Will the UK become China’s key trading partner?

Economy & Politics | Export | International | National | Technology
Shanghai

Written by Domenica Di Lieto, CEO of Emerging Communications

The UK government’s recent decision to accept Huawei’s 5G network has major implications for international trade.

The decision to work with Huawei, despite China’s deteriorating relationship with other Western trading nations, could position the UK as China’s key trading partner.

In the context of Brexit and Trump’s trade war, China and the UK could potentially forge a trading relationship that gives UK businesses a competitive advantage in Chinese domestic markets. As China sees its attempts to become a global trading nation and supplier of technology services increasingly rebuffed, the already popular proposition of a post-Brexit trade deal with the UK is becoming even more attractive.

The United States, Canada, Australia and New Zealand have restricted trade with China for various reasons. The EU, led by France and Germany, is also talking about putting up new trade barriers. Of the G7 nations, only Italy has signed up to China’s strategic Belt and Road global trade initiative with most others remaining aloof at best.

Trump’s anti-China rhetoric over trade and technology are well catalogued, but Canada’s arrest of Huawei’s CFO caused outrage in China, and its ban on the company’s 5G technology has led to China blocking Canadian imports.

Australia and New Zealand banned Huawei technology and had imports blocked in kind.

The UK presents one of limited options for China’s wish for global trade, with the prospect of a trade arrangement proving popular with the Chinese people and business.

The UK government has sent mixed messages about its disposition to China. Chancellor Philip Hammond and government business departments made determinedly positive overtures about trade on the one hand, but Defence Secretary Gavin Williamson, made empty threats to send an aircraft carrier with no planes to police the Chinese navy.

Nonetheless, the decision to accept Chinese 5G technology is significant in deciding future trade relations with China. The US has placed considerable pressure on Downing St to reject Huawei; the snub to President Trump suggests increasing value placed on the UK-China relationship.

If the UK does become China’s key trading partner, UK businesses could benefit from tariff-free exporting, access to previously restricted infrastructure projects, and favoured status against rivals that have antagonised Chinese consumers and business buyers.

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