Since UK declared referendum results, it caught attention from international community, UK The Independent says this referendum destroyed most to the UK politics since last 20 's. Germany Deputy Prime Minister Gabriel commented on Twitter, "for Europe, today is a bad day". While the US also began to worry Brexit will hurt their business investment, according to media predictions, Brexit will have a significant impact on the global economy. After the referendum announcement, CCTV and other major domestic media have made detailed analysis of Brexit's influence on Chinese manufacturing, which shows little direct impact on Chinese economy, but knock-on effects should not be overlooked.
So, Brexit for China's manufacturing, and the LED industry we care most, will be more positive or do more harm than good? Below the author will analyse in 3 aspects, showing main influence through specific datas.
Sino-Europe cooperation strategy will be in a fix
Recent years see Sino-British trade increased, creating a growing number of economic interests in common. To realize mutual benefit, as a member of EU, UK gradually transforms into China's important partner and supporter, for example, it vigorously lobbied the EU to recognize China's market-economy status, to help China achieve tariff reductions. Besides, UK also largely promotes the China-EU free trade agreement.
If this agreement funding amounted to billions of dollars is successfully signed, it will bring a huge trade order to Chinese manufacturing, which helps to open the European market. For Chinese LED enterprises, UK also has a huge market with LED market constantly expanding.
But once Brexited, it’s tantamount to an indirect break of the cooperation ties, and the early implementation of various trade policy with EU will be difficult, thus becoming high sunk costs.
Presently, China is based on the entire European economy to launch international trade, Brexit will separate Sino-British and Sino-EU trade, which adds uncertainty to China handling relations with European countries.
It will lose many business investment from China
The Europe Union is the greatest trade partner of China. For internal EU, the UK is the second largest one after Germany. In recently, the amount of LED lighting industry from China export to Britain is also increasing.
London has always been a European financial center, many financial and economic
activities are carried out here. After the UK "brexit", the establishment of the international market for China's manufacturing industry will have more difficulties than previously. Because the European market has already reached to highly integration and developed their own mature market model. Besides, they have tight cooperation among domestic brands and rejected many Chinese enterprises.
Facing such situation, many Chinese enterprises choose to break into the UK market that Chinese enterprises are relatively loose, then they enter into the European market based on the conditions. Once the British public vote on leaving the EU,which means it is blocked the Chinese companies’ strategy for entering the European market, the British will lose a lot of trade investment from Chinese enterprises.
LED as a member of the manufacturer industry , now this is the best time to out of the overseas market and get the opportunity to expand overseas market.However, after brexit, the EU and even all the global economy will be shocked. Thus, the foreign trade situation is not optimistic.
Disturbing the international step of RMB
Nowadays, the RMB has just joined a basket of currencies of the IMF and stepped out for an important step in the internationalization of the RMB. China is promoting main trade cooperation to realize the RMB’s settlement policy thereby to consolidate and strengthen the international influence of RMB.
The UK has supported for China on this field: London has become the second offshore RMB settlement center after the Hong Kong. As for brexit affairs, internationalization of the RMB will be affected definitely. It is estimated by Malayan Bank that the RMB will be the biggest gains in Asian currencies after brexit,the rise could be as high up to 11.7% and the exchange rate of RMB and rupees may fell to 5.2% and 5.2% respectively.
Due to the fact that the change of exchange rate will directly affect the whole international import and export business, the cost of Chinese LED enterprises to import the UK products will reduce, but the LED products profit of export to UK will be greatly reduced. what kind of value these two comprehensive aspects interests will generate is difficult to predict.
Euro devaluation triggered international export trade is a certain event, in the short term, the euro depreciate will significantly trigger a global economic turmoil and cause devaluation of the RMB exchange rate, but in the long run, China will be a in a
good position on the issue of FTA between China and Britain after brexit.
For China's manufacturing industry, the international market is very important, in recent years, as a result of LED industry in the domestic sales is under depression, many companies are investing in overseas markets. In the short term,the global economy will still be in the turmoil stage and the LED industry will meet a bigger challenge when it goes abroad.