Rachel Reeves has said the UK “must engage confidently with China”, as she arrived in Beijing amid market turbulence at home.
The Conservatives and Liberal Democrats had demanded the chancellor call off her China trip after the value of the pound plummeted to its lowest level in a year. But ministers argue that improved relations with the world’s second-largest economy will help boost growth, and that under the Conservatives the UK lagged behind the US and EU when it came to high-level engagement with Beijing.
The chancellor described the visit as a “significant milestone” in Britain’s relationship with China.
When asked by reporters in Beijing if closer ties to China carried any risk for the UK, Reeves said: “We need to make sure we have a pragmatic and good relationship with countries around the world. That is in our national interest.
“It’s what our allies around the world do and it’s what I will be pursuing as chancellor: always acting in the national interest while looking to help British businesses export overseas.”
Writing in the Times, Reeves said: “We cannot ignore the fact that China is the second-largest economy worldwide and our fourth-largest trading partner, with exports supporting close to half a million jobs in the UK.
“Choosing not to engage with China is therefore no choice at all.”
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Labour MPs have urged Reeves to demand the release of the pro-democracy media mogul Jimmy Lai during her visit to China, which is the first by a UK chancellor in nearly a decade.
Nine Labour MPs have joined a cross-party call for Reeves to raise the detention of political prisoners in Hong Kong and ask for Lai’s “immediate and unconditional release” during her two-day visit. A government official said Reeves intended to raise Lai’s case. The Treasury said the chancellor would express concerns about Hong Kong – whose police have issued warrants for pro-democracy activists living in the UK – and China’s support for Russia’s invasion of Ukraine.
Speaking on Saturday during a visit to Beijing’s flagship store of UK bicycle maker Brompton, Reeves focused on the economic importance of the visit, and vowed to stand firmly behind her October budget, insisting the fiscal rules laid out in the papers were “non-negotiable”.
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The chancellor refused to be drawn into a discussion on recent turbulence in the global financial markets, telling reporters she would not alter her economic plans, with the budget designed to return the UK to economic stability.
“Growth is the number one mission of this government,” Reeves said. “The fiscal rules laid out in the budget are non-negotiable. Economic stability is the bedrock for economic growth and prosperity.”
Reeves met the vice-premier, He Lifeng. She was accompanied by the Bank of England governor, Andrew Bailey; the FCA chief, Nikhil Rathi; and executives from major banks. The delegation was scheduled to hold an economic and financial dialogue with China for the first time since 2019.
Speaking at a meeting with He Lifeng, she said: “I believe that increasing trade and investment with an economically important partner like China is crucial for achieving my number one mission in government – economic growth.
“Improving market access is essential for enhancing our bilateral trade, reducing barriers to trade and creating a level playing field for businesses will benefit not only our economies but also consumers and citizens in our countries.”
Though this weekend’s trip is focused on financial services, one area where ministers see potential is green tech. The government has held early-stage talks with at least two Chinese electric car manufacturers about investment in the UK, the Guardian has been told. Unlike the US and EU, the UK has not put tariffs on Chinese electric cars.
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A senior business source said Labour had acknowledged the UK economy was “critically dependent on international trade and investment flows” and needed to be “talking sensibly in a grownup, well-informed way to the Chinese as major players in that global economy”. They said: “Reeves is going to be an important building block in rebuilding the normal relationship that other western powers have with China.”
But Charles Parton, a former diplomat who spent more than two decades in China and Hong Kong, said ministers were overestimating the economic ramifications of the UK’s political relationship with Beijing. He said: “2022 and 2023 were record years for exports to China, and those are the years where Labour says the Conservatives messed up the China policy by being too hostile.”
Critics also say the government is compromising on human rights and security concerns for the sake of improving relations. Labour has already backtracked on its pledge
to declare China’s treatment of Uyghur Muslims in the north-western province of Xinjiang as genocide, and now says it is a matter for international courts.
The issue is likely to gain fresh attention as the Chinese fast-fashion retailer Shein prepares to list on the London Stock Exchange this year – a move Labour said it would welcome. In a tense hearing with the business select committee this week, Shein’s general counsel in Europe could not say whether any of its manufacturers were based in Xinjiang or used Xinjiang cotton.
Lai, a British citizen who founded the pro-democracy newspaper Apple Daily, is accused of conspiracy to commit foreign collusion in Hong Kong’s most high-profile national security trial. He has been in jail since December 2020 and turned 77 in solitary confinement last month. Keir Starmer raised concerns about Lai’s health when he met Xi Jinping in November.
A letter coordinated by the Inter-Parliamentary Alliance on China (Ipac) said Lai’s trial was “emblematic of the destruction of Hong Kong’s freedoms and the impunity with which Beijing believes it can now behave”.
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Signatories included the newly elected Labour MPs Alex Barros-Curtis, who is Labour’s former executive director of legal affairs, Blair McDougall, Phil Brickell, Connor Rand and James Naish. Several of these MPs have joined Ipac, which campaigns for a tougher stance towards Beijing.
The government is carrying out a cross-Whitehall audit of its China policy, the publication of which has been pushed back to the spring. Ministers face two crunch decisions that will have important ramifications for China relations this year. The first is whether to approve the construction of a huge Chinese embassy building in Tower Hamlets. The second is whether to designate China a security threat on a par with Russia and North Korea in the forthcoming foreign influence registration scheme (Firs).
MI5 and Home Office officials are said to believe it is vital that China is designated an enhanced risk in the Firs, but businesses have said this would have a chilling effect on trade and economic exchanges.
