By embracing China, we can enjoy a golden age of trade post-Brexit

As the Prime Minister visits China on her first major trade trip of 2018, both the UK and China are redefining their positions on the world stage.

The UK is raising its eyes to look beyond Europe, rekindling old alliances and friendships with countries afar, whilst China is seeking to transform its high economic growth, driven primarily by goods exports, into sustainable growth in order to capitalise on its increasing economic dominance.

By 2030, the Chinese market is forecast to overtake the United States to become the largest economy in the world. Total UK-China trade is worth almost £60 billion a year, and has increased significantly since 2000. China is the UK’s fourth largest importer of goods and services, which illustrates the integration of our markets. Most recently, the significant commitments made at the Ninth UK China Economic and Financial Dialogue on 16 December on deepening their financial services relationship demonstrates the vast scope for closer trade relations.

Post-Brexit, both the UK and China should work together to achieve their shared global aspirations. In order to grasp the opportunities at our fingertips however, questions over China’s economy need to be answered.

First, there is the question of China’s market economy status and how we intend to treat them at the World Trade Organisation. The UK will need to decide what Trade Defence Instruments it will possess post-Brexit to address problems such as an influx of steel and other products. Co-operating multilaterally in Geneva will be vital to kick-starting global trade agreements and, as the second largest economy in the world, China is holding the cards.

Second, there is concern over significant foreign investment in sectors with security or national interests. The UK is currently reviewing its own investment framework, which may have implications for investment from countries such as China. Between 2016 and 2017, Chinese foreign direct investment grew from £6.45 billion to £14.5 billion. Companies from across the economy have received investment: from BP to Weetabix, House of Fraser to Aston Villa football club. There is a balance to be struck between security and healthy investment, and it is vital the UK remains globally competitive and an open economy post-Brexit.

Whilst there are questions over the UK-China economic relationship, the opportunities are plentiful. Discussions at the recent UK-China Trade Working Group focused on the future trade and investment relationship ahead of the UK leaving the EU. The UK can go one step further than the EU to negotiate and sign an agreement with China that removes barriers to goods and opens each other’s economies to services.

China has already taken positive steps in this direction. Last November, China cut import tariffs on 187 consumer goods from nappies to electric razors. Tariffs on whisky have been reduced from 10% to 5%, enabling distilleries across the UK to increase their exports to China.

Furthermore, restrictions on foreign ownership of financial services groups are being eased after years of pressure. Commercial banking, securities, futures, asset managements and insurance sectors will all benefit from these measures. China’s opening up to the rest of the world demonstrably remains a priority of the Xi Presidency and the UK must seize the opportunities this presents.

As the UK begins to carve out a new role in the world, while remaining alert to the risks, we must strengthen and deepen our trade relations with China if we are to embrace a new Golden Era of co-operation.

© Copyright Emma McClarkin
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