More time needed for agreement, challenges remain: experts
China and the UK are likely to reach a free trade deal as the two countries are highly complementary in certain industries, experts noted on Monday. However, it may not become a reality until after Brexit takes effect, and challenges still remain.
The comments were made following British Chancellor Philip Hammond's interview with the BBC during the two-day meeting of finance ministers from G20 countries held in Chengdu, capital of Southwest China's Sichuan Province.
"Definitely I could see such a thing," Hammond was quoted when asked whether there would be a free trade deal bilaterally agreed to with China, according to the BBC.
He also noted that it was time to explore new opportunities across the world, including with China, one of the UK's largest inward investors, the BBC noted.
The new UK government has only just been appointed so it will take some time for the different parts to be set in motion toward negotiating a formal deal, a spokesman at the China-Britain Business Council told the Global Times Monday night.
Bilateral trade between our countries already stands at around $80 billion per year and negotiating a free trade deal will make it easier to further develop an already flourishing trade relationship, the spokesman noted.
The two countries are very complementary in terms of trade and have less competition in some fields, which serves as a common ground for reaching the trade agreement, Chen Xin, head of the economics division under the Chinese Academy of Social Sciences' Institute of European Studies, told the Global Times on Monday. "The bilateral trade volume is quite large," he said.
In April, UK exports to China reached 1.8 billion pounds ($2.37 billion) while imports of Chinese goods reached 2.9 billion pounds, according to data released by the UK Office for National Statistics in June. China remains one of the UK's major G20 trading economies.
Hurdles in reaching the deal
Prior to leaving the EU, the UK will not be permitted to establish trade deals with third-party nations. However, that does not necessarily mean that the country can not begin negotiations with its counterparts, Chen said.
"Once two nations reach an agreement, the deal could be signed as soon as the Britain leaves the EU," Chen noted.
Still, changes to UK's membership in the EU will take time, Stephen Perry, chairman of the 48 Group Club, a London-based business networking organization, told the Global Times on Monday.
An understanding will need to be developed inside China on how to work with the UK on different scenarios, and that which works in most cases will be undertaken, for example buying brands, good return for investments and developing the internationalization of the yuan, he said.
Any such deal would take years to negotiate, Brian Jackson, China Economist at IHS Global Insight, told the Global Times on Monday.
The major hurdle for China will be that the UK is a much more service-oriented economy than some of the other partners China has signed free trade agreements with in recent years, Jackson noted.
"This means the UK will likely consider the investment portion of the agreement much more important, to ensure UK companies can invest more easily into China," he said.
This remains a traditionally sensitive issue for China, as demonstrated by the very slow pace of negotiations between the US and China for the Bilateral Investment Treaty, said Jackson.
Challenges in bilateral relations
Recently, the UK steel industry has raised concerns about Chinese dumping and the impact that has had on jobs in some regions.
The steel dispute has become a major hurdle in bilateral relations between the two countries, experts noted on Monday.
For instance, Tata Steel blames China's excess capacity in the steel industry for killing its operations in the UK, which could be seen as a "potential risk" to the trading partnership between the two countries, Chen noted.
"However, it still has limited impact on the overall bilateral trade volume," he said.
Almost 40 billion pounds worth of deals between the two countries were agreed to during President Xi Jinping's visit to the UK in October 2015, according to the UK government.
