Rachel Reeves defends visit to China and welcomes 600 million boost to UK.

Reuters

British Prime Minister Rachel Reeves has defended her decision to visit China to improve economic ties at a time when soaring government borrowing costs threaten to strain Britain's public finances.

She said she wanted a long-term relationship with China that was “purely in our national interest” and said the agreement signed in Beijing on Saturday would be worth $600 million to Britain over the next five years.

Her trip was overshadowed by Britain's borrowing costs hitting a 16-year high and the value of the pound falling, with the Conservatives accusing Reeves of “fleeing to China”.

During a visit to the Beijing store of British bicycle manufacturer Brompton, Reeves insisted he would not change his economic plans.

Reeves met with Chinese Vice Premier He Lifeng in Beijing to discuss trade and investment opportunities as part of efforts to grow the British economy and raise living standards.

After the meeting, Britain's 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. Exports to the UK supported more than 455,000 jobs in the UK in 2020, according to the Treasury.

Reeves told reporters in Beijing that “we will take steps” to ensure fiscal regulations are met as borrowing costs rise.

“Our fiscal rules are non-negotiable and we have been really clear that we will pay our day-to-day spending through tax receipts and reduce debt as a share of GDP,” she said.

But market movements pose a potential problem for Reeves as he tries to meet the rules he sets for himself.

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

But borrowing costs in the UK have been rising in recent months and this week borrowing costs for more than a decade reached their highest level since 2008. The pound also fell below $1.22 on Friday.

There is market turmoil as growth in the UK economy stagnates and businesses prepare for tax rises that will come into effect in April.

Reuters

Officials said the premier would raise “difficult issues” with Chinese Vice Premier Heifeng during the trip.

The Treasury said Reeves' visit to China delivered on the “commitment to explore deeper economic cooperation” between Prime Minister Keir Starmer and Xi signed last year.

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

He said Britain now risks upsetting the new administration of Donald Trump in the United States if it encourages China's role as part of its green growth strategy.

During his meeting with China's vice premier on Saturday, Reeves discussed Hong Kong and Russia's invasion of Ukraine.

“We discussed that there will be areas where we disagree and that it is important to communicate openly and honestly about these issues,” she said.

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

Tory lawmaker and former security secretary Tom Tugendhat told BBC Radio 4's Today program that the timing of Reeves' visit to China was questionable.

“She’s coming at a time when the budget is plundering the economy and debt rates are rising, and it looks like she’s begging, not bargaining,” he said. “This is a real problem because it actually makes the UK look more vulnerable and other people around the world will see that too.”

Tugendhat said Reeves had not made it “at all” clear what he wanted to achieve from his visit.

“We don’t use the second most important person in government to do anything other than fundamentally change the relationship,” he said. “Well, she didn’t tell us what the change was.”

Liberal Democrat deputy leader and Treasury spokeswoman Daisy Cooper called on the Prime Minister to return to the UK “to urgently address the ongoing market crisis and announce serious plans for growth”.

Paul Johnson, director of think tank the Institute for Fiscal Studies, told BBC Radio 4's Today program that Britain's relationship with China has been “hot and cold” in recent decades, and said the Chinese government could be “quite skeptical” of British policy. suggested. towards it.

On the Prime Minister's fiscal rules, Mr Johnson said it would be very difficult for him to abandon them.

He said: “She has really nailed her colors to the mast for the UK and we have seen that markets are quite concerned about the UK’s position, which is partly because we are too dependent on international financial flows to finance our debt and trade deficit. “Because it depends,” he said.

In addition to expanding current financial services trade in Shanghai, the government said it would discuss “breaking down the barriers” British companies face when trying to export or expand into China.

Reeves was joined by Bank of England governor Andrew Bailey, Financial Conduct Authority chief executive Nikhil Rathi and other senior representatives from the UK's largest financial services companies.

But the visit also comes after MPs challenged Chinese start-up fashion retailer Shein over its supply chain over allegations of forced labor and human rights abuses. Shein denied these claims.

On Tuesday, the lead lawyer representing Shane repeatedly refused to say whether the company sold products containing cotton from the Xinjiang region, where China is accused of forcing forced labor on Uyghur Muslims.

Sir Sherrad Cowper Coles, chairman of the China-Britain Business Council, said it was right for the Prime Minister to visit China.

“He opened his eyes wide and emphasized national security and our [UK] “We emphasize values ​​and human rights,” he said.

He told the Today program: “A mature, confident nation engaging with serious players around the world, we agree to disagree and stand up for our values.”

“The government’s approach is very similar to the previous government’s policy of competition, challenge and cooperation,” he said. “That’s what we need to do.”

“There is a middle class of 800 million people in China who buy British products and are interested in British savings and pension products. It would be crazy not to get involved.”

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