UK Prime Minister Theresa May was scheduled to arrive in China on Wednesday to pay a long overdue visit. The China trip comes against the background that a hard Brexit has become a fact. The UK and the EU have officially set March 2019 as the deadline for the UK to leave the EU.
After breaking away from the EU, the UK now faces the problem of re-entering the world trade system. Western countries such as the US should be considered first as economic partners. However, US President Donald Trump is pursuing an “American First” agenda and does not play by the rules. He cancelled a trip to the UK by posting his decision on Twitter, which overshadowed the US-UK special relationship.
Therefore, the UK will keep good relations with China despite some doubts. China is the world’s economic engine and is willing to shoulder responsibilities in globalization. The bilateral trade relationship is very promising, with trade reaching $79 billion in 2017, a 6.2 percent increase compared with 2016. Exports from the UK to China stood at $22.3 billion, a 19.4 percent jump.
Developing economic ties with China has become an important part of the UK’s foreign policy. China also believes that both countries have a vast basis for cooperation on the Belt and Road (B&R) initiative. A stronger relationship will benefit both sides and infuse momentum into the “China-UK Golden Age.”
Prospects for financial cooperation between China and the UK are bright. London’s position as one of the world’s financial centers will be undermined after Brexit.
Since there are strong competitors as Frankfurt, Paris and Zurich, London must seek cooperation with other countries. China, meanwhile, is eager to build a world-class financial center, so there is common ground for cooperation.
London is where innovation has been taking place during the process of yuan internationalization. London has become the world’s second-largest yuan offshore trading center after Hong Kong. Financial cooperation between China and the UK has a broader foundation as well. At the establishment of the Asian Infrastructure Investment Bank, the UK was the first major Western country that participated.
This is the background to the “China-UK Golden Age.” Unlike her predecessor David Cameron, May has been very cautious when it comes to a commitment involving B&R projects. According to the Financial Times, she has resisted giving a formal endorsement to the B&R initiative.
May’s attitude is to imply that bilateral cooperation has to meet the standards and interests of the UK. Meanwhile, being unyielding to China caters to domestic voters. Investment and construction under the B&R initiative will face some uncertainties after Brexit. The market size will shrink and China might lose access to the European market. Moreover, reviews may take longer for investment projects since the shift from EU standards to UK standards takes time. This may hurt Chinese companies since seizing policy opportunities is a time-sensitive process. China will also have to adapt to new standards and models in the UK.
There are positive effects for China, too. Investment projects in UK must now abide by regulations and rules of the EU, which are much stricter. Brexit will give the UK more independence and flexibility in relations with China. Tripartite cooperation and a China-UK bilateral free trade zone are two plausible economic cooperation models down the road. A bilateral free trade zone requires negotiations. Tripartite cooperation is more feasible and acceptable for both sides.
The Hinkley Point C nuclear power station, which is being built by Chinese and French companies on the Somerset coast of the UK, is an example of tripartite cooperation.
So far, London has focused more on its domestic concerns and relations with the EU. Now it will tentatively explore cooperation with China. Such cooperation has a future if the UK abandons bias and enhances communication with China. At the same time, China should give more thought on how to carry out B&R cooperation with Western countries.
[The author is research fellow with the Institute of European Studies, Chinese Academy of Social Sciences. [email protected]]