Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Rachel Reeves wants to breathe fresh life into a scheme to link the London and Shanghai Stock Exchanges, as she highlighted financial services as the “pinnacle” of Britain’s economic relationship with China on Saturday.
The chancellor will push for greater cooperation between Britain and China in bonds, pensions and capital markets, as well as asset management as she seeks to restart dialogue after more than five years of high-level British visits to the country.
The UK government is sensing an opening to boost financial services ties with China as Donald Trump prepares to become US president after pledging to take a tougher stance on Beijing, according to financiers briefed on the trip.
However, Reeves’ preparations for a three-day visit to Beijing and Shanghai have been overshadowed by a sell-off in bond markets that has pushed the British borrowing costs to the highest level since the financial crisis of 2008. Opposition conservative politicians urged her to cancel the trip.
“We are witnessing an economic mess of Rachel Reeves’ own making, and the impact of her disastrous budget continues to bite. Yet, astonishingly, she chose to get on the plane rather than stay and try to cope,” shadow chancellor Mel Stride said.
“The chancellor should turn around immediately and return to the UK immediately,” he added.
Speaking ahead of the trip, Reeves she said she would find “common ground on trade and investment while being honest about our differences and upholding national security as the first duty of this government.”
She added: “We can build for the long term economic a relationship with China that works in the national interest.”
The City of London is suffering from a lack of initial public offerings amid a steady stream of UK-listed companies moving their listings to other countries or going private.
Bank executives hope that Chinese companies that previously sought US listings may decide to sell shares in London if relations between Washington and Beijing deteriorate.
Shein, the Chinese online fast fashion retailer, filed confidential documents with British and Chinese regulators last year for an initial public offering in London with a planned market valuation of 50 billion pounds.
That has raised hopes among financiers that other Chinese companies could follow, despite controversy surrounding claims that Shein uses forced labor as part of its supply of cotton from China’s northwestern region of Xinjiang.
Financial Conduct Authority chief executive Nikhil Rathi is accompanying Reeves on the three-day trip and may discuss Shein’s plans to go public with his counterparts in Beijing. David Schwimmer, executive director of the London Stock Exchange, is also in the delegation.
Reeves saw the meetings as an opportunity to boost financial services exports to China, given that a small portion of exports are currently to the U.S. and the EU, officials said.
The Shanghai-London stock link was launched to great fanfare in 2019, but has since struggled to gain traction. The intention was to encourage Chinese and British companies to list their shares in their respective countries.
But only six Chinese companies did so, to raise $6.6 billion, rather than British companies, while trading was muted. The Chancellor hopes to facilitate such dual listings between the UK and China.
The visit marks the revival of the economic and financial dialogue between China and the United Kingdom, an annual round of bilateral talks that has been suspended since 2019 due to the Covid-19 pandemic and the deterioration of diplomatic relations.
During his visit, Reeves will visit the Beijing store of British bicycle manufacturer Brompton and meet with executives from other British companies present in China, including Jaguar Land Rover, Unilever and Diageo.
HSBC chairman Mark Tucker, who is leading the business delegation, and Standard Chartered chairman José Viñals are among senior City of London bankers with significant business in China accompanying her this week.
Bank of England Governor Andrew Bailey is also on the way, along with Baroness Shriti Vadera, chairman of insurance firm Prudential, Sir Douglas Flint, chairman of fund manager Abrdn, and Richard Oldfield, head of asset manager Schroders.
