Britain’s significance to China could be ‘compromised’ by hung parliament, analysts say

A coalition government would see more trade barriers which would discourage overseas investors and any instability would cast doubt on China’s willingness to continue with the ‘golden era’ status with Britain

PUBLISHED : Friday, 09 June, 2017, 10:34am
UPDATED : Friday, 09 June, 2017, 2:00pm

Britain’s diplomatic and economic significance to China could be compromised by a coalition government after the UK election resulted in a hung parliament on Friday morning, analysts have said.

“A coalition government is a bad thing for overseas investment,” Dr Cherry Yu Jie, head of China Foresight Project at London School of Economics, told the Post.

“Britain’s political instability will also cast doubt on China’s willingness to adhere to the ‘golden era’ status with Britain,” she added.

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The warnings came after it was confirmed that Prime Minister Theresa May’s Conservatives remained the largest party in Britain’s parliament but fell short of the 326 seats required to establish a majority

British political scientists said a coalition government could even be formed by Labour leader Jeremy Corbyn.

“In the case of a coalition government, policy consideration will be given to social equity, while more trade barriers will probably be set up, which will be discouraging for overseas investors,” she said.

The trade barrier could take the form of setting up what resembles the US’s Committee in Foreign Investment, Yu said.

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The UK is one of China’s biggest trade partners and is jockeying for the position as the biggest offshore settlement centre for yuan trade.

Shi Zhiqin, of Carnegie-Tsinghua Centre for Global Policy, and Yu agreed that Britain’s role has diminished following the Brexit referendum, as China no longer saw the need to keep it as a strong ally in the European Union.

“But I think Britain’s main concern is to keep China as a trade partner after it lost the EU market,” Shi added.

May unexpectedly called the snap election seven weeks ago, in a bid to increase the slim majority she had inherited from her predecessor David Cameron and strengthen her hand before launching into arduous divorce talks with the European Union, set to start in just over a week.

Stuart Lau is reporting from London.