggest historical events in the calendar since Britain’s declaration of war on Germany on 3 rd September 1939. “We have become eyewitnesses to history.” These were the words trending on Sina blog (a popular Media Platform in China). Others were reflecting on possible questions like: ‘When did United Kingdom leave the European Union?’ coming up in future History examination papers.

It wasn’t that long, when the visit of the Chinese President Xi Jinping to UK, was heralded by David Cameron the British Prime Minster as the “Golden Era” in the two countries relationship.

Although Chinese officials expressed their respect for the democratic choice of the British people, they would have preferred to see a United Europe. This is partly because Britain is one of the few supporters that favours China’s Market Economy Status (MES), a system in which free trade and enterprise are encouraged to thrive.

Since China’s economy is widely regarded as being controlled by a powerful central government and China’s wholesale dumping of cheap steel products – which poses threat to European competitors – the EU countries seem reluctant to accept China’s MES. China’s massive economy is going through one of its most turbulent years. The uncertainty of the EU economy and European ministers plan to impose tougher sanctions on cheap imports would further exasperate China’s ailing slow growth, old manufacturing industry and ever increasing debt levels. ShanghaiDaily.com commented that “in our assessment, the near-term economic impact of Brexit on China is likely to be limited, but it could have important implications on China’s exchange rate, policy operation, the strategy in capital account liberalization, and monetary policy operation.”

Since its big devaluation last year and depreciation last few months, the Yuan has been at its weakest against dollars and the impact of Brexit could effectively affect the dynamic of not only the Yuan but also other major currencies.

The Brexit Camp always argued that leaving the EU would be a perfect opportunity for the UK to negotiate its own trade deal with China. Although the Chinese exports to the UK account for a tiny portion of its GDP, China could have the upper hand by negotiating with the EU and thus forcing the UK to a more compatible deal. It is worth bearing in mind that the EU is China’s biggest trading partner ($350 Billion).

After Brexit, will the UK retain the decision-making privileges within the EU? Will the EU add barriers to China’s access to the European Market and limit trade and investment talks with the European continent? According to Article 50 – a part of Lisbon Treaty that deals with the withdrawal from the EU – there will be a two-year negotiation period after which the UK notifies the European Council of its withdrawal. These two years give the Chinese Government time to adjust its strategy and policy in striving for fair trade treatment in Europe… Or we may see a more protectionist approach taken by the EU when dealing with China.

The Effect of Brexit was best summed up by the Chinese Premier Li Keqiang, “The impact of the Brexit vote is already shown in the International Financial Market, adding new uncertainties for the world economy and making it more difficult for the economy to rebound.”


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