Britain’s vote to leave the European Union last week has left things, well, complicated – not only domestically, but for the world as a whole. On the global front, the Brexit result will profoundly affect the United Kingdom’s relations with foreign nations, including economic partnerships and affairs. In fact, the shifting of attitudes has already begun.
Dating back to even before Winston Churchill fashioned the phrase “special relationship” to describe the UK and the US, the two powerful nations were known for their amiable and politically-sound bond. For decades, if not longer, their ally-ship has encouraged strategic and mutually-beneficial collaboration. For Washington, the UK has had the significant act of being the door into the realm of European politics. But things are quickly changing.
“London has lost relevance to US foreign policy,” Charles Lichfield, a Europe specialist with the research firm Eurasia Group, said on a conference call with the media.
“Washington will not be pleased” with the UK leaving the European Union, he went on. “Part of London’s attraction for the US was its role as a liberal voice within the EU.”
In the wake of the Brexit referendum and the subsequent fact that foreign relations between the two have fallen into the territory of the unknown, however, a new competitor vying for Britain’s favor is on the rise: China.
China’s financial presence in the United Kingdom was already growing even before Britain’s decision to leave the EU. Several Chinese banks, including the Bank of China and China’s Construction Bank, have set up shop, with London serving as China’s European economic home-front.
Jennifer Harris, a Senior Fellow at the Council on Foreign Relations and formerly with the State Department and the National Intelligence Council, commented on this budding relationship: “The British are most inclined to be optimistic on where China is headed, given their economic and financial incentives are stronger than other EU countries,” she said.
While China has demonstrated its favor toward Britain with its investments and buying up property in London, the UK too has shown support of the Asian power-nation. An example: When the Chinese-led Asia Infrastructure Investment Bank was launched in 2015, the UK was the first major Western economy to apply for membership – a huge international statement, to be sure.
The UK’s bold move aroused concern from Washington, who feared that this new Chinese-led bank would interfere with the World Bank’s work and influence in international affairs.
“The UK’s decision to join the AIIB as a founding member upset Washington but pleased China enormously,” said Philippe Le Corre, visiting fellow at the Brookings Institution’s Center on the United States and Europe and author of the book “China’s Offensive on Europe,” CNBC reports.
Although Chinese officials have delivered statements expressing concern that the aftermath of the Brexit vote could create economic instability, outside strategists and experts say China may find that it is an advantageous time to up its game in investing in British assets.
Mr. Lichfield told CNBC in a phone interview: “China is very interested in investing in prestigious projects in Britain — specifically in energy and infrastructure.” This could help China increase both its economic and political platform, which is one of its goals, he added.
Mr. Lichfield believes that Beijing’s aim to build its financial standing will likely be encouraged by the UK, for incoming investments from other foreign nations, including many European countries, is expected to slow down.
“The UK Treasury’s balance sheet will be stressed in the next few years, therefore Chinese investments will be welcomed,” he said.
“China is willing to increase its presence in Europe, so this is a good opportunity,” Mr. Le Corre remarked. “Chinese could step in and buy properties and companies that are getting cheaper due to the pound.”
And it has already done so. This year alone, China has acquired or taken a stake in 17 UK corporations, totaling $2.3 billion, according to financial data firm Lipper.
Paul Holland, a former European software entrepreneur who is now general partner at venture capital firm Foundation Capital, weighed in on the matter: “Given the history and so forth over time, the Chinese will not hesitate to take advantage of the fact that the UK will be less affiliated with their EU partners going forward.”
In this time of financial uncertainty and shaky international partnerships in the aftermath of Brexit, only time will tell the future of its economic relations in the global arena – and China is one growing nation to keep an eye on.