It was hailed by British Prime Minister David Cameron as “something of a golden era,” a trade relationship so cozy that Britain was lured from the U.S. camp to join the Asian Infrastructure Investment Bank (AIIB), China’s effort to create an alternative global financial institution to the World Bank. On the eve of Xi Jinping’s state visit to Britain last fall, during which some $60 billion in trade deals were signed, the Chinese President enthused about ties between his homeland and the onetime imperial power that vanquished China during the Opium Wars.
“The U.K. has stated that it will be the western country that is most open to China,” Xi said in written comments to Reuters. “This is a visionary and strategic choice that fully meets Britain’s own long-term interest.”
Now, as Britain prepares to exit the European Union after Friday’s historic referendum, that golden relationship looks decidedly tarnished. Cameron, Europe’s China booster, will resign by October. Brexit means that Beijing will lose its strategic access to Europe through Britain. The global market turmoil that followed Friday’s vote sent the Chinese yuan, already propped up by strenuous official intervention, to its lowest point against the dollar in more than five years.
Chinese Foreign Ministry spokesperson Hua Chunying tried for a balanced approach on Friday afternoon, according to Chinese state media, noting that China respected the British people’s choice while also hoping that the U.K. and E.U. could reach a successful agreement. Yet during his British tour, Xi was clear about China’s position, saying he supported a “prosperous Europe and a united E.U.”
Brexit undermines China’s economic relationship with the E.U. at the precise moment that the Chinese economy is slowing and in search of global partners. Over the past few years, Chinese companies have invested heavily in Britain. Everything from London cabs to Weetabix now survive with help from Chinese investors. These totems of Britannia, though, may lose some of their power when Britain no longer serves as a launching pad for Chinese investment into Europe. Beijing will lose a British ally that had been pushing for completion of an E.U.-China trade deal, as well as for China to gain Market Economy Status—a designation that would shield the world’s second-largest economy from certain E.U. trade tariffs. (Last month, the European parliament, amid protectionist sentiment across the continent, rejected granting market economy status to China, although a further vote is planned for December.)
Still, on Friday Chinese state media stayed away from the large-font Brexit headlines that dominated much of global press coverage. Throughout the day, China’s Xinhua state news agency maintained an online banner headline on President Xi’s visits to Serbia, Poland and Uzbekistan, as well as his attendance at the Shanghai Cooperation Organization summit—a Chinese-initiated security grouping. By Friday afternoon, the People’s Daily, the mouthpiece of the Chinese Communist Party, noted that a new nation was keen to join another Chinese-founded organization, the AIIB: Afghanistan.