China and the UK restart economic and financial talks after a 6-year hiatus

UK Chancellor of the Exchequer Rachel Reeves led a delegation of British business leaders and financial officials to Beijing, marking the resumption of economic and financial dialogue between China and the UK after a six-year hiatus. This visit comes as the UK's Labour government seeks to reset strained relations with the world's second-largest economy.

Reeves met with Chinese leaders including Vice Premier He Lifeng and Vice President Han Zheng. As she concluded talks in Beijing, she emphasized the need for a "stable, pragmatic" UK-China relationship. She stated, "Our two countries can cooperate in areas of mutual interest for the benefit of our citizens, while being frank when we disagree."

Relations between the UK and China have deteriorated due to a series of events, including mutual accusations of espionage, China's support for Russia in the war in Ukraine, and the suppression of civil liberties in the former British colony of Hong Kong. British officials indicated that Reeves would also urge Beijing to cease providing material and economic support for Russia's war in Ukraine and raise concerns about rights and freedoms in Hong Kong.

The two sides signed agreements on Saturday in areas including finance, which Reeves said would "bring £600 million ($732 million) of value to the UK economy over the next five years," although she did not detail the specifics of the agreements. She added, "Overall, this government's re-engagement with China has the potential to unlock up to £1 billion of value for the UK economy."

Reeves' three-day visit was overshadowed by turmoil in the bond markets, which has led to borrowing costs reaching their highest level since the 2008 financial crisis. The opposition Conservative Party accused her of "fleeing to China" instead of addressing market concerns about inflation and economic stagnation. In an op-ed in The Times, Reeves insisted that China offers opportunities for growth for the UK. She stated that the UK cannot ignore the fact that China is its fourth-largest trading partner, with exports supporting nearly 500,000 UK jobs. "Therefore, choosing not to engage with China is simply not an option," she wrote.

Reeves' visit marks the resumption of the UK-China Economic and Financial Dialogue, a bilateral annual meeting that had been suspended since 2019 due to the COVID-19 pandemic and deteriorating relations. London hopes the resumption of dialogue will help remove barriers faced by UK businesses seeking to export to or expand in China. Reeves added that the UK is seeking improved engagement in areas such as sustainable finance, capital market connectivity, pensions and regulatory coordination, as well as trade and investment.

She also stated, "As part of this, it is important to prevent economic ties from undermining our national security and economic resilience." She welcomed China's plans to issue its first overseas sovereign green bond in London this year. The meetings also focused on how to remove market access barriers for goods and services, "including unlocking a package of agri-food measures which will boost UK trade with China," Reeves added.

Vice Premier He Lifeng stated that China and the UK agreed to remove investment barriers in areas such as clean technology, life sciences, digital technology, and financial services. Members of the delegation included Bank of England Governor Andrew Bailey, as well as the chief executives of the UK's Financial Conduct Authority and the London Stock Exchange Group. Executives from some of the UK’s largest financial services firms, including the group chairmen of HSBC and Standard Chartered, also participated in the visit.

Reeves’ visit follows a trip to China by Foreign Secretary David Lammy in October and a meeting between Prime Minister Keir Starmer and Chinese President Xi Jinping at the G20 summit in Brazil in November. According to the UK Treasury, it is part of an effort by Starmer, who was elected leader of the Labour Party in July, to strengthen political and economic ties with China, the UK's fourth-largest single trading partner.

Officials stated that Starmer wants to take a “pragmatic” approach and cooperate with Beijing on maintaining global stability, tackling climate change, and transitioning to clean energy. However, some in the opposition Conservative Party have criticized his stance, stating that trade relations should not come at the expense of national security and human rights concerns. UK political leaders and intelligence chiefs have repeatedly warned that China poses a security threat. Calls to address this challenge have grown louder following reports last month that a suspected Chinese spy had cultivated close ties with Prince Andrew and carried out "covert and deceptive activities" for China's ruling Communist Party.

Reeves stated, "National security is the bedrock of any government's priorities in the national interest. But we need to ensure we have pragmatic and good relations with countries around the world. That is in our national interest."