Rachel Reeves seeks to revive City of London links with China

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Rachel Reeves wants to breathe fresh life into a scheme linking the London and Shanghai stock exchanges, as she touts financial services as the “highlight” of Britain’s economic relations with China on Saturday. 

The chancellor will argue for greater co-operation between Britain and China in bonds, pensions and capital markets as well as asset management as she seeks to restart dialogue after a more than five-year hiatus in top-level UK visits to the country. 

The UK government senses an opening to boost financial services ties with China as Donald Trump prepares to become US president after he promised to adopt a tougher stance with Beijing, according to financiers briefed on the trip.

However, Reeves’ preparations for the three-day visit to Beijing and Shanghai have been overshadowed by a sell-off in bond markets that this week pushed British borrowing costs to their highest level since the 2008 financial crisis. Opposition Conservative politicians called for her to cancel the trip.

“We are witnessing an economic mess of Rachel Reeves’ own making, with the impacts of her disastrous Budget continuing to bite. Yet astonishingly she made the choice to get on a jet rather than stay and try to get a grip,” said shadow chancellor Mel Stride.

“The chancellor should turn right back around, and return to the UK urgently,” he added.

Speaking ahead of the trip, Reeves said she would find “common ground on trade and investment while being candid about our differences and upholding national security as the first duty of this government”.

She added: “We can build a long-term economic relationship with China that works in the national interest.”

The City of London is suffering from a dearth of initial public offerings amid a steady flow of UK-listed companies moving their listings to other countries or going private.

Bank executives hope Chinese companies that previously would have sought to list in the US may choose instead to sell shares in London if relations between Washington and Beijing worsen.

Shein, the Chinese online fast-fashion retailer, filed confidential documents with UK and Chinese regulators last year for a London IPO with a planned market valuation of £50bn. 

This has sparked hopes among financiers that other Chinese companies could follow, despite controversy over allegations that Shein uses forced labour as part of its cotton supply from China’s north-western Xinjiang region.

Financial Conduct Authority chief executive Nikhil Rathi is accompanying Reeves on the three-day trip and could discuss the Shein listing plans with his counterparts in Beijing. David Schwimmer, chief executive of the London Stock Exchange, is also part of the delegation.

Reeves saw the meetings as an opportunity to bolster financial services exports to China, given they are currently a fraction of those to the US and EU, officials said. 

The Shanghai-London stock connect was launched with great fanfare in 2019 but has struggled to gain traction since then. It was meant to encourage Chinese and British companies to list their shares in each others’ countries.

But this has been done by only six Chinese companies, raising $6.6bn, with trading being muted. No UK companies have done so. The chancellor hopes to make such dual listings between the UK and China easier.

The visit marks a revival of the China-UK Economic and Financial Dialogue, an annual set of bilateral talks that has been suspended since 2019 due to both the Covid-19 pandemic and worsening diplomatic relations. 

During her visit, Reeves will visit the Beijing store of UK bicycle maker Brompton and meet executives from other British companies present in China, including Jaguar Land Rover, Unilever and Diageo.

HSBC chair Mark Tucker, leading the business delegation, and Standard Chartered chair José Viñals are among the senior City of London bankers with sizeable Chinese operations accompanying her this week.

Bank of England governor Andrew Bailey is also on the trip, along with Baroness Shriti Vadera, chair of insurer Prudential, Sir Douglas Flint, chair of fund manager Abrdn, and Richard Oldfield, head of asset manager Schroders.