Rachel Reeves defends China visit and welcomes £600m boost for UK

Chancellor Rachel Reeves has defended her decision to travel to China to improve economic ties at a time when rising government borrowing costs threaten to squeeze Britain’s public finances.

She says she wants a long-term relationship with China that is “squarely in our national interest” and said on Saturday that deals agreed in Beijing would be worth £600m to Britain over the next five years.

His trip has been overshadowed by Britain’s borrowing costs at a 16-year high and the pound falling in value, with Conservatives accusing Reeves of “fleeing to China”.

Speaking during a visit to British bike maker Brompton’s Beijing store, Reeves insisted it would not change its economic plans.

Reeves met Chinese Vice Premier He Lifeng in Beijing, discussing trade and investment opportunities as part of Britain’s efforts to grow the economy and raise living standards.

After the talks, the UK Treasury said the two countries had agreed to deepen cooperation on trade, financial services, investment and climate issues.

China is the world’s second largest economy and the UK’s fourth largest single trading partner. According to the Treasury, exports to the country supported more than 455,000 jobs in the UK in 2020.

Reeves told reporters in Beijing that she would “take action” to ensure she met her fiscal rules after the increase in borrowing costs.

She said: “I have made it really clear that our fiscal principles are non-negotiable, that we will pay for day-to-day spending through tax receipts and that we will reduce debt as a share of GDP. will.”

But market movements pose a potential problem for Reeves if she wants to meet her self-imposed rules.

Governments usually spend more than they raise in taxes so they borrow money to fill the gap, usually by selling bonds to investors.

But the UK’s borrowing costs have been rising in recent months and this week borrowing costs hit their highest level since 2008 in 10 years. The pound also fell below $1.22 on Friday.

The market jitters come as growth in the UK economy stagnates and businesses brace for tax hikes due to take effect in April.

The Treasury said Reeves’ visit to China builds on a “commitment to explore deeper economic cooperation” between Prime Minister Sir Keir Starmer and President Xi Jinping, made last year.

Faisal Islam, the BBC’s economics editor, said other European countries such as Spain had encouraged China not only to set up factories but also to transfer its advanced battery technology to Europe.

He said Britain could now upset Donald Trump’s new US administration if it encourages China’s role as part of its green growth strategy.

During Saturday’s meeting with the Chinese vice premier, Reus discussed Hong Kong and Russia’s invasion of Ukraine.

He said: “We discussed that there will need to be areas where we disagree and it is important that we discuss these issues openly and openly.

“This includes national and economic security, market access and the impact of subsidies and industrial policy concerns to ensure that there is a level playing field.”

Tory MP and former security minister Tom Tugendhat told BBC Radio 4’s Today program that the timing of Reeves’ visit to China was suspicious.

“She’s going in at a time when her budget has wrecked the economy, we’ve got debt levels going up, and she looks like she’s going in with a begging bowl,” he said. Yes, not with a trade agreement.” “It’s a real problem because it actually makes Britain look more vulnerable, and other people around the world will see that too.”

Tugendhat said Reeves has not made it “absolutely clear” what she hopes to achieve from her visit.

“We don’t use the second most important person in government for anything other than fundamentally changing relationships,” he said. “Well, he didn’t tell us what that change was?”

Liberal Democrat deputy leader and Treasury spokeswoman Daisy Cooper urged the chancellor to return to the UK “to urgently address the ongoing crisis in the markets and announce a serious plan for growth”.

Paul Johnson, director of the Institute for Fiscal Studies think tank, told BBC Radio 4’s Today program that the UK had “heated and cooled” in its relationship with China over recent decades, suggesting that the Chinese government had been more sensitive to British policies. There may be “considerable doubt” about towards him

On the chancellor’s financial rules, Mr Johnson said it would be very difficult for him to abandon them.

He said: “It’s really put its colors to the mast there and we’ve seen that the markets are quite concerned about the UK’s position. One of the reasons is that we have to pay down our debt and trade deficit. rely heavily on international flows of finance to do so.”

As well as boosting existing financial services trade in Shanghai, the government has said the talks will look at “reducing the barriers” British businesses face when trying to export or expand to China.

Reeves is joined by Bank of England Governor Andrew Bailey, Financial Conduct Authority Chief Executive Nikhil Rathi and other senior representatives from some of the UK’s biggest financial services firms.

But the visit also came as MPs challenged China-based fashion retailer Shen over its supply chains amid allegations of forced labor and human rights abuses. Shane has denied these claims.

A senior lawyer representing Shane on Tuesday Repeatedly declined to say whether the company sold products containing cotton from the Xinjiang region. An area in which China has been accused of subjecting Uighur Muslims to forced labor.

Sir Sherard Cowper Coles, chairman of the China-British Business Council, said the chancellor’s visit to China was the right one.

“She’s doing exactly the right thing with her eyes wide open, emphasizing national security, emphasizing our point. [UK] values, emphasizing human rights,” he said.

He told the Today programme: “A big, confident country engaging with serious players around the world, we agree to disagree, we stand up for our values.”

He said that the approach of the government is very similar to the policy of the previous government which is to compete, challenge and cooperate. This is what we need to do.

“There are 800 million middle-class people in China who want to buy British products, are interested in British savings and pension products – it’s madness not to engage.”