(Bloomberg) -- UK Chancellor of the Exchequer Rachel Reeves sought to allay market concerns over the government’s fiscal position during a trip to China, where she reached deals worth £600 million ($731 million) to the British economy over the next five years.
“There’s undoubtedly been moves in global financial markets over the last few days,” Reeves told reporters in Beijing on Saturday. “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.”
The comments mark the most explicit acknowledgment so far from Reeves that the government would have to either announce fresh spending cuts or tax increases after a selloff in assets including gilts and the pound in recent days. Amid the turmoil, opposition parties had called on the chancellor to cancel her China visit, which is seen as a commitment by the government to stay focused on long-term plans to get the British economy growing again.
Yields on 10-year gilts this week reached the highest since 2008 while the pound weakened to near the lowest since 2023. The moves suggest that investors are casting doubt on the government’s plans to deliver the growth needed to tackle the national debt pile or address persistent inflation.
“Rachel Reeves has got her priorities badly wrong,” Conservative Shadow Chancellor Mel Stride said. “The Chancellor’s place should be fixing this mess of her own making. She should get on a jet and come straight back to the UK.”
Reeves on Saturday reiterated the Labour government’s goal of pursuing economic growth, including through boosting trade with countries like China. She insisted that she would stick with her commitment to have only one budget a year, which would take place in the autumn.
The chancellor was joined on the trip — designed to revive high-level bilateral talks between Britain and China — by Bank of England Governor Andrew Bailey, UK Financial Conduct Authority Chief Executive Nikhil Rathi and senior figures from banks including HSBC Holdings Plc.
Following a meeting with Chinese Vice Premier He Lifeng in Beijing, officials agreed to deepen financial services links and lift certain export barriers, according to a statement by the Treasury. The agreements are worth £600 million to the UK economy over the next five years, with longer term benefits of up to £1 billion.
The UK and China committed to further enhancing a stock connect between the two countries, as well as welcomed the launch of an over-the-counter bond business. Other capital market initiatives include plans to explore a wealth connect program as well as for China to issue an inaugural overseas sovereign green bond in London this year.
The lifting of barriers that restrict export to China, especially in areas like agri-food, will boost UK trade and support new jobs, according to the statement. China, which is the UK’s fourth-largest single trading partner, also agreed to continue to liberalize sectors such as education and culture where foreign investment is restricted. The meetings also yielded agreements on vaccine approvals, fertilizer, whiskey labeling, legal services and accountancy.
In meetings with Chinese officials, Reeves also raised concerns over interference in the UK’s national security, China’s support for Russia’s defense industry as well as human rights issues.
(Updates with more details of UK-China agreements, comments from Conservatives.)
