Shock waves of UK exit’s impact will rearrange the face of global politics and markets

Source:Global Times Published: 2016/6/27 0:08:00

Britain has voted to leave the EU, with the "Leave" campaign winning by 51.9 percent to 48.1 percent.

Despite previous preparations, the result took global markets by surprise and triggered huge market volatility across the globe. It should be noted that the current performance of capital markets is temporary and is likely to subside after markets have digested the reality of Brexit. But long-term adjustments will continue afterward, so it would be more valuable for investors to take the mid- to long-term influence of Brexit into account.

Britain's withdrawal from the EU is more of a significant geopolitical incident that is likely to open a crack in Europe, leading to a trend likely to divide Europe and depart from the previous trend of European integration in terms of geopolitics, trade and investment, monetary policies, financial markets, culture and values. It remains to be seen how long, to what degree and how much deeper this trend could go.

What's certain is that Britain's EU departure and division in Europe will bring huge levels of uncertainty to global politics and the global economy. The future landscape of global politics is likely to undergo major changes similar to those attested to by the geological history of the breakup of Gondwana, an ancient supercontinent, about 180 million years ago. Major countries, China included, will yet again experience significant shifts in the political landscape and may need to make more adjustments to their choice of a yardstick for global governance.

A sense of panic from the EU is evident from the public reaction after the referendum. The lesson learned from Britain's exit is that the EU should refrain from further deepening European integration. Presently, the first priority for the EU is to maintain the stability of the eurozone.

The UK's exit from the EU is projected to affect a broader range of issues, including the performance of global financial markets, international trade and investment, political circumstances in Europe, European integration and Europe's respective relations with the US and with Asia. Brexit's influence on these fields and relationships might be huge, but it is likely to emerge slowly and continuously.

We also need to note that the UK's intention to withdraw from the EU after the referendum doesn't represent an immediate exit from the EU, but suggests that under Article 50 of the Lisbon Treaty - which lays out the formal route to exit from the EU - the UK could choose to initiate the breakup process and start divorce talks with the EU within a two-year time frame that can only be extended by unanimous decision by Britain and the EU's 27 other member states. This gives the UK time to withdraw from the EU while giving the country and the rest of the world a comparatively tranquil period for transition.

The article is based on a report by Beijing-based private strategic think tank Anbound.

Posted in: Eye on The Economy

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