UK finance minister begins China visit amid govt bond crisis

British finance minister Rachel Reeves began a visit to China on Saturday, seeking to revive dialogue with the world's number two economy as UK borrowing costs soar.

Reeves, whose formal title is Chancellor of the Exchequer, is the most senior British government official to visit China since then-prime minister Theresa May held talks with President Xi Jinping seven years ago.

Reeves's trip comes as the yield on UK government bonds reached a 17-year high this week, further complicating the ruling Labour Party's sputtering efforts to revitalise growth.

The increase makes it more costly for the government to finance current operations and repay debt, raising risks it will have to make spending cuts or hike taxes.

Reeves on Saturday acknowledged "moves in global financial markets over the last few days," but said the fiscal rules she set out in her October budget were "non-negotiable."

"Growth is the number one mission of this government, to make our country better off," she said at British bicycle-maker Brompton's Beijing showroom.

"That's why I'm in China, to unlock tangible benefits for British businesses exporting and trading around the world," she said.

Reeves faced pressure from the parliamentary opposition to stay home to address the financial crisis, but a spokesperson for Prime Minister Keir Starmer said she was not planning on canceling her "long-standing" China trip.

She is expected to meet her Chinese counterpart, He Lifeng, for economic and financial talks later Saturday.

They may seek to revive long-suspended annual trade and investment dialogue and discuss avenues for cooperation, potentially including financial services.

China's foreign ministry said Friday that the two sides would "open discussions on macroeconomic policy and economic globalisation, trade and investment, industrial cooperation, financial market development and cooperation on financial regulation."

"China and the UK strengthening economic and financial cooperation accords with the two countries' interests... and will add certainty and inject new momentum into the development of the global economy," ministry spokesman Guo Jiakun said at a regular news briefing.

Realistic approach

The governor of the Bank of England and the chief executive of the UK's Financial Conduct Authority are also taking part in the visit. In a sign of the thorny nature of ties, a Starmer spokesperson said Reeves was prepared to raise the topic of human rights.

Starmer has sought to reset the UK's diplomatic relationship with China after tensions rose under his Conservative predecessors over trade, human rights and Beijing's crackdown in the former British colony of Hong Kong. Starmer in November became the first British prime minister to meet Xi since 2018, when the pair spoke at the G20 summit in Brazil.

But trust is fragile following claims that a Chinese businessman used his links with Britain's Prince Andrew to spy for the Communist Party, an allegation Beijing has dismissed as "preposterous."

On Thursday, British Foreign Secretary David Lammy fleshed out London's doctrine of "progressive realism" in managing ties with the Asian powerhouse.

The approach involves "pragmatic engagement to cooperate with China where we can, such as on trade, climate, global health or AI regulation," Lammy said.

But he added that Britain would "challenge (China) where there are clear threats," such as by sanctioning companies that aid Russia's invasion of Ukraine, pushing for the release of Hong Kong democracy advocate and British national Jimmy Lai and calling for an end to human rights abuses in Xinjiang, where Beijing is accused of a sweeping crackdown on Muslim minorities.

"We will engage with China. We have to challenge them not to throw their lot in with (Vladimir) Putin," Lammy said.