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China's finance minister sees 'Brexit' heightening uncertainty for markets

Published 26/06/2016, 13:37
© Reuters. Chinese Finance Minister Lou Jiwei attends the opening ceremony of the first annual meeting of AIIB in Beijing

By Ben Blanchard and Kevin Yao

BEIJING/TIANJIN, China (Reuters) - China's policymakers and leading economists on Sunday voiced concerns about Britain's vote to leave the European Union, with the finance minister saying it has heightened market uncertainty, though some expect a limited impact on the Chinese economy.

The "Brexit" decision "will cast a shadow over the global economy ... The repercussions and fallout will emerge in the next five to 10 years," said Lou Jiwei, China's minister of finance, at the first annual meeting of the Asian Infrastructure Investment Bank in Beijing.

"It's difficult to predict now," he said. "The knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view."

Stock markets around the world plunged in the wake of the referendum. Sterling's value also plummeted.

Lou's views were echoed by the head of China's top economic planning authority and other economists at the World Economic Forum (WEF) in the northern city of Tianjin.

"For Chinese firms that are going to invest or carry out mergers, entrepreneurs are smarter than me, and they will definitely wait and see," Xu Shaoshi, chairman of the National Development and Reform Commission, said at WEF on Sunday.

"The Brexit incident wil affect China's economy via investment, trade and capital," he said. "But I believe the impact will not be big and relevant government departments have made contingency plans."

Huang Yiping, a professor at Peking University and a member of the central bank's monetary policy committee, said it is hard to judge the direct impact of the British referendum 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," Huang said.

Li Daokui, a professor at Tsinghua University and a former adviser to China's central bank, was more optimistic on the referendum's effects on 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 an audience at WEF.

"The only short-term impact I can think about is the exchange rate of the renminbi ... But I do think within a few trading sessions that situation will very quickly be subdued," Li said.

Also speaking at WEF was economist Nouriel Roubini, famed for predicting the global financial crisis, who said the decision to leave the European Union "creates a whole bunch of financial, economic, political and geopolitical uncertainties."

It could be the "beginning of the disintegration" of the bloc of countries, the euro zone or the United Kingdom, said 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."

Michael Falcon, CEO of Global Investment Management Asia Pacific at JP Morgan, said he expects more market volatility but doubts the vote will derail a global recovery.

© Reuters. Chinese Finance Minister Lou Jiwei attends the opening ceremony of the first annual meeting of AIIB in Beijing

"It is a shock, not a crisis, and so far markets seem to be handling this pretty well," Falcon said at the WEF conference.

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