Limited impact from interest rates hike seen for trade, investment ties with China

The Bank of England's decision to raise interest rates for the first time in 10 years will have minimal impact on the United Kingdom's trade and investment relationship with China, according to business adviser Yu Zongwen.

The UK's central bank increased interest rates from a record low of 0.25 percent to 0.5 percent on Nov 2 to help curb inflation.

The widely expected move reversed the emergency action the bank took in the wake of last year's referendum on European Union membership, when it cut rates to avert a recession.

Following the rate increase, the pound fell by around 1 percent against the dollar and the euro on dovish commentary from the central bank.

The UK inflation rate is running a full percentage point above the central bank's 2 percent target.

Bank of England Governor Mark Carney says inflation was unlikely to return to the target level without raising rates, because the economy was growing at levels "above its speed limit".

Yu, CEO of the London-based advisory company Shanghai-London Connect, says, "The UK's decision is a solution mainly to combat inflation.

"The depreciation in the pound's value could even be beneficial for Chinese investors, as the costs of investing in the UK are reduced."

China Daily

(China Daily European Weekly 11/10/2017 page28)