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Rachel Reeves will next month lead a delegation of senior bankers to Beijing seeking closer ties across a range of financial services, while quietly sidelining security concerns over the UK-China relationship.
The chancellor has been leading opposition to China's inclusion in the “enhanced level” of a new scheme that would force companies working for foreign entities to report their work on a central registry, according to government officials.
It fears the inclusion of Chinese nationals in the scheme – which is intended to allow the UK to monitor potential foreign influence – will hamper trade relations with the People's Republic of China.
The alleged Chinese spying scandal at the heart of the British establishment this week has complicated the matter Reeves“Visiting in January.
The Chancellor will be accompanied by City Minister Tulip Siddiq and senior financial figures on the trip, which is expected to relaunch the UK-China economic and financial dialogue, which was last held in 2019.
The talks will cover issues such as cooperation in capital markets, increasing connectivity between financial and bond markets, cooperation in regulation, and clean energy, according to people familiar with the agenda.
However, senior Conservatives said this week's spying scandal showed Britain must take a tougher line with Beijing.
Tom Tugendhat, the former Conservative security minister, said this was crucial China He was placed on the “enhanced tier” of the new “Foreign Influence Registration Scheme,” which he devised.
The scheme is a two-tier program that would force companies acting in certain capacities for foreign powers or entities to report that activity on a central register. It aims to enhance the UK Government's understanding of the nature and extent of foreign influence at home.
Loosely modeled on the US Foreign Agents Registration Act, the scheme was first proposed by Rishi Sunak with the aim of becoming active this autumn.
But it has been delayed since Labor took office, with Sir Keir Starmer facing the same controversy that surrounded his Tory predecessors: whether China should be included in the tougher level.
Tugendhat said this week that MI5's advice was “very, very clear” that the scheme “would be of no value” if Beijing was not at an enhanced level, which would require additional scrutiny for some foreign nationals.
Reeves and Jonathan Reynolds, the business secretary, are among those opposed to China's inclusion, according to government officials. “It will have a clear impact on the financial services sector,” one of them said.
Reeves said on Monday that Britain would take a “pragmatic” approach to relations with China and that national security would be the top priority – but he added that commercial considerations were also vital.
“Like other countries around the world, we must trade and seek investment when it is in our national interest, and that will be the approach this government will take,” she said.
City of London lobbyists refuse to speak publicly for fear of inflaming the issue, but say the scheme will complicate business with China and create a system more onerous than that seen in rival nations.
“It's going to take over a lot of the day-to-day business,” one said. There wasn't really any consultation. North Korea or Iran (both at the top level) are very different from China, given the level of trade interaction.
Reeves' talks in Beijing will focus on financial services. According to a document first published by Bloomberg News, it will include discussion of resuming the London-Shanghai equity linkage program — to allow dual listings — that was first proposed in 2015 and halted in 2020.
The discussions will also look at improving the regulatory environment for fintech companies and deepening cooperation between UK and Chinese asset management firms. The Treasury Department declined to comment.
