UK-China relations after Brexit

Brexit is a mixed blessing for China. On one hand it loses the UK as a relatively China-friendly influencer within the EU and a weakened EU is less of an effective balance against the US and Russia (the Chinese-Russian friendship is one of convenience and riven with suspicion). On the other hand, China’s leverage over the UK is likely to increase, as the latter is forced to step up its economic relationships with non-EU nations, (notably, or optimistically, the US, China and India). In terms of trade, the UK will have to negotiate a new deal with China, and given the UK’s weaker position, it is likely to be an improvement for China. With the significantly falling value of sterling, there will be attractive opportunities for Chinese investors; in addition to importers, students and tourists. The medium to long term (5-10 years) outlook for the UK economy is not as dire as short term instability suggests, and thus there is good value for investors. While it may find Brexit a perplexing act of self-harm, China continues to value its economic relationship with UK; but it will be able to demand a better deal.

The Brexit nightmare bolsters the CCP narrative about democracy’s flaws and “the people” cannot be trusted to make decisions that serve the nation’s best interest. There isn’t much sympathy for the U.K. government on that score. However, China has benefitted from global stability and it does not welcome the uncertainties brought by Brexit, not for the UK but the Eurozone and global markets. Nor is Beijing a fan of “secession” movements and the potential break-up of the UK, hitherto a strong Union, reminds China of its own would-be breakaway regions. As a “close friend in the west” China does not want to see the UK marginalised. The leaders who oversaw the nascence of a “golden relationship” (former Prime Minister David Cameron and Chancellor George Osborne) are no longer driving UK policy (Osborne’s status in a Theresa May government remains in question) and it remains to be seen whether the new government’s position on China will be as enthusiastic.

In sum, the UK Government is hastily re-assembling behind a new leader, and is preoccupied with how to handle Brexit. It is in no position to formulate major strategic plans, and it is hard to say what UK-China relations will look like in the future. However, the relationship with China is very important to the UK and will probably become even more so, if more asymmetrical than previously planned.