Minitrue: Don’t Hype, Speculate, or Comment on Brexit

The following censorship instructions, issued to the media by government authorities, have been leaked and distributed online. The name of the issuing body has been omitted to protect the source.

Regarding the British vote to leave the and related matters, immediately control the scale of coverage on all websites and new media platforms: reduce the quantity of reports, and don’t hype the story, speculate, or comment. (June 27, 2016) [Chinese]

Britain narrowly voted to leave the European Union last week, tipping its domestic politics into disarray and its future into deep uncertainty. Observers are divided on whether the news will help or harm China’s interests, in terms of its economy, “golden relationship” with Britain and contacts with the rest of , and its broader geopolitical position.

China’s , meanwhile, made political hay. Sinocism’s Bill Bishop commented:

One thing that seems obvious is that it is a propaganda windfall for Beijing as the screed against the perils of mass democracy basically writes itself. Greece nearly collapsed a few years ago, Britain looks to be driving itself towards a cliff, and if America elects Trump president then three of the cradles of democracy will have highlighted to those with an illiberal bent the dangers of unchecked democracy, effectively giving the Chinese Communist Party a propaganda trifecta. [Source]

On Saturday—prior to the directive, though different rules often apply to top state media in any case—People’s Daily pursued this theme with zeal. It highlighted the economic and political instability following the vote, the divisiveness and distortions of the campaign, the likelihood that the referendum will fail to address people’s basic anxieties, and the sizable minority pulled along against their will:

On June 24th, the results of the U.K.’s “” referendum appeared. With the “Leave” faction winning a majority, Britain’s separation from the European Union will become a reality. This is a major decision by the British people regarding the course of their national development, and the rest of the world should respect it. But it is worth noting that the voting result offers no readily available solution to a number of real issues that brings, or to the various problems arising from the referendum itself.

As soon as the “Leave” result was announced, global markets sank into panic. At the same time, news kept spreading of Scotland and Northern Ireland demanding independence, and of right-wing factions in other member states demanding to vote on leaving the E.U. as the U.K. had. Right now, the most important thing for Britain and the E.U. is obviously to try to conduct effective “crisis management” following the referendum, to prevent its negative effects from spreading out of control. At the same time, they must quickly reach an agreement through relevant negotiation to stabilize people’s expectations for the continent’s future.

[…] On June 16th, the pro-Remain British MP Jo Cox was cruelly murdered by an assassin who called himself “Death to traitors, freedom for Britain.” This is an extreme illustration of the divisions in British society that were aggravated by the referendum.

Stirring up disharmony would be a source of instability in any society. To increase their own influence, the Leave and Remain camps each attacked the other without restraint, not even hesitating to abuse fact and statistics. Before the vote, “Harry Potter” author J.K. Rowling wrote on her blog that “the tales we have been told during this referendum have been uglier than any I can remember in my lifetime,” even for someone who has “created monsters” in stories herself. Guardian columnist Zoe Williams was even more direct: “No general election has ever been as full of mendacity as this referendum, so that the casual voter basically has to guess who is telling the truth by how fast they’re talking and the look in their eyes.” [The Chinese translation, reflected here, differs slightly from the original.]

The Brexit trend had various earlier manifestations in Britain. That it has now come to fruition is inseparably linked to the culmination of a widespread sense of anxiety in British society in the wake of the international financial crisis. Income growth stagnated, employment stability dropped, social justice was lacking … a number of such problems intensified the British public’s hunger for change. But the problem is, a single referendum cannot solve these problems. More importantly, with economic globalization already an established historical trend, can people really turn back the clock?

Obviously, the referendum outcome doesn’t show that British society has reached consensus, because no small number of Britons supported Remain. The U.K.’s domestic differences are as prominent as ever. A considerable section of the population is completely unconvinced that Brexit will naturally increase economic competitiveness, bringing better development opportunities and more wealth; they even anticipate that the shock of it will bring irretrievable costs. [Chinese]

Similarly, from the state-run Global Times:

The UK voted to leave the EU, with the Leave supporters beating Remain by 51.9 percent to 48.1 percent. The slight victory is likely to have opened a Pandora’s box in Europe, pushing the continent into chaos.

[…] Europe is not able to resolve the problems it is facing. The public are confused and disappointed and extremism is steading.

The Leave grouping beat out the Remain supporters by only 4 percentage points, which could have resulted from some temporary reasons. Is it really fair to decide Britain’s future this way?

[…] There is no direct political impact on Russia and China. For the Chinese people, who are at a critical time to learn about globalization and democracy, they will continue to watch the consequence of Britain’s embracing of a “democratic” referendum. [Source]

But a front page commentary in People’s Daily’s overseas edition struck a milder note, as Reuters’ Ben Blanchard described:

In a front page commentary, the People’s Daily overseas edition dismissed people wanting to “stir up trouble and badmouth Sino-British ties”.

“In the face of much complicated information, people need to see the positive aspects in relations,” it said. “Cooperation won’t change because of Brexit.”

Both are important players on the world stage, including permanent members of the U.N. Security Council, the paper added.

“Going forward, China and Britain will keep pushing for the early realization of the ‘golden age’.” [Source]

This is more in keeping with the tone of statements from the Ministry of Foreign Affairs and from Premier , who told the World Economic Forum in Tianjin that “Europe is China’s important cooperative partner, and China will continue to devote itself to maintain and develop ties between China and Europe, between China and Britain. We hope to see a united and stable European Union and a stable and prosperous Britain.”

Reuters gathered a range of other views from the WEF and elsewhere as the debate over Brexit’s implications for China continued.

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.”

[…] 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. [Source]

Read more on Chinese views from the WEF from Stephen McDonell at the BBC, on analysts’ predictions for the yuan at Marketwatch, and on other economic fallout in Asia at South China Morning Post.

A less direct economic impact could arise from a further stalling of reform if, as Christopher Balding suggested at Bloomberg View, the result inflames already raw anxieties which could also affect the domestic political climate:

At least one major target of “Leave” campaigners in the U.K. – an unaccountable bureaucracy in Brussels, enjoying the fruits of power – will certainly resonate with Chinese citizens. Despite a recent corruption crackdown, dissatisfaction with officials is simmering in many parts of China – over land grabs, unpaid wages, layoffs and more. For the Communist Party, a popular rejection of distant bureaucrats isn’t to be taken lightly.

[…] A deeper worry for the party is instability. The political and business classes in China are extremely risk-averse. Banks lend to state-owned enterprises in the belief that the government stands behind them, students from the best schools aspire to the civil service, and changes to policy flow from on high. Party technocrats tend to see political and financial instability as intimately linked. And as Premier Li Keqiang stressed repeatedly yesterday at the World Economic Forum, Brexit has increased both.

[… E]xpect China’s leadership to double down on economic and financial policies intended to keep growth humming and minimize any disruption, no matter what the price. That may mean a further weakening of the yuan and more credit-fueled investment. It may mean leaders will think twice about undertaking contentious bank reforms. And a much-needed overhaul of state-owned enterprises – which risks turning laid-off workers into crowds of protesters – could be placed on the backburner. A further tightening of dissent also can’t be ruled out. [Source]

In terms of international politics, there is still widespread disagreement over whether and how China stands to benefit. Ting Shi reported at Bloomberg that the referendum has “thrown off Xi and Cameron’s political bromance,” and presented a range of other views:

“One major reason why China attaches great importance to its relations with the U.K. is to leverage EU policy via the U.K.,” said Xie Tao, a professor of political science at Beijing Foreign Studies University. London’s value as a “bridgehead” to Europe has been lost with Brexit, Xie said, leaving China to turn its focus to Germany.

[…] “Brexit might end up as a blessing in disguise for China,” said Ruan Zongze, vice president of China Institute of International Studies, a policy research group run by China’s Ministry of Foreign Affairs. “It looks like a bad situation on the surface, but there are opportunities that can be discovered and played up, as long as there’s effort on both sides.”

[…] “If a more conservative leader takes over, the successor may ditch the U.K.’s current China strategy and move back toward its ‘special relationship’ with the U.S.,” said Zhang Baohui, director of the Center for Asian Pacific Studies at Lingnan University in Hong Kong. “A weakened EU, which may see more defections after the British vote, is not in China’s grand strategic interests.”

[…] “On the whole, China would have preferred for their own self interest for the U.K. to stay in the EU,” said Kerry Brown, director of the Lau China Institute at King’s College, London, and a former U.K. diplomat in Beijing. ”In the end, I think that China will work to its advantage with whatever outcome eventually emerges.” [Source]

Zhang Baohui’s suggestion of a revitalized U.S.-U.K. partnership may overlook the now greatly diminished value of the “special relationship” to the American side as well. For now, the U.S. seems set to do what it can to soften the economic impact on its ally. As Zhang Bei of the China Institute of International Studies argues, however, “a diminished Britain after Brexit might need ever more the support of the US, but what it could offer in return is a big question.” Eurasia Group President Ian Bremmer described the British decision as a blow to the whole post-War world order, whose largely American architecture has been a frequent bone of contention for China.

At Brookings, David Dollar argued that although “in the short run, Brexit is a modest negative” for China’s economy, “in the long run it is hard to see it as anything but a plus for China as the West continues to decline and China continues to rise.” He adds, though, that “Brexit does complicate China’s currency policy.”

Finally, from a larger geostrategic perspective, it would seem that China is the big winner from Brexit. Europe is likely to be a less influential player on the world stage and will be absorbed with internal issues of negotiating the British exit, controlling immigration, and keeping the periphery inside the eurozone. The is also likely to be distracted by these European challenges. This gives China more scope to pursue its reclamation activities in the South China Sea and to play divide and conquer with European states on various issues. For example, China would like to be recognized as a market economy, which is both symbolic and a practical matter for adjudicating anti-dumping cases. It is also negotiating investment treaties with both the and the EU, though so far China’s offers have not been very attractive in the sense that they exempt many important sectors from open investment. A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made. Brexit itself may not be that important but it may prove to be a good signal of the decline of Europe and the rise of China. [Source]

In Britain, meanwhile, the Leave campaign was accused of indulging in some information management of its own after wiping the front page of its website. As Human Rights Watch urged the country not “to abandon its human rights commitments at home or abroad” as it leaves the E.U., a group of Conservative MPs has suggested that it should reconsider the outgoing leadership’s “golden relationship” with China in light of mounting human rights concerns. But in any case, LaTrobe Asia’s Nick Bisley told The Guardian, “Brexit condemns the golden thing to history, I think. Britain’s stock has declined and Britain will be less important to China in its view of the world.” At Strife, Lauren Dickey similarly warns:

[T]he referendum is a game changer. Brexit threatens what lies at the core of the UK-China relationship: Britain’s promise to serve as an ‘essential partner for an opening China, for the benefit of [both] peoples.’ The question ahead for British policymakers — and, importantly the captain that steers the ‘leave’ ship after Prime Minister David Cameron — is whether the can still be the western country ‘most open’ to China’s rise. It is a question that has serious reverberations for China’s economic standing at a time when its economy is slowing and it continues to search for global partners.

Assuming the two-year process to leave the EU proceeds without hiccup or member state opposition, once the UK is fully divorced from the EU, China will lose its access to the European market via Britain. The United Kingdom is no longer an attractive extension of the ‘one belt, one road’ initiative to link markets from Europe to China by land and sea. For existing plans to develop the ‘northern powerhouse,’ boosting economies in Manchester, Leeds, and Liverpool, Britain cannot expect the deep pockets of Chinese investors to save the day. Additionally, with London as host to more than 40 percent of the global market for currency trading — and the second largest offshore centre of renminbi — it will be difficult for the City to retain its lustre and gateway banking position in Europe. While offshore yuan trading centres are largely dictums of Chinese policy, the Brexit will, at a minimum, yield a significant re-think of Beijing’s fiscal posture in the UK. [Source]

British tycoon Richard Branson told The Guardian on Tuesday that “I met with a group of Chinese businessmen yesterday morning who have invested heavily in England and who are now going to stop investing and withdraw investments they’ve already made.” The Economist Intelligence Unit similarly warned:

Chinese companies have invested heavily in the UK in recent years, and the stock of Chinese overseas direct investment in the UK stood at around US$13bn at end–2014, the second-largest in the EU, according to the latest data from China’s Ministry of Commerce. The many Chinese firms that have invested in the UK property market will probably have to book a loss in the near term as these assets fall in value, and this could give rise to domestic criticism about the wisdom of such investment choices. Some new investors might view falling property prices and a weaker pound as boosting the attractiveness of UK property assets, but we generally assume that they will want to wait until the political scene stabilises and economic prospects become clearer before entering the market—a process that could take years.

Amid heightened risk aversion, Chinese investors are likely to become more nervous about future planned investments in the UK, including in strategic projects under discussion, such as the Hinkley Point nuclear power plant and high-speed railway, as well as in financial services. The UK’s appeal to Chinese banks has rested in its access to the EU market, but the UK will struggle to retain similar access in services following Brexit. This could prompt China to look to other European financial centres, besides the UK capital, London, in its effort to internationalise the renminbi and create major offshore trading hubs.

[…] The political implications of Brexit will also be significant for China. Since 2012 the UK has been a supportive voice within the EU for closer ties with China and has historically been one of the strongest advocates of free trade. It was the first EU country that said that it would join the China-led Asian Investment Infrastructure Bank, has expressed support for China to be granted Market Economy Status later this year and would be favourably disposed to an EU-China bilateral investment treaty. Losing such a voice within the EU could complicate China’s relationship with the trading bloc, with German influence likely to increase. Human rights issues have held a more prominent place in Germany’s foreign policy than in that of the UK in recent years.

Besides, the political recriminations in the EU that will follow Brexit suggest bilateral discussions with China over such issues would be put onto the back-burner for a number of years. Arguably, China could view such a crisis as an opportunity for it to maximise influence and play off EU members against each other. However, the Chinese government generally views instability unfavourably, and would probably see any broader fallout in Europe—such as steps towards breaking up the EU—as highly undesirable. [Source]

One likely visible effect in Britain is a greater influx of Chinese tourists enjoying the weak pound. This trend could run hard into a rising wave of hate crimes against non-white or identifiably foreign people in the wake of the vote.

真Since directives are sometimes communicated orally to journalists and editors, who then leak them online, the wording published here may not be exact. The date given may indicate when the directive was leaked, rather than when it was issued. CDT does its utmost to verify dates and wording, but also takes precautions to protect the source. See CDT’s collection of Directives from the Ministry of Truth since 2011.