By ANGUS MCNEICE in Londonangus@mail.chinadailyuk.com

B ritain’s trade relations with China, celebrated as a key part of a golden era during President Xi Jinping’s state vis-it in October, are likely to be a ected

if Britons vote to leave the European Union in a referendum on June 23.

Analysts and policy experts contacted by China Daily believe the UK would be at a disad-vantage in any trade negotiations in the event of a “leave” vote.

Attention here is already focusing on the e ects of the referendum’s result, which will be known early on June 24, London time.

China has cautiously implied it would favor the status quo. On his visit in October, Xi reportedly indicated to Cameron that China would prefer the UK to remain in the EU — a position later confi rmed in a Foreign Ministry statement.

Last month, Yao Ling, deputy director of a research center under China’s Ministry of Commerce, warned in a ministry-run paper that those investing in Britain as a way into the EU would see the “bridgehead curtailed” if the country exits the EU.

In May, Ipsos MORI surveyed 667 interna-tional businesses with operations in Britain. Of the 26 Chinese businesses included, 29 percent said a Brexit (a name coined by the British media) would have a very negative impact on their company’s future investment decisions, 21 percent said the impact would be fairly nega-tive, 39 percent said it would have no e ect and 11 percent did not know. Not one company said it expected a very positive or fairly posi-tive e ect.

Chinese investment has fl ooded into Britain over the past decade, and UK exports to China

have more than doubled since 2010. Cameron led a business delegation to Chi-na in 2013 when he spoke of lifting the “bamboo curtain” of European trade barriers to China. President Xi’s vis-it heralded deals worth 40 billion pounds ($57 billion; 50.6 billion euros).

As of November, the last set of official figures available, UK exports to China were worth 18.7 bil-lion pounds, with Chinese imports running at 38.3 billion pounds. Although Britain had a surplus with China in the services sector, this was countered by a defi -cit in the trade of goods.

Both sides o er compet-ing narratives on what will happen to the Brit-ain and China’s “special relationship” should the public vote to leave the EU.

The line from the Leave camp is that Britain would greatly benefi t from a bilateral free trade agreement with China, something the Europe-an Commission has so far been unable to reach.

John Zai, founder and CEO of Cocoon Net-works, a China-funded private equity com-pany in London, is among the Chinese busi-nessmen who said they believe the idea of Britain leaving the EU is bad. He said it would harm the prospects for Chinese investment in

European companies.C o c o o n ’s b u s i n e s s

includes buying equity stakes in European busi-nesses that market their activities through London-based networks to attract international investors. “This process may become more difficult if London stops being seen as the deal negotiation center for merg-ers and acquisition activ-ity for European fi rms,” Zai says.

In addition, he adds, the lack of a free flow of resources between Europe and Britain will reduce the UK’s competitiveness, which in turn would make British fi rms less attractive

as equity investment targets for Chinese com-panies.

Others hold a di erent view.“I think we would do a good deal with China

in a relatively short amount of time,” says Geof-frey Clifton-Brown, a legislator who is chair of the Conservative Friends of the Chinese. “Rather than EU bureaucracy getting in the way, I think our trade with China is likely to go from strength to strength.

“I actually think it would be both in China’s interests and the UK’s interest if we came out of the EU. We should do a trade deal that suits

both of us, and suits our businesses.”Clifton-Brown points to China and Britain

working together to establish London as the biggest trading center outside Beijing for ren-minbi as an example of the kind of moves Brit-ain would be able to make as a standalone nation.

“This had nothing whatsoever to do with the EU,” he says. “If we can do colossal deals like that, there is no reason why we shouldn’t go on doing other deals.”

Andy Clayton, chief executive of LNP China, which helps companies do business with China, says if Britain were to leave the EU, then the country would have to rely on fi nancial services as its most potent leveraging tool.

“The disparities (between the British and Chinese economies) are on several levels, and within that lay both an opportunity and a chal-lenge,” he says, explaining that negotiations would inevitably be one-sided. “Typically, the nature of FTAs is that they refl ect the relative strengths and weaknesses of the two econo-mies, and I think the opportunity for Britain is to somehow leverage our position in the fi nan-cial services.”

Those who support the Remain campaign, however, fear that China’s interest in Britain would cool, as the Chinese seek out an alternate gateway into the European single market.

“We’d be immeasurably weakened,” argues Lord Clement-Jones, a Liberal Democrat peer and deputy chair or the All Party Parliamentary China Group. “There’s an element of suspended disbelief — the idea that we’re going to leave a trading bloc of 500 million people is a little bit incredible as far as (the Chinese) are concerned. They think of us as being fi rmly rooted in the EU. They talk about Europe a heck of the lot of the time, not about Britain.”

8 CO VE R STORY CHINA DAILY EUROPEAN WEEKLYJune 17 - 23, 2016

Should I stay, or should I go?WIND TURBINE TOWERS produced by CS Wind China in Lianyungang, Jiangsu province, are prepared to be shipped to the United Kingdom. Britain’s trade relations with China are likely to be a" ected if Britons vote to leave the European Union, experts say. PROVIDED TO CHINA DAILY

Analysts share their views on what Brexit could mean for China-UK trade and relations

“This process may become more di� cult if London stops being seen as the deal negotiation center for mergers and acquisition activity for European fi rms.”JOHN ZAI

founder and CEO of Cocoon Networks

>> PAGE 9

C O V E R S TO RY 9CHINA DAILY EUROPEAN WEEKLY June 17 - 23, 2016

By CHRIS PETERSON

U K Prime Minister David Cameron’s election pledge was made in the run up to the 2015 general election as a means of uniting the Conserva-

tive Party in order to gain a clear victory over Labour’s Ed Miliband and rid itself of the increasing fractious Liberal Democrats, with whom they’d been in an uneasy ruling coali-tion since failing to gain a clear-cut majority in the 2010 plebiscite.

Well, that decision, also aimed at keeping at bay the then perceived threat of Nigel Farage’s UKIP party, which was seeking to curb immi-gration and quit the EU, has now come back to haunt Cameron with a vengeance.

Although it achieved its short-term goal — a clear working majority for the Conservative Party in the House of Commons, and crushing UKIP’s chances of a serious presence in Par-liament, plus the annihilation of the Labour Party — it has raised other, far more serious issues.

It doesn’t matter whether it’s a yes or no vote to June 23’s simple question, the damage to British politics and in particular the Conser-vative Party has already been done.

Yes, it’s true that Cameron vowed he would only serve one more term as Prime Minister until 2020, thus becoming in modern political terminology a lame-duck leader, but by pledg-ing a referendum he’s managed, in the eyes of many, to shoot himself in the foot, if you don’t mind me mixing my metaphors.

Much of the population are angry that this referendum, which Cameron and his col-leagues, perhaps naively, believed would be carried out with reserve and British phlegm, has developed into a bitter shouting match, and a sort of early leadership battle for the Conservatives post-Cameron.

Indeed, many people I’ve spoken to are angry that the real issue of whether or not the UK should remain in the European Union, has been drowned in the ever-increasing yelling match over who is to become the next leader of the Conservative Party.

Many, and I include myself in this, feel Boris Johnson, the former London Mayor, as well as Iain Duncan-Smith, leader of the Conserva-tives when they were in opposition and Chris Grayling, the former Justice Secretary, have made a huge error in jumping on the Leave bandwagon, aligning themselves with Nigel Farage and George Galloway.

Johnson in particular is viewed by many for having taken an opportunistic and cynical

leap onto the bandwagon to enhance what he sees are his chances for a crack at the leader-ship of both the country and the Conservative Party.

So the smoke from the burning bonfi re that is a de facto leadership battle has, for many, obscured the real reason for the referendum.

I suspect that sanity will prevail, and the Great British Public, as Winston Churchill once called the electorate, will opt to remain.

But it still leaves Cameron with the major headache of repairing the huge schism that has reopened in the Conservatives over Europe, to enable them to continue in o9 ce.

There is another scary prospect — much-reviled Labour Party leader Jeremy Corbyn has been at best lukewarm in leading his

party’s support for the Remain campaign. This has led many to believe that he is playing some sort of waiting game, hoping the Con-servatives will self-destruct and allow him and his former colleagues to take over. Corbyn’s critics rightly point out that he’s never been in charge of anything up until now, not even a local party committee.

So Cameron’s high-fl own ideal of allowing the people a democratic right to have their say on Europe has opened up a huge can of worms, as the saying here goes.

Buckle up, it’s going to be a bumpy ride.

The author is managing editor of China Daily Europe, based in London. Contact the writer at chris@mail.chinadailyuk.com

EU referendum opens up a can of wormsRegardless of the result, the Conservatives will have to repair a huge schism that could plague them for many years

COMMENT

>> FROM PAGE 8Philippe Le Corre, a policy analyst in China-

Europe relations and a fellow at the Brookings Institution think tank, echoes this sentiment: “The UK market is just not big enough or inter-esting enough for China. What is interesting for China is the whole of the EU.”

Fredrik Erixon, an economist and former adviser to China’s commerce and fi nance min-istries, says the idea that Britain would be able to leverage market access reforms in China in any trade agreement as a standalone nation is a “naive proposition”.

“The opportunities are scarce (in the event of a leave vote). What I recommend if (Britain) did leave is to become the Hong Kong of Europe,” he says. “To deregulate, cut taxes ruthlessly, cut spending ruthlessly, take away not just regula-tions that come from the EU, but all regulations that have been generated domestically, and use

that as an opportunity to change the composi-tion of policy in the country.”

Nigel Evans, an MP and vice-chairman of the All Party Parliamentary China Group, who sup-ports the Leave campaign, points to an absence of free-trade deals with some of the world’s largest economies as a strike against a remain vote in terms of trade.

“It’s just startling that the EU doesn’t have trade deals with three of the biggest or fastest growing economies in the world — China, India and the United States. I believe, post-Brexit, we have the opportunity to forge new alliances, to forge new trade deals, and I think China will be very high on the shopping list.”

Evans believes Britain would be more dynam-ic in the absence of what he identifi es as stifl ing levels of bureaucracy inherent to the EU.

“The UK without all of this unnecessary red tape will forge deals more quickly, speedily

and reorientate those areas where we do have strength toward the Chinese market in a much better way,” he says. “Post-Brexit, where the doors of the EU have been fi rmly shut toward China, Britain will be open for business with China on a much greater basis.”

However, Kerry Brown, director of the Lau China Institute at King’s College London, believes the Chinese government has signaled that it sees a decision to leave the EU as a reckless one.

“They would think the logical thing to do for any country of any size is to make friends and groups around itself, optimize its infl uence and impact, and that it is extremely perverse to walk away from the world’s largest trading group,” he says.

Brown adds that a Brexit would remove Brit-ain’s status as a “launch pad” for Chinese invest-ment in Europe.

These comments are somewhat at odds with

remarks made in 2014 by Wang Hongzhang, chairman of China Construction Bank, in a BBC interview: “Whether the UK will stay in the EU or not will not do any harm to trade and economic ties or fi nancial relations between the UK and China.”

Lord Clement-Jones believes that these com-peting narratives from leading Chinese fi gures, and the diplomatic phrasing of the Ministry’s statement on the EU referendum, are born from a dual impetus to both make clear that China would prefer Britain to remain in the EU and to emphasize that relations would not be damaged beyond repair in the event of a vote to leave.

“What Wang is trying to do is reassure people that life won’t end, and of course life won’t end, but it will be much more di9 cult,” he says.

Cecily Liu contributed to this story.

BRITISH PRIME MINISTER David Cameron joins students at the launch of the Brighter Future In campaign bus at Exeter University on April 7 in Exeter, England. The government have announced that every household in the country will receive a taxpayer-funded leafl et on the referendum setting out the case for Britain to remain in the European Union. PROVIDED TO CHINA DAILY

“It doesn’t matter whether it’s a yes or no vote to June 23’s simple question, the damage to British politics and in particular the Conservative Party has already been done.”