UK must ‘engage confidently with China’ on trade, says Reeves

The UK “must engage confidently with China” in trade, Rachel Reeves has suggested, as she arrived in Beijing amid market turbulence at home.

The Chancellor has said “choosing not to engage” with the Asian nation “is no choice at all” but said that Britain must also “speak candidly” in areas where “we disagree, including on democratic values and freedoms”.

Writing for the Times at the start of her trip, the Chancellor said that the previous Government “failed to realise the value of engagement with China”.

Ms Reeves is due to meet China’s vice premier He Lifeng during the trip, following Sir Keir Starmer’s talks with Chinese leader Xi Jinping in November.

However, the trip has been overshadowed by concerns over a rise in government borrowing costs after yields on UK bonds surged to their highest point since 2008.

Writing in the Times, Ms 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.”

She went on: “Choosing not to engage with China is therefore no choice at all. The UK must engage confidently with China in areas of trade that benefit the UK’s national interest and be equally confident in expressing our real economic and trade concerns to the Chinese, including market access and wider market-distorting practices.”

Ms Reeves later added: “This engagement also needs to advance broader UK interests. We must speak often and candidly with China where we disagree, including on democratic values and freedoms, Hong Kong, and support for Russia’s illegal war in Ukraine.”

Yields on 10-year gilts hit the highest point since 2008 on Thursday, at 4.89%.

It remained elevated throughout Friday, but did not surpass Thursday’s peak, and ended the day about three basis points higher, at 4.84%.

The yield on 30-year gilts briefly touched 5.43%, just below the peak of Thursday’s sell-off, which was the highest point since 1998.

By the end of the day it had settled at 5.41%, about three basis points higher for the day.

Culture Secretary Lisa Nandy defended Ms Reeves’ trip on Friday after opposition parties called on her to cancel the visit.

“China is the second-largest economy, and what China does has the biggest impact on people from Stockton to Sunderland, right across the UK, and it’s absolutely essential that we have a relationship with them,” Ms Nandy said.

“We need to make sure that the UK economy remains competitive, we need to challenge where we must, including in the area of human rights, but we also need to make sure that we are working with China on those areas of shared interest.”

It also marked a week of volatility for the pound, which slumped against the US dollar, while the American currency strengthened off the back of data showing its jobs market has been growing.

The pound hit a fresh 13-month low against the dollar and was down 0.7% by the time European markets closed on Friday.

The increase in the cost of servicing Government debts could cut into Labour’s expected financial headroom in a potentially worrying sign of how investors see fiscal sustainability in the UK.

The Chancellor has previously ruled out both increasing borrowing and raising taxes following the significant tax hikes in October’s Budget, leaving her with few options beyond further spending cuts.