Rachel Reeves must approach economics talks in China with pragmatism

Winnie Cao, Partner and Head of the China desk  said:

It is great news for both China and the UK that Rachel Reeves is going to have mid-January talks with her Chinese counterpart, He Lifeng. To see a UK Chancellor prepared to work with China after six years of the UK-China Economic and Financial Dialogue being on hold is very promising.

She added:

If the UK positions itself in a pragmatic way in these talks it will speak loudly about cooperation across countries, and may help reduce tensions across the world. It could also lead to improved trade relationships and therefore boost both countries’ economies.

To get the maximum benefit for both countries, they should try to play to each other’s strengths. China can offer the UK affordable electric vehicles and battery storage, thanks to its complete supply chain within the country. This will help the UK drive towards its zero carbon objectives. China’s domestic economy growth has slowed and its vibrant companies are under pressure to seek opportunities outside of China. The UK is a perfect place to find them, and Chinese companies are already looking at, or currently expanding into the UK.

Given that China is one of the two top trading partners for the UK, a closer economic relationship with China could be a boon to Labour’s growth plans. China could also be a more ‘stable’ trading partner than President-elect Donald Trump’s America, where sanctions are being used as a threat to get economic compliance.

However, it is likely both parties will approach this meeting with some caution. The UK have enacted a National Security Law to keep foreign investment within a small stake, consumer market, showing they are concerned about foreign investors having too much power, or perceived power over the UK economy. He Lifeng is also no doubt aware that Trump may view closer UK cooperation with China as a threat.

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