SHANGHAI—Three years ago, when British Prime Minister David Cameron visited China, the nationalist-leaning Global Times newspaper couldn’t resist a dig at the former imperialist power.
The U.K., it scoffed in an editorial, “is no longer any kind of ‘big country’ but merely a country of old Europe suitable for tourism and study.”
For China, Britain has since grown in stature and importance—and its position as a political and economic leader in Europe has been a substantial part of its appeal. Chinese investors, some of them with wider European ambitions, have been drawn to Britain by its relatively uncomplicated tax regime, its financial expertise, deep pools of capital and the ease of doing business in an English-language environment.
In Chinese eyes, Britain is now diminished.
On Friday, the Global Times weighed in again. “Some said that Great Britain, after 300 years of conquest, had colonies all over the world and was labeled “the empire on which the sun never sets,” it wrote in a Chinese-language editorial on the British vote result. “Today, it has returned to the starting point, and perhaps all that will remain in the end is that small bit that is England.”
The U.K.’s vote to leave the EU will dismay the Chinese leadership — even though Beijing’s official response was circumspect. China “respects the choice made by the British people,” a Foreign Ministry spokeswoman said.
Nevertheless, on President Xi Jinping’s state visit to Britain last year, when he rode with Queen Elizabeth II down the Mall in a gilded horse-drawn carriage, he made clear his preference. “China hopes to see a prosperous Europe and a united EU, and hopes Britain, as an important member of the EU, can play an even more positive and constructive role in promoting the deepening development of China-EU ties,” the Chinese Foreign Ministry quoted him as saying.
The U.K.-China relationship, long troubled by differences over Hong Kong, the former British colony, has lately been on a roll.
The City of London financial center is the key. In recent months, it has surpassed Singapore as an offshore hub for trading the Chinese currency, the yuan. China’s biggest private bank, China Minsheng Bank, chose London as its European headquarters.
Chinese state companies and funds have made Britain their top investment destination in Europe; they’ve poured billions into prime London real estate and splashed out on stakes in British infrastructure, including Heathrow and Manchester airports as well as Thames Water.
Mr. Cameron himself sold Britain to Chinese leaders partly on the basis of his government’s ability to open doors, including to Europe; it would become Beijing’s “best partner in the West,” he told Mr. Xi in London.
To demonstrate its willingness to offer China a red carpet to other European capitals, Britain broke ranks with America last year and signed up as a founding member of the Asian Infrastructure Investment Bank, which Washington views as part of a Chinese challenge to the U.S.-dominated global financial architecture. Germany, France, Italy and other European countries scrambled to sign up in Britain’s wake.
But Britain’s “Leave” vote creates uncertainty over the future of the relationship. The country’s position as a gateway to Europe is clearly compromised, even though it remains an influential member of the Group of Seven leading industrialized economies and one of five permanent members of the U.N. Security Council with a veto, along with China.
Moreover, Britain’s withdrawal weakens the economy of a continent already plagued by heavy debt and joblessness that China sees as critical to its economic future.
Europe is China’s biggest trading partner. And it is the terminus for China’s massively ambitious “One Belt, One Road” project—a string of ports, logistics hubs and energy pipelines starting in East Asia and aimed at spurring trade and lifting economies along the route.
Philippe Le Corre, a visiting fellow at the Brookings Institution and the author, along with Alain Sepulchre, of “China’s Offensive in Europe,” questions whether Britain outside the EU will remain the leading destination in Europe for Chinese investors.
“For all its flaws, the EU is a powerful trade bloc with clear interlocutors on issues of importance to China,” he told The Wall Street Journal in a recent written Q&A.
One casualty, Mr. Le Corre predicts: Britain’s hopes of attracting Chinese capital for the so-called “Northern Powerhouse”—a project to boost the economies of cities such as Manchester, Leeds and Liverpool by constructing high-speed rail links, port facilities and other infrastructure. Mr. Cameron has been touting the project as a perfect fit with “One Belt, One Road.”
Ironically, the board of British bank HSBC recently decided to leave the bank’s headquarters in London, rather than move it to Hong Kong, a vote of confidence in the U.K.’s relative stability at a time when Beijing’s tighter grip clouds Hong Kong’s future.
On Friday, as HSBC shares plunged in Hong Kong on fears over its exposure to the now deeply shaken U.K. economy, the message for Beijing couldn’t have been clearer: Its European partnership is coming unstuck. And Mr. Cameron, the eager proponent of that tie-up, will soon be history too. http://www.wsj.com/articles/a-wrench-in-the-u-k-china-relationship-1466768571
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