Making working people in Britain better off will be at the “forefront” of the chancellor’s mind during her visit to China, the Treasury has said, following criticism of the trip amid trouble on the financial markets at home.
Rachel Reeves will meet her opposite number in Beijing this weekend to explore trade and investment opportunities in a bid to achieve the government’s main goal of growing the UK economy to raise living standards.
However, her visit has been overshadowed by UK borrowing costs hitting a 16-year high and a fall in the value of the pound.
The Conservatives accused Reeves of having “fled to China”, but the government has defended the trip.
Culture Secretary Lisa Nandy said the rise in borrowing costs was “a global trend that we’ve seen affecting economies all over the world”, while the Treasury ruled out any emergency intervention in the markets.
Governments generally spend more than they raise in tax so they borrow money to fill the gap, usually by selling bonds to investors.
But UK borrowing costs have been rising in recent months and this week the cost of borrowing over 10 years hit its highest level since 2008. The pound also dropped on Friday to below $1.22.
The market movements create a potential problem for Reeves if she wants to meet her self-imposed fiscal rules. She has pledged not to borrow to fund day-to-day spending and to get debt falling as a share of national income by the end of this parliament.
The market turbulence also comes as growth in the UK economy has been stagnant and businesses are bracing themselves for tax rises due to come into effect in April.
The Treasury said Reeves’ visit to China delivered on a “commitment to explore deeper economic co-operation” between Prime Minister Sir Keir Starmer and President Xi, made last year.
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 UK jobs in 2020.
But officials said the chancellor would also raise “difficult issues” with her counterpart, Vice Premier He Lifeng, which include urging China to stop its “material and economic support” for Russia’s war against Ukraine, as well as raising concerns about people’s rights and freedoms in Hong Kong.
“By finding common ground on trade and investment while being candid about our differences and upholding national security as the first duty of this government, we can build a long-term economic relationship with China that works in the national interest,” Reeves said in a statement.
While in Beijing, the chancellor will visit the flagship store of bicycle maker Brompton, which the Treasury said was “a major success story for UK exports to China”.
In addition to expanding current financial services trade in Shanghai, the government said talks would look to “bring down barriers” that British businesses face in trying to export or expand to China.
Reeves will be joined by Bank of England governor Andrew Bailey, chief executive of the Financial Conduct Authority Nikhil Rathi and other senior representatives from some of Britain’s biggest financial services firms.
But the visit also comes after MPs challenged Chinese-founded fashion retailer Shein over its supply chains amid allegations of forced labour and human rights abuses. Shein has denied the claims.
On Tuesday, a senior lawyer representing Shein repeatedly refused to say whether the company sold products containing cotton from the Xinjiang region, an area in which China has been accused of subjecting Uyghur Muslims to forced labour.
