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, despite criticism of her decision to make the trip.
Rachel Reeves will meet her opposite number in Beijing this weekend to explore trade and investment opportunities as part of efforts to grow the UK economy and raise living standards.
The trip has been overshadowed by UK borrowing costs hitting a 16-year high and a fall in the value of the pound, with the Conservatives accusing Reeves of having “fled to China”.
Speaking during a visit to UK bike maker Brompton’s Beijing store, Reeves said she would not alter her economic plans.
“Growth is the number one mission of this government,” she said.
“The fiscal rules laid out in the Budget are non-negotiable. Economic stability is the bedrock for economic growth and prosperity.”
But 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.
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 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.
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.