Friendly relations belie the ruthless reality for China

Two men in dark formal suits were sitting on bar stools in a London pub in October last year when one of them, the Chinese president Xi Jinping, turned to his companion, the British prime minister David Cameron, and said: “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 message was clear: China wants the United Kingdom to stay with European Union. The two leaders’ apparent bonhomie came three days after Mr Xi addressed the British parliament explaining why Britain was particularly important China: it was the first major western country to recognise modern Communist China after it was founded in 1949, and also the first among the EU countries in establishing comprehensive strategic partnership with it, he said.

“What’s past is prologue,” Mr Xi said, quoting William Shakespeare. Mr Cameron declared that UK-China relationship have entered into a “golden era”.

Such matey behaviour may become a thing of the past should Britain choose to exit the EU next month, as some businessmen and experts are now predicting.

Today, Mr Cameron’s fate hangs in balance as British politicians and business leaders both for and against a Brexit unleash what appear to be increasingly apocalyptic warnings to try to sway voters to their side in the referendum.

Worrying about the outcome are some chieftains of industry in both Britain and China. One of them is Andrew Mackenzie, the chief executive BHP Billiton, the world’s biggest mining company, which derived the largest amount of its revenue, representing 37 per cent of the total, from China in 2015.

“I can tell you from my dealings with the highest level of the Chinese government that China takes Britain far more seriously because we are a major player in the EU,” says Mr Mackenzie, adding, “Brexit would inflict a blow on the EU that it can hardly afford given the euro zone and migration crises”.

More dire warnings have come from experts including Philippe Le Corre, a visiting fellow at the Center on the United States and Europe at the Brookings Institution. “If Brexit takes place in June, China will certainly reconsider some of its long-term investments, because it will not have the access to EU markets as if the UK was a full member of the EU,” he says.

Most economists think voters will reject the Brexiters’ alarm bells and chose to stay with the European common market, fearing possible job losses and recession in the event of leaving the 28-nation club.

Some economists also expect the Queen, traditionally above political involvement in any way in Britain, to speak on the subject.

"I think the Queen will ask the people to vote, and think hard before voting. This will be a signal to the voters to seriously consider the implications of the Brexit vote," Jacob Kirkegaard, an expert with the Washington-based Peterson Institute of International Economics, tells The National. "She will not take sides. But she will say something," he says, pointing out that she made a similar statement during the Scotland referendum on independence in 2014.

China has other worries. None of the other European countries are as effective, or willing, in taking up China’s cause in the European Union as the UK, says Zhang Bei, a researcher in the European department of China Institute of International Studies. Without that leverage China would feel somewhat weakened in EU trade negotiations.

Still, there may be some short-term advantages to China of a Brexit. Most analysts and the UK government have said the British economy would be hit, which would also mean a reduction in the prices of economic assets. Chinese investors are traditionally assets grabbers where opportunity arises – anywhere. On the downside, some economists argue a Brexit may not really help Chinese predators because British assets would have lost value along with their prices if it leaves the EU.

But having a close ally as strong as the UK within the EU is also important to China for other reasons. The world’s second-biggest economy is facing a long struggle ahead to convince reluctant members of the bloc to give it market economy status, something the UK is supportive of.

“At present, no [other] single European country is terribly inclined to give China this status. There has been massive pressure on politicians from the European steel industry, which is complaining about the overcapacity in Chinese steel sector,” says Jan Gaspers, the head of research at the European China policy unit of Mercator Institute of Chinese Studies in Berlin.

China is keen to see a united Europe, not a continent that is weakened by the British exit, and it regards the EU as a counter-weight in a multi-polar world. A potentially fragmented Europe with limited global influence would make China’s determined efforts to stand up to the United States, both politically and commercially, a lot more difficult to maintain.

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