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Brexit impact on trade between China and Europe


06-24-2016 04:58 BJT

Residents in the United Kingdom are voting Thursday on whether the country should remain in the 28-nation European Union, or leave it. The debate has been intense and has been topping the global headlines for weeks, as it's likely to not only affect the UK and Europe, but much further afield as well. So our reporter Mi Jiayi takes a look here at how a "leave" outcome might affect business ties between China and Europe.

The UK is China's second largest trading partner in the EU, and traders are worried that a British exit from the Union could mean trouble. Zhang Bin's company manufactures steel kitchenware, and exports one third of of its products to the EU, including the UK.

"I think that if the referendum decides to leave the EU, the sterling will go down, and so would the Euro. This would be seriously bad news for our products and our competitiveness. The Euro might even depreciate after that. Some of our clients in Europe are very nervous about this issue. They are quite worried about the future, and so we are under a lot of pressure too. We do upscale products so our profit margin is quite high. I think it would be an even harder hit for exporters of low-end products," said Zhang Bin, CEO of Solidware.

Data from China's Customs show the country exported 370 billion yuan worth of goods to the UK in 2015, a 5.5 percent growth from the previous year. The UK was the only country among China's major trade partners in the EU to see an increase. China and UK has also strengthened cooperation in several areas since October last year, when President Xi Jinping visited the country. One professor who studies the relations between China and Europe says, however, that he isn't too worried about the UK's upcoming decision.

"My personal guess is that they are likely to stay in the EU, but the majority in favor of that is not substantial. So at some point there is a possibility the UK will leave the EU. But, bilateral trade and financial cooperation between China and UK is very strong. And London is also the offshore center for RMB settlement. So I don't think a British exit would have much of an influence on the ties between China and the UK," said Dr. Ye Jiang, executive director of Institute for Global Studies.

Professor Ye says that however, if the UK decided to leave the EU, it might affect London's role as the financial center of Europe. Ratings agency Standard and Poor's has warned that a UK exit from the EU might endanger sterling's status as an international reserve currency, and therefore threaten the country's credit ratings. The World Trade Organization says that if the UK decides to leave the EU, it will cost the country's consumers an extra 9 billion pounds every year in import duties.

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