Rachel Reeves wants to revive the City of London’s links with China

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Rachel Reeves aims to breathe new life into a plan to link the London and Shanghai stock exchanges by touting 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 on bonds, pensions and capital markets and asset management as she seeks to restart dialogue after a more than five-year pause in high-level British visits to the country.

The British government is sensing an opportunity to strengthen financial services ties with China as Donald Trump prepares to become U.S. president after promising to take a tougher stance on Beijing, according to financiers briefed on the trip.

However, Reeves’ preparations for the three-day visit to Beijing and Shanghai were overshadowed by a sell-off in bond markets that weighed on Britons this week Loan costs to the highest level since the 2008 financial crisis. Opposition conservative politicians called on them to cancel the trip.

“We are witnessing economic chaos of Rachel Reeves’ own making, and the impact of her disastrous budget continues to be felt. But amazingly she made the decision to get on a jet rather than stay and try to get herself under control,” Shadow Chancellor Mel Stride said.

“The Chancellor should turn around immediately and return to the UK urgently,” he added.

Before the trip I say: Reeves said she would “find common ground on trade and investment while speaking openly about our differences and upholding national security as this administration’s primary duty.”

She added: “We can build a long-term strategy economically Relations with China that work in the national interest.”

The City of London is suffering from a lack of IPOs as more UK-listed companies move their listings to other countries or go private.

Bank executives hope that Chinese companies that previously would have sought to go public in the U.S. might instead choose 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.

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

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

Reeves viewed the meetings as an opportunity to boost financial services exports to China, since they currently represent only a fraction of exports to the U.S. and EU, officials said.

The Shanghai-London Stock Connect launched with great fanfare in 2019 but has struggled to gain traction since then. It should encourage Chinese and British companies to list their shares in each other’s countries.

However, only six Chinese companies managed to do so, raising $6.6 billion, with trading muted. No British company has done this. The Chancellor hopes to make such double lists between Great Britain and China easier.

The visit marks a revival of the China-British Economic and Financial Dialogue, an annual series of bilateral talks that have been suspended since 2019 due to the Covid-19 pandemic and deteriorating diplomatic relations.

During her visit, Reeves will visit the Beijing store of British bicycle maker Brompton and meet executives from other China-based British companies, 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 the senior City of London bankers joining them this week on major China operations.

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