Beijing: The official Chinese reaction to Brexit has been largely dispassionate: the country's sharemarkets left relatively unscathed, the premier, Li Keqiang, seeking to strike a reassuring tone despite another likely drag on global economic growth.
But the global financial shocks brought on by the United Kingdom's vote to leave the European Union expose China's already stretched economic policymakers to another unwelcome stress test: how to manage the yuan with all major currencies, except the US dollar and the yen, plunging.
On Monday, China did weaken its daily yuan "fix" to the greenback by nearly 1 per cent, the most since last August, when a surprise devaluation roiled global markets, exacerbating global concerns in the Communist Party's stewardship of its slowing economy amid a steep sell-off in the country's sharemarkets.
And while Monday's adjustment was widely considered modest by currency analysts, the response from Chinese authorities in the wake of the Brexit vote will continue to be watched closely for any unexpected moves and any sign of hot money flows out of China.
"The Brexit incident will affect China's economy via investment, trade and capital," Xu Shaoshi, chairman of the China's top economic planning agency, the National Development Reform Commission, said Sunday. "But I believe the impact will not be big and relevant government departments have made contingency plans."
China stands to lose one of its strongest allies in the EU trade blocs, and already struggling with slowing growth and falling exports, it can ill afford any significant downturn in European demand or global investor sentiment.
Japanese investment bank Nomura said Asian economies could be among those hit hardest by Britain's departure from the EU, warning investors not to "underestimate the depth and reach of financial market contagion to Asia". It said it now expected significant monetary policy in the region, and for China's central bank to loosen reserve requirement ratios three times by year-end, in addition to at least one interest rate cut.
"China hopes to see a united, steady European Union as well as a stable and prosperous United Kingdom," Li Keqiang said Monday at the World Economic Forum in Tianjin, while calling for investors to regard China with a "calm and cool head".
"No country can depart from the world economy to promote development of itself. So we need to join forces."
But Brexit has also proven to be a propaganda windfall for Commmunist Party mouthpieces quick to point out the pitfalls of the democratic vote.
"In terms of Chinese society, we have arrived at a critical period where we need to understand the big questions for globalization and democracy," the state-run Global Times said. "England is representative of Western democracy.What will be the result of its embrace of the referendum—the "highest form" of democracy—to decide this question?"