China finance experts have warned that Britain’s decision to leave the European Union will “cast a shadow over the global economy”.
Finance minister Lou Jiwei said the “repercussions and fallout” will emerge over the next five to 10 years.
Huang Yiping, a member of China’s central bank monetary policy committee, said the Brexit could mark a “reversal of globalisation”.
If so, he said, it would be “very bad” for both the world and China.
Last year, China was responsible for $3.3 billion worth of foreign direct investment in Britain, according to law firm Baker & McKenzie. Between 2005 and 2015, it has invested nearly $30 billion in Britain.
David Cameron announced £40 billion worth of deals between Britain and China following a visit to the UK by President Xi Jinping in October last year.
While Mr Lou said the result “will cast a shadow over the global economy”, he added that it was difficult to predict the outcome and said the reaction from global stock markets, which fell sharply on Friday, may have been overdone.
“The knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view,” he said.
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Following the result of the vote, the pound plunged 10% against the dollar to a 31-year low before trimming losses to end the day around 7.5% down.
Sterling also fell 11.4% against the Japanese yen which is seen by investors as a safe haven for investors in times of crisis.
Japan hinted that it may intervene to stem the yen’s strength.
Tomomi Inada, chairwoman of the Policy Research Council of the ruling Liberal Democratic Party, said: “Speculative, violent moves (in the forex market) have extremely negative effects. If necessary, the government should not hesitate to respond, including currency intervention.”
On Friday, the Swiss National Bank acted to weaken the Swiss franc which rose 2.1% against the dollar as investors rushed to buy the currency.
In the Middle East, shares on the Saudi Arabia stock exchange fell 3.7% on Sunday.
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Anand Mahindra, chairman of Mahindra Group, the auto to aerospace Indian conglomerate with operations in Britain, said the world was behaving “as if a tsunami wave has hit” which he viewed as an over-reaction.
He said: “My hunch is that you’re going to see a fair amount of recovery in markets worldwide and a certain amount of objectivity and reason return to the perspective in which the Brexit is viewed from tomorrow.”
Earlier this year, the Indian company launched the e2o electric car in the UK where it already has a presence with its IT business Tech Mahindra.
Mr Mahindra said Britain’s decision to leave may prove advantageous.
“The last time I spoke to the people in the British government about reducing taxes and duty on electric vehicles, they said they were hampered from doing so because of the European Union protocols and tariffs.
“So I hate to say this but as far as our electric vehicles are concerned this is probably something where I could go back to them and say you know you’re going to have your own discretion to lower the taxes from now on. So I’m certainly going to drive that point home.”
Adi Godrej, chairman of India’s Godrej Group, which operates worldwide and sells beauty brands such as Soft & Gentle and Bio-Oil in Britain, was less sanguine than Mr Mahindra. He said it was surprising the UK had taken a decision “which is going to be so negative for it from an economic point of view”.
He added that it would affect Indian companies which had set up in Britain as a gateway to the EU.
“It will be bad because they will have to establish themselves in other parts of Europe.”
Source: BBC
