Brexit is a nice scapegoat for a sagging economy, that’s all
But don’t let that get in the way of an easy excuse for maladministration
Asian economies may slow down sharply and currencies may be pushed broadly lower as the Brexit contagion hits Asia, with Hong Kong likely to fall into a recession and the yuan to decline further, according to analysts.
Business, June 29
Let’s deal with the Hong Kong bit first. Here we quoted analysts from Nomura (a has-been Japanese name), who said we are exposed to Brexit because exports to the European Union were the equivalent of 14 per cent of our gross domestic product in 2015, the highest figure in Asia.
It’s true. As the chart shows, the figure was much higher ten years ago but it clocks in at about 14 per cent at the moment. And, yes, this is very likely the highest figure in Asia at the moment. I could confirm it but it’s summer and I’m lazy and I don’t relish the prospect of several hours of spreadsheet work.
The point, however, is that this is the figure for total exports, which is about 98.8 per cent composed of re-exports. These consist of pass-through trade to and from the mainland to which we do nothing but adjust the stated price as part of the money laundering service we offer mainland industrialists.
Our own exports are called domestic exports and now look at the chart again. The line crawling along the bottom represents our domestic exports to the EU as a percentage of our GDP. The present figure is about one tenth of one per cent. Let’s quake in our boots about the Brexit danger.
All of this assumes, of course, that there will be a decline in Asian exports to the EU. There already is one and it has been in evidence for almost two years. What is not in evidence is that Europeans will suddenly stop wearing shoes or buying plastic rubbish because Britain wants out of the EU.
And if we change the question to one of European investment rather than European trade, then it is the Europeans who must come on their knees to us, not the other way round. Relative to the size of our economy, Hong Kong is one of the world’s biggest providers of foreign investment. We’re givers, not takers.
As to the bit about the yuan falling further, the operative word is “further”. It has already been in general decline against the US dollar for more than two years although more because of a strong US dollar than because of its own weakness.
But there is reason for some weakness at home. The mainland economy is slowing down and the last year has seen a serious outflow of private money on the balance of payments. These are not conditions in which to expect a strong currency.
They are also not conditions that suddenly sprang into being with a vote in the United Kingdom on whether to leave the European Union.
But if politicians are looking for ways to dodge the blame for their own maladministration then Brexit is a gift from heaven and this is clearly happening at the moment.
Attempts to stimulate growth with artificially depressed interest rates are proving to have failed in both America and Europe. All they did was stimulate speculation on financial markets and widen the wealth gap. Underlying economic performance remains weak.
It cannot continue much longer. The hunt for a scapegoat is already on. How fortunate then that this unfortunate goat has presented itself without the bother of a search. Brexit be thy name and let no one inquire further. It’s all the fault of English yokels who wouldn’t be guided by their compatriots in London.