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Under pressure from a sharp rise in British interest rates, Reeves defends her budget at the start of the two-day visit to China
Published : 11 Jan 2025, 09:31 PM
British finance minister Rachel Reeves, facing criticism for travelling to China during financial market turmoil at home, said on Saturday she will act to ensure the government's fiscal rules are met.
Under pressure from a sharp rise in British interest rates, Reeves defended her budget at the start of the two-day visit to China, where she is seeking to revive high-level economic and financial talks that have been frozen for nearly six years.
"Those fiscal rules that I set out in the budget in October are non-negotiable and we will take actions to ensure that we meet those fiscal rules," Reeves told reporters after meeting with Vice Premier He Lifeng.
The rise in British government borrowing costs, due in part to a global bond selloff, prompted comparisons with the 2022 "mini-budget" crisis that forced then-Prime Minister Liz Truss out of Downing Street.
However, this week's market moves have been less sharp and there has so far been no evidence of the strain on institutional investors that forced the Bank of England into emergency bond purchases in 2022.
Reeves, criticised by the opposition Conservative Party for going to China during a period of turmoil in bond markets, said she would not give a running commentary on the moves.
Asked if she would announce measures to rebuild buffers against the fiscal rules in her March 26 economic update, Reeves said: "I committed just to have one budget a year and that budget will be in the autumn."
Economic growth remained the government's top priority, Reeves said.
Agreements reached with China this weekend, including commitments to deepen financial services trade and expand agri-food exports, are worth 600 million pounds ($732 million) over the next five years for the British economy, Reeves said.
Asked earlier during a visit to a Brompton bicycle shop whether Britain would follow Washington and Brussels in imposing tariffs on Chinese electric vehicles, Reeves, who will be in Shanghai on Sunday, said: "We keep issues under review but we make decisions in our national interest."
British car manufacturers "like Jaguar Land Rover, export substantially to Chinese markets, and we want to help them to grow," she said.
After her bicycle shop visit, Reeves met Vice President Han Zheng, telling him it was "important to have open and frank dialogue in areas where we agree, but also in areas where we have different views".
'COMMON GROUND'
Her delegation, which includes Bank of England Governor Andrew Bailey, Standard Chartered STAN.L Chairman Jose Vinals, and HSBC HSBA.L Chairman Mark Tucker, then met Chinese counterparts led by Vice Premier He Lifeng.
He urged British financial firms to expand renminbi services and promote deeper yuan CNY= internationalisation, while inviting them to participate in green finance and the pension industry in China.
Reeves said she looked forward to China issuing its first overseas sovereign green bond in London this year.
Her visit follows a dialogue opened last year between Prime Minister Keir Starmer and President Xi Jinping, the first between the two countries' leaders since 2018.
Reeves told He that Russia's invasion of Ukraine, rising geopolitical tensions and climate change meant that the environment was more challenging than when their predecessors last met.
"It is important to prevent economic leaps weakening our national security and economic resilience," she said, adding both she and He wanted to "find common ground" in this regard.
He said Beijing will work with London to ensure a fair, non-discriminatory business environment for each country's firms.
The approach adopted by Starmer's Labour government, elected in July, contrasts with that of the previous Conservative administration, which took a robust stance on differences with China - particularly over human rights, Hong Kong and allegations of Chinese espionage.
