GOOD MORNING FROM LONDON #282 19 JULY 2021
In recent days UK/China relations have been thrown into question over China’s interest in the Newport Wafer Fab Company (“Newport”).
UK opponents of closer links with China argue that the UK should not sell Newport to China – a company that makes semiconductors, a valuable world commodity. Defenders of the deal say that Newport does not make sophisticated types of chips and that, in any event, none of the previous owners was able to make Newport make profits.
China has stressed that countries that frown upon China will find themselves excluded from the big investments that China is making across the world.
Despite the nationalist rhetoric of Brexit, the UK faces world trade problems. A trade deal with India is a long way from completion. Similarly, deep-seated US/UK differences on Northern Ireland has relegated down the list of US priorities the completion of a US/UK trade deal and, the Comprehensive and Progressive Agreement for Trans-Pacific does not provide any business breakthrough as it is more to do with political window dressing than real trade progress.
Finally, Brexit has led to a fall of 40% in UK trade volumes with the European Union.
In the meantime, China’s growing middle-class domestic consumer market strengthened by its high level of accumulated savings beckons the UK just as Prime Minister’s Johnson’s Tilt Towards China is undermined by objections to the Newport deal from within his own party.
Johnson wants China, its trade + its investment but his ruling Conservative Party opposes him. Things will come to a head as the new UK aircraft carrier steams into the S China Sea in a show of strength. The UK needs China more than China needs the UK. Problems lie ahead.