UK seeks rapprochement with China amid rising tensions with the US, as Labour’s controversial high-tax budget and Donald Trump’s return stoke political rifts. Chancellor Rachel Reeves secures £600M deals in Beijing while navigating fiscal and diplomatic challenges.
Following weeks of unprecedented attacks on a British government by a business tycoon figure close to the incoming US administration, the visit this weekend by far-left Chancellor of the Exchequer Rachel Reeves will be noted. The embattled Chancellor has faced a threatened financial crisis this week for her recent high-spend, high-tax budget in October. In the meantime, the unabated interferences by American tycoon and former X owner Elon Musk coincide with the inauguration of U.S. President Donald Trump on January 20. Not only is the incoming Trump administration preparing radical shake ups in economic and trade policy, but it also appears ready to launch an all-out war for free speech—not just in the United States but also across the world.
As US-UK ties sour with the anticipated return of Donald Trump to the White House on January 20th, Britain has turned its attention to mending relations with China.
This shift was evident over the weekend. For instance, UK Chancellor Rachel Reeves was welcomed in Beijing by Chinese leaders during a high-profile visit.
The visit marks a significant moment in UK-China relations. Undoubtedly these have been strained for years over security concerns, human rights issues, and policies on Hong Kong.
Reeves, under pressure due to her controversial budget that raised taxes and revived “big government” policies reminiscent of the 1970s, co-hosted the 11th China-UK Economic and Financial Dialogue with Chinese Vice-Premier He Lifeng.
UK and China reach £600 million agreements to reset relations during Reeves’ visit to Beijing
At length, the talks resulted in £600 million worth of agreements between UK and Chinese parties, highlighting a mutual desire to reset the relationship. Reeves confirmed these agreements during her two-day trip, stating that re-engagement with China could deliver significant economic benefits for Britain.
Vice-Premier He Lifeng emphasized the potential for deeper collaboration, calling for expanded trade, investment, and partnerships in key areas such as financial services, clean energy, artificial intelligence, and biomedicine.
“China and the United Kingdom enjoy complementary economies and extensive shared interests that far outweigh their differences,” He said during the dialogue. He also highlighted China’s willingness to create a “fair, just, and non-discriminatory” business environment, addressing concerns long raised by foreign investors.
Both nations face economic challenges that may limit the scope for deeper collaboration in key sectors
Both nations face pressing economic challenges. The UK is struggling with sluggish growth and a looming fiscal crunch. Meanwhile, China, though still growing, is mired in a deflationary cycle exacerbated by a prolonged property crisis. Chinese policymakers have attempted to stimulate the economy, but confidence among consumers and businesses remains low.
In the UK, Reeves positioned London as a “natural home” for Chinese financial services firms. In brief, a gateway for Chinese businesses to establish a global presence. She emphasized Britain’s expertise in sustainable finance, capital markets, and regulatory alignment as areas for closer cooperation.
However, Reeves also reaffirmed the UK’s commitment to national security. “While we strengthen our financial relationship, it’s crucial we work together on regulatory cooperation and uphold our respective values,” she stated.
Labour government’s pivot towards China coincides with rising US tensions, influencing political climate
The Labour government’s pivot toward China coincides with rising tensions with the United States. In particular, fueled by Donald Trump’s aggressive stance on trade and his use of social media to target political adversaries. Trump, along with Elon Musk on the X platform, has directed scathing criticism at Labour policies. Undeniably creating a challenging political climate for Prime Minister Sir Keir Starmer.
There is growing speculation about Starmer’s leadership, with some calling for his resignation amidst the intensifying scrutiny. Meanwhile, Musk’s controversial interventions continue unabated. These include his steadfast support for right-wing activist Tommy Robinson.
In addition, his commentary on sensitive societal issues is openly challenging draconian hate speech legislation in the United Kingdom. This is deliberate, as it appears the Trump administration is preparing to use Musk’s absolutist stance on free speech to challenge other models of governance.
In particular, Musk has focused on a five-decade Muslim grooming scandal in the UK Midlands. Consequently, this has led to unprecedentedly inflamed divisions in UK politics.
The UK-China dialogue signals a return to diplomatic engagement, despite previous tensions and challenges
At this time, this renewed dialogue reflects a broader effort to stabilize UK-China relations after years of tension. It was the 11th Economic and Financial Dialogue, originally launched in 2008 but suspended in 2019.
Notably, Reeves’ visit to Beijing was the most senior UK government delegation since Foreign Secretary David Lammy’s trip in October.
The second high profile British public figure to visit is therefore seen as marking a revival of diplomatic engagement.
China is the UK’s fourth-largest trading partner, with $89.3 billion in trade in the 11 months to November 2024.
However, the UK, under Conservative governments, previously was a source of unflinching criticism of Beijing over its crackdown in Hong Kong. Critics claim this violated the Sino-British Joint Declaration signed in 1984, which led to the territory’s reunification with China in 1997.
Nevertheless this Labour UK government despite its election manifesto last year had shown itself to have lurched very much to the left. In particular, it appears very much in favour of heavy handed control of free speech rights.
Both countries pursue enhanced cooperation despite ongoing challenges in human rights and media freedom
China, for its part, views the rapprochement as an opportunity to bolster its global economic standing. The Chinese government has promoted its economic growth prospects as a stabilizing force for the global economy. Vice-President Han Zheng, who also met Reeves during the trip, underscored the significance of strengthening economic and financial ties.
The agreements reached during the dialogue include measures to enhance cooperation in sustainable finance, connectivity, and green economy initiatives. Additionally, the UK remains a key hub for offshore yuan trading and investment opportunities for Chinese firms.
Despite the optimistic tone of the talks, significant challenges remain. Both sides acknowledged differences on human rights and national security, with Reeves reiterating that these issues would not be sidelined.
The UK’s crackdown on freedom of expression, combined with China’s stringent control of media and dissent, places both governments under international scrutiny. Critics argue that these policies in the UK must be challenged. Eventually, it could strain the fragile relationship that has opened up between London and Beijing. Particularly so as Trump’s presidency ushers in a more confrontational US stance in favor of right-wing values.
Economic and political uncertainties may limit the long-term success of UK-China collaboration despite accords
The economic environment also poses risks. China’s deflationary pressures and the UK’s fiscal constraints could limit the scope of collaboration.
Falling Chinese bond yields and muted household consumption highlight the difficulties Beijing faces in reviving its economy.
Labour turns back the clock in Britain with a budget raising taxes to the highest level since 1993
War with China is a rising spectre that must be confronted as US General predicts conflict by 2025
The rapprochement between the UK and China appears to be a pragmatic move for both nations. Both are dealing with uncertain economic and political landscapes.
Join the Thai News forum, follow Thai Examiner on Facebook here
Receive all our stories as they come out on Telegram here
Follow Thai Examiner here
Further reading:
Labour turns back the clock in Britain with a budget raising taxes to the highest level since 1993
UK’s former ruling Conservative Party to announce a new leader on November 2 as contenders emerge
UK mother takes her family to live in Thailand to escape her own country’s cost of living crisis
New tax era in Thailand begins as Revenue now shares data with 138 countries within the OECD
Calls for clarification of new Tax regime which appears to target expat foreign income sources
10 year visa a magnet for global citizens setting up in Thailand with zero tax on offshore income
Wealthy foreigners to own small landholdings associated with homes here agreed in principle
New plan for the Thai economy could see an elite foreign visa scheme generate up to 6% of GDP
Economic plan to put the smile back in Thailand’s appeal to western foreigners to live and work
IMF urges government to loosen nation’s purse strings as finances tighten with the tax take down
