Rachel Reeves seeks to revive City of London links with China

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Rachel Reeves wants to breathe new life into the scheme linking the London and Shanghai stock exchanges as she on Saturday described financial services as a “crucial point” in Britain’s economic relationship with China.

The chancellor will push for greater co-operation between the UK and China in bond, pensions and capital markets, as well as asset management, as he seeks to restart dialogue after a hiatus of more than five years of high-level UK visits to the country.

The British government is open to boosting financial services ties with China as Donald Trump prepares to become US president after he pledged to take a tougher line with Beijing, according to financiers briefed on the trip.

However, Reeves’ preparations for a three-day visit to Beijing and Shanghai were overshadowed by a sell-off in bond markets that pushed Britain ahead this week. borrowing costs their highest level since the financial crisis of 2008. Opposition conservative politicians called on him to cancel the trip.

“We are witnessing the economic mess created by Rachel Reeves as her disastrous budget continues to sting. Yet, amazingly, she has made the decision to get on a plane rather than stay and try to catch on,” said shadow chancellor Mel Stride.

“The chancellor should turn around and return to Great Britain immediately,” he added.

Speaking before the trip. Reeves said he would “find common ground on trade and investment, while being honest about our differences and protecting national security as the first responsibility of this government.”

He added: “We can build for the long term economic relations with China that work in the national interest.”

The City of London is suffering from a shortage of initial public offerings amid a steady stream of UK-listed companies delisting or going private.

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

Shane, the Chinese online fast fashion retailer, filed confidential documents with UK and Chinese regulators last year for an initial public offering in London with a planned market valuation of £50 billion.

This has raised hopes among financiers that other Chinese companies may follow, despite controversy that Shein uses forced labor as part of its cotton sourcing from China’s northwestern Xinjiang region.

Financial Conduct Authority chief executive Nikhil Rathi is accompanying Reeves on the three-day trip and may discuss Shane’s listing plans with his colleagues in Beijing.The delegation also includes London Stock Exchange chief executive David Schwimmer.

Officials said Reeves saw the meetings as an opportunity to boost China’s financial services exports, given that they currently account for a small fraction of those to the US and EU.

The Shanghai-London stock link launched to great fanfare in 2019 but has since struggled to gain traction.It was designed to encourage Chinese and British companies to list their shares in each other’s countries.

But this has only been done by six Chinese companies to raise $6.6 billion, as well as UK companies, while trade is muted.The chancellor hopes to facilitate such dual listings between the UK and China.

The visit marks the revival of the China-UK Economic and Financial Dialogue, an annual series of bilateral talks that has been suspended since 2019 due to both 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 heads the business delegation, and Standard Chartered chairman Jose Vinal are among senior City of London bankers accompanying him this week on significant Chinese operations.

Bank of England Governor Andrew Bailey is also on the trip, along with Baroness Sriti Vadera, chairman of insurer Prudential, Sir Douglas Flint, fund manager Aberdeen, and Richard Oldfield, asset manager Schroders.