The UK has turned its back on the EU – we must not do the same to China
It has been a little over two months since the EU referendum and data from the UK economy has continued to leave both sides of the Brexit debate wanting.
Commentators were overly negative in July and now seem to be swinging excessively positive but the reality is we simply haven’t had enough data to work out which one is right.
We still have little idea about what is really happening under the hood of the economy and thus the picture will only become clearer as slower sides of the economy – inflation, jobs and investment – start to react. In truth the only prevailing certainty is that of uncertainty.
While this has largely been driven by Brexit, it has not been helped by the decision of Prime Minister Theresa May to hit the pause button on the Hinkley Point power station due to “Chinese security concerns”. By doing so Mrs May has not only reset British-Chinese relations, but has also potentially jeopardised future economic collaboration beyond Hinkley Point.
A leading argument made by proponents of Brexit was that leaving the EU would allow the UK to divert more energy into building stronger economic ties with the rest of the world, rather than our European neighbours. This must start now.
Although I doubt we will see Mrs May taking President Xi Jinping out for fish and chips in her local, she can ill-afford to renege on the efforts made by Mr Cameron and Mr Osborne to build stronger ties with the world’s second largest economy.
Read more: Can China avoid a hard landing?
Chinese investment in the UK would mean greater certainty during a time of change and highlight to the rest of the world that there is confidence in the strength of the British economy despite the unchartered territory that lies ahead.
With the likelihood that Chancellor Philip Hammond will commit to new infrastructure projects to help the economy adjust to Brexit, the support of China in projects beyond Hinkley Point could also help ease some of the pressure on the UK’s deficit that will now not return to surplus until sometime in the next parliament.
David Cameron and Xi Jinping enjoy a pint of beer during last year's state visit.
Strong ties with China are also important in order to ensure that UK businesses are able to maximise the opportunities within China itself. In the short-term, the lower value of the pound- which is likely to remain for some time – could provide a boost to British exporters in a market that is widely regarded as untapped by the UK in comparison to the EU. Longer term, the process of negotiating a complex trade deal with the Chinese that is beneficial to UK businesses will be made significantly easier if it is underpinned by healthy diplomatic relations.
The ties between China and the UK are not coincidental; the UK is the G10 country that relies the most on its services sector and China is looking to transform itself into a services behemoth, just as it became a manufacturing giant over the last 20 years. Whether it be insurance, marketing or fintech, we are world leaders and would be well placed to support China through its economic transition.
Closer ties with China could be the relationship that defines the UK throughout the rest of this century. The UK turned its back on the EU on 23 June. Making Brexit a success means we cannot do the same to China.