Rachel Reeves says UK has 'no choice' but to engage with China as chancellor kicks off Beijing visit
10 January 2025, 22:07 | Updated: 10 January 2025, 22:10
Rachel Reeves has said the UK has "no choice" but to engage "confidently" with China, as she arrived in Beijing to begin what she described as "financial dialogue" between the nations.
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"National security and growth are not opposed," the Chancellor said on Friday as she began her much publicised trip alongside financial officials.
A meeting with China’s finance minister Lan Fo’an marked the start of her week-long trip to Beijing and Shanghai.
Reeves was joined by the governor of the Bank of England, the chief executive of the Financial Conduct Authority, alongside a host of financial service leaders.
The chancellor has faced widespread criticism in recent days over her decision to go ahead with a pre-planned visit to Beijing this weekend.
It comes as many raised concerns over the UK's "flatlining" economy.
Reeves is the most senior British government official to visit China since Theresa May held talks with President Xi Jinping seven years ago.
"We must and will continue to engage with international partners on trade and investment to grow our economy, while ensuring that our security and values are not compromised," she wrote in The Times on Friday.
On Thursday, UK borrowing costs hit a 27-year high - a milestone that saw many liken the economic turbulence to that seen under Liz Truss.
"In a world in flux, I believe there can be no greater need for this approach than on our economy," Reeves wrote in her column.
"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."
"British culture in China — film, fashion, music and sport — has a foothold in supporting the UK economy and our reputation.
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"China’s economy is expected to provide the largest driver of global growth this decade, from which there are significant opportunities that can benefit Britain.
"Choosing not to engage with China is therefore no choice at all."
Explaining that the UK must "engage confidently with China", she said that now is not the time to be coy, highlighting the need to voice trade concerns directly, "including market access and wider market-distorting practices".
The chancellor's trip come amid speculation that she's prepared to impose more severe spending cuts on departments if necessary.
Investors are bracing for further increases in borrowing costs on Friday, as the United States is set to publish crucial employment data.
It's reported the chancellor has also asked ministers to draw up alternative plans for securing growth and "cease anti-growth measures" as she attempts to meet the Government's aim of improving living standards across the country.
Downing Street insisted it was "still the Chancellor's intention to have one big fiscal statement a year, not two" - as it swatted away suggestions of an emergency "mini-Budget" on March 26.
It comes as cross-bench peer Lord Jim O'Neill told LBC there needs to be a halt to the use of "emotive language" around the current borrowing figures.
"I think it needs to be put into some perspective about what's happening in the world as a whole," he told Ian Dale.
"The pound has not fallen since the budget, other than against the same strengthening dollar that has strengthened against everything else.
"The pound against the euro is the same today as it was on budget day... the pound has hardly moved against the Yen, so the commonality is that everything has weakened against the dollar.
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"People need to get this in perspective... I'd say 80 per cent of the move in bond yields has been because of the US. Since it became clear that Donald Trump was going to win...US bond yields have hit the highest level in nine months.
"And because of the role of the US bond market and the US financial markets in the world, it affects everything else around the world.
"The other 20 per cent is because the other markets are not sure both about the commitment by the government to this latest policy and some of the important details."
On Thursday, shadow chancellor Mel Stride criticised the chancellor's decision to go ahead with the trip, questioning whether she will be forced to increase taxes further or cut public services should her fiscal headroom evaporate.
He said Ms Reeves should "now cancel her travel and focus on this country instead".
In the House of Commons, Reform UK deputy leader Richard Tice said Ms Reeves should "return from her ridiculous trip" given that the pound is "almost collapsing".
Tory former Treasury minister Dame Harriett Baldwin added: "Is the reason that the (Government) front bench is so empty today, the Chancellor has fled to China, that she has realised that her Budget means that she now is the arsonist?"
Any further spending cuts could be announced ahead of a spending review that has already required Government departments to find efficiency savings worth 5% of their budgets.
Treasury minister Darren Jones, who was sent by the Government to reply to an urgent question directed at the Chancellor, said the trip is "important" for UK trade and would continue.
The exchanges in the House of Commons came against the backdrop of Government borrowing costs continuing to surge, which has put more pressure on Labour over its fiscal plans.
Outside the chamber, Liberal Democrat leader Sir Ed Davey said Ms Reeves should cancel her trip to China and make an emergency statement to Parliament.
He said: "Instead of jetting off to China, the Chancellor should urgently come before the House of Commons to cancel her counterproductive jobs tax and set out a real plan for growth.
"The country is paying an ever-higher price for the total mess the Conservative Party made of our economy, and the Chancellor needs to realise that she'll never dig us out of this hole without a far more ambitious plan to grow our economy, including rebuilding trade with Europe."
Asked why the Chancellor did not respond to the urgent question, the Prime Minister's official spokesman said: "It's up to the Treasury who they send to respond to UQs.
"I think it's quite common for the chief secretary to respond to urgent questions in the chamber."
