As the due date of leaving the EU draws near, the UK recently signaled an intention to reset its diplomatic relations, including with China. The UK seems inclined to take a more aggressive path towards China at a cost of obstructing a free trade agreement talks with the world’s second largest economy, among others.
From UK authority’s strengthening crackdown on 5G frontrunner Huawei Technologies, to think-tank’s instigation of tilting resources to the Indo-Pacific and form a so-called counterweight against “growing China influence,” inversely, UK’s pragmatist politicians who are worried about its darkened economic prospects are losing voice.
Against the backdrop of the bumpy Brexit and the deadly COVID-19 pandemic spread, the UK has been one of the European economies hit hardest. Based on IMF estimations, the UK economy may shrink by 9.8 percent in 2020, much worse than the 5.8-percent average contraction of all developed economies.
Edging toward a breakup with the EU, the UK is also in urgent need of bonding with other markets so as to rapidly fill the trading gap following Brexit. Besides the EU, the US is the top trade partner for the UK, making it a priority for London to hold onto economic ties with Washington despite the lack of growth momentum of the two nations’ trade.
Though London has shown increased sincerity, it is going to be a tougher road for the Johnson administration after the US President-elect Joe Biden entering the White House as the Democratic Party are not big fans of London exiting the EU common community, and may attach political strings to the already difficult trade talks.
Meanwhile, London taking a more confrontational stance toward China will inevitably dampen bilateral economic cooperation prospects, such as a possible delay or suspension of talks between China and the UK on free trade talks and mutual investments.
China, after concluding the world’s largest free trade agreement – the Regional Comprehensive Economic Partnership (RCEP) – with other 14 Asian-Pacific countries, China’s negotiations with the EU on their bilateral investment treaty (BIT) is also expected to be inked in the near future, probably in December.
While the UK is leaving the EU, its role as a “bridge between China and the EU” will be weakened as some industries will find that it is more efficient to directly base in EU countries. In fact, this trend is already accelerating, as Chinese capital had seen surging into Germany in previous years. Moreover, the prospect of investing in the UK will remain risk for a period of time even though it could leave the EU with an agreement as it takes time for the agreements to be put in place.
Currently, the Johnson administration may attach more significance on imminent interests and temporarily put aside of economic ties with emerging markets, despite the fact that it could promote much needed growth in the future.
In responding to UK’s latest crackdown on Huawei by passing a law to fine UK telecom carriers if they continue to use Huawei gear after a set deadline, China’s Foreign Ministry spokesperson Zhao Lijian said it blatantly violates the principles of a free market economy and free trade norms, severely undermines the interests of Chinese companies, and erodes mutual trust with China, which is the basis for bilateral cooperation.
“In light of this, significant concerns have been raised over the openness and fairness of the British market as well as the security of foreign investment in the UK.”
The article was compiled based on an interview with Cui Hongjian, director of the Department of European Studies of the China Institute of International Studies. bizopinion@globaltimes.com.cn
Global Times
