Brexit will "cast a shadow over the global economy" and the true impact will be felt in the next five to 10 years, China's finance minister Lou Jiwei told the first meeting of a China-led development bank.
"The repercussions and fallout will emerge in the next five to 10 years," Mr Lou told the inaugural annual meeting of the Asian Infrastructure Investment Bank (AIIB) in Beijing.
“It’s difficult to predict now . . . the knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view,” he said.
The previous day, state media said that Britain's decision to leave the European Union showed its people were of a "losing mind-set" and evidence of the "decline of Europe", while the government called for a calm response, saying a "stable and united European Union was in the interest of all parties".
Mr Lou's views were echoed by analysts attending the World Economic Forum (WEF) in China's northern city of Tianjin, who were also waiting to see the full impact of Brexit.
US economist Nouriel Roubini, who famously forecast the timing and scale of the global financial crisis in 2008, told an audience in Tianjin that Brexit “creates a whole bunch of financial, economic, political and geopolitical uncertainties”.
It could be the "beginning of the disintegration" of the EU, the euro zone or the United Kingdom, said Mr Roubini.
“I don’t expect a global recession or another global financial crisis,” he added. “I think the impact of Brexit is significant but not of the same size and magnitude of the one we had 2007 to 2009.”
Important landmark
Huang Yiping, a professor of economics at Peking University’s National School of Development, and a member of the People’s Bank of China’s (PBoC) monetary policy committee, said: “It’s hard to talk about and judge the direct impact on China’s economy . . . If [Brexit] is an important landmark in terms of a reversal of globalisation, I think that’s very bad for the world, it’s very bad for
China
, ” Mr Huang said.
Li Daokui, director of the Centre for China at Tsinghua University and who formerly sat on the PBoC monetary policy committee, did not believe it would have a major impact on China, the world’s second largest economy.
“China is perhaps one of the least impacted economies in the world by the event of Brexit,” he told a WEF briefing.
“The only short-term impact I can think about is the exchange rate of the yuan . . . But I do think within a few trading sessions that situation will very quickly subdue,” said Mr Li.
Michael Falcon, CEO of Global Investment Management Asia Pacific at JP Morgan, said he expects more market volatility but doesn’t think the vote would derail a global recovery.
“It is a shock, not a crisis and so far markets seem to be handling this pretty well,” Mr Falcon told the WEF conference.
Income gap
A commentary on China’s official state news agency Xinhua said Brexit probably did not threaten an end to globalisation, but did show the extent of the problem of Britain’s yawning income gap. Large income disparity is a criticism often levelled at China’s economy.
“So, maybe Brexit marks a right moment for globalisation advocates to have a break and think better about how to tackle the consequent challenges and how to move next. Especially the European Union. Brexit has brought its difficulties and problems into spotlight,” it said.
“As for the grand mansion of globalisation, immediate repairs after Brexit are now necessary, and access to its benefits for the poor and more people around the world is the priority,” Xinhua said.
Ever pragmatic, Chinese tourists are rushing to book package holidays in Britain because of the weak sterling, according to tour operators, which should also benefit tourism numbers to Ireland as UK visas work in Ireland.
(Additional reporting by Reuters)
