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Forex Fundamental Analysis

Sat,12 Nov 2016-   FundamentalOutlook

An important question that pops up in the mind of the world especially Chinese people and government is that what will happen to the relationship between China and Britain after the Brexit issue.

There is high level of investment and trade relationship between China and United Kingdom. As for China UK is the top destination of European Union (EU) trade and investment while China invested a worth of 16.9 billion $ in United Kingdom between the time span of 2010 to 2015. David Cameron the ex- Prime Minister of UK visited China in 2013 and a worth of £54 billion/$70 billion bilateral trade took place between the two countries. In 2014 during a state stopover President Xi Jinping agreed on a worth of 57$ billion commercial deals that were more than 30 deals. Last year the relationship between China and UK were said to be entering into “golden era”.

The decision of UK to leave EU brought a shockwave. As being top-notch trade and investment partner of UK the question that cracks in the mind of Chinese analysts and economists is “What does this mean for us?” On 26th June after exit of Britain from EU a member of Central bank of China monetary policy committee Huang Yiping considered Brexit as “very bad for the world and very bad for China” and entitled the event a breakthrough in terms of the “reversal of globalization”. And in views of business figures and analysts, what was supposed to be a UK-China “golden era” may crack down into a twisted trade talks decade as well as with some possible opportunities. The UK is now less attractive as a partner in securing trade deals with EU. In United Kingdom Brexit is probably going to reduce future investments of China whereas London may also lose its status as an offshore trading Centre for Renminbi (the Chinese currency). Britain’s deteriorating sway on China could offer opportunities for other countries of European Union as well. And its expected that relationship of China with the broader EU is unlikely to be ominously damaged by Brexit. The instantaneous upshot from Brexit was a hasty depreciation of the Euro and this depreciation created a relative price increase for foreign goods, which may decrease Chinese products demand. But there are chances that at least there will be British bargains for Chinese buyers along the way.

The reshuffle in the British government and Brexit has already effected China as recently May Theresa the PM of United Kingdom shifted the policies on Chinese investment which was  expected neither by Chinese expects nor others. Steps are being taken and are planned by both the economies related to maintain a good relationship between China and Britain and it would be too early to come to any conclusion regarding how and what will be the end result of Brexit on the relationship between UK and China.

Aimen Tayyab

Financial Analyst