A UK 'Brexit' could weigh on China: experts

Updated: 2016-04-26 11:06

By Hua Shengdun in Washington(China Daily)

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The possibility of the United Kingdom leaving the European Union has been troubling its member states since a referendum was put forth in 2015 in the British Parliament, but the prospect holds broader implications that stretch beyond Western nations, experts believe.

"If Brexit (Britain's exit) 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," said Philippe Le Corre, visiting fellow at the Center on the United States and Europe at the Brookings Institution.

Le Corre spoke at a panel discussion on China's overseas investments in Europe at the Brookings Institution in Washington on Monday.

"Particularly, the nuclear project might be questionable," said Le Corre, referring to the Hinkley Point nuclear deal between China and the UK, which President Xi Jinping and British Prime Minister David Cameron signed in October 2015.

Hinkley Point would be China's largest inward investment in the history of the UK, with plans to construct at least one nuclear power plant on the Somerset coast and the possibility of two more.

Construction of the first power station, Hinkley Point C, is expected to cost stakeholders $26 billion, create 25,000 jobs and provide enough energy to power 6 million British homes when up and running. China is expected to cover about a third of the cost.

Vital though this nuclear project may be to Chinese outbound foreign direct investment (OFDI), China has various other interests in the region, with OFDI to Europe reaching record highs in 2015.

"If recent trends continue, China will replace Japan as the largest net creditor in the world in the next five years," said David Dollar, senior fellow at Brookings.

According to the Rhodium Group, China has expanded its investments in Europe.

The increasing growth of Chinese OFDI may result in more structured negotiations between China and its European investment targets in the future, something that the US has been keen to establish.

Le Corre said this business of FDI from China is going to take a new step, probably this year, with the signature of a bilateral investment treaty, which is also something that is going on in the US.

Allan Fong in Washington contributed to this story.

 

 

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