What impact will the UK's "Brexit" have on LED display companies?

At 14:00 on June 24, Beijing time, the UK announced the final results of the "Brexit" referendum: 16,141,241 people supported remaining in the EU, accounting for 48.1%, and 17,410,742 people supported leaving the EU, accounting for 51.9%. However, the British people seem to be dissatisfied with the results of the referendum. The vote for Brexit was almost "50-50". People expressed their surprise, and many people even asked for a re-vote! Some people launched a petition on the British Parliament website, calling for a second referendum. The petition has currently received more than 520,000 signatures. However, some media said that a second reinvestment is unlikely.

Why does the UK want to "Brexit"

The "germinations" of Brexit have always existed, and the pursuit of independence is a major reason. Historically, the United Kingdom was known as the Empire on which the sun never sets, and was a global hegemon in both political and economic fields. Although the United Kingdom joined the European Union in 1973, Eurosceptic voices have always existed. In 1975, two years after joining the EU, the UK held a referendum on leaving the EU, but chose to remain in the EU at that time.

The EU has been trying to promote the process of regional integration, but the UK hopes to retain a certain degree of independence, so it still maintains a certain distance from other EU economies after joining.

Since the outbreak of the global financial crisis in 2008, sovereign debt crises have broken out in many EU countries. Coupled with the high welfare policies of Greece and other countries, the sovereign debt problem has become more prominent. Become the trigger for Brexit. Meanwhile, the UK economy is doing better than the EU and is feeling dragged down. Looking at the GDP growth rate, the UK GDP grew by 2.3% in 2015, while the EU only grew by 1.9%;

In addition, in recent years, a large number of EU immigrants have poured into the UK, posing a threat to the employment and welfare of British workers, especially low-skilled workers. The EU stipulates that the UK must treat these immigrants with the same welfare benefits as local workers. This policy has also caused a huge economic burden on the British government and businesses. The UK is also the main contributor to the EU's "membership fees", which is also a major reason for the UK's complaints.

What impact will Britain's "Brexit" have on China?

The EU is currently China's largest trading partner and is vital to China. From an export perspective, the EU is China's second largest export destination economy. In 2015, China's exports to the EU were US$356 billion, of which US$59.6 billion was to the UK, accounting for 16.7%, second only to Germany. From an import perspective, the EU is China's largest import source economy. In 2015, China imported US$208.9 billion from the EU, of which US$18.9 billion was imported from the UK, accounting for 9%. From the perspective of trade balance, the EU is China's source of net demand. In 2015, China's surplus with the EU reached US$147.1 billion.

The impact of Brexit on China’s existing trade is also limited. The current average tariff level among EU countries is 1%, which is at a very low level. Considering China's economic size and international status, the probability that the UK will leave the EU and raise tariffs on China is not very likely.

Within the EU, the UK is a staunch promoter of free trade. British Prime Minister Cameron proposed supporting China and the EU in signing a free trade agreement in 2013, but other member states believe that China should first treat the EUEase investment and expand service trade opening before signing a free trade agreement. The China-EU investment agreement negotiations are currently in active progress. Once the UK withdraws from the EU, it will be difficult to influence EU decision-making, and the progress of negotiations between China and the EU may be affected.

The RMB exchange rate is temporarily stable. In the future, due to factors such as U.S. interest rate hikes and Brexit, the pressure on the RMB to depreciate may resurface. First of all, the U.S. economic situation has been improving. In February, the core PCE inflation level has rebounded to 1.68%. In March, 215,000 new non-farm jobs were added, which was also better than expected. The Federal Reserve will only be late to raise interest rates and will not be absent. Secondly, Brexit will impact the pound and the euro, which may push up the U.S. dollar index. If the Federal Reserve raises interest rates and Brexit comes together, the RMB is likely to experience renewed depreciation pressure.

What impact will the UK's "Brexit" have on LED display companies?

Britain's departure from the European Union triggered a butterfly effect. Stock prices plummeted, the pound depreciated, and a series of economic fluctuations followed one after another, which had a huge negative impact not only on the UK itself, but also on the EU and the world! For China’s manufacturing industry, the establishment of international marketsStanding will be more difficult than before.

For example, the LED display industry in mainland China is mainly export-oriented, and the export volume of LED display products accounts for about 15% to 20% of all sales. The top ten export destination countries are the United States, Germany, Russia, Australia, Mexico, the United Kingdom, Italy, Hong Kong, and the Netherlands. The main export regions are Europe, the United States, Japan, South Korea, Southeast Asia and other places, among which exports to the UK rank sixth. Now is the best time to enter the overseas market and welcome the new overseas blue ocean. However, after the UK leaves the EU, the EU and even the entire global economy will be shaken, and the current situation of foreign trade is not optimistic.

At present, the most direct impact is that the pound and the euro have fallen sharply, and safe-haven assets such as the U.S. dollar, Japanese yen and gold have risen rapidly. Changes in the exchange rate directly affect the international import and export industry. The sharp fall in the pound will reduce the cost of Chinese LED display companies importing British products, but the profits of LED products exported to the UK will be greatly reduced. It is difficult to say what kind of benefit value the combination of these two aspects will produce.

BrexitSuccess, China's strategic plan to strengthen cooperation with the EU through the UK will become very difficult, forcing China to choose other ways to strengthen cooperation with the EU, and it will be even more difficult for the LED industry to expand the European market through the UK in the future. However, most of the companies that can develop in overseas markets in the long term are some old and leading companies, and some companies are only in the testing stage of overseas markets, so the crisis is not as big as imagined.

It is understood that Britain's departure from the European Union has also intensified the turmoil in the Chinese stock market. After Britain's departure from the European Union, safe-haven assets such as the U.S. dollar, Japanese yen, and gold rose rapidly, and the pressure for depreciation of the RMB exchange rate increased. The market once experienced a panic decline. This will also be a major test for A-share LED listed companies. However, according to analysis by industry insiders, A-share trends are relatively independent, and investors are more optimistic about the market outlook after all the bad news.

The depreciation of the RMB has both advantages and disadvantages for China’s import and export trade. For exporters, if the RMB exchange rate falls, export volume will increase because export prices will become more competitive. The global economy will still be in a turbulent stage in the short term after Brexit, and there will be greater challenges for LED displays going abroad. In the long term, China’s LED display international market willThe field is still wide. Brexit will affect the entire industry. The Chinese LED industry urgently needs to recognize the advantages and disadvantages brought to the industry after Brexit, actively respond to the correct guidance, and identify the opportunities and challenges in the situation.