Reeves insists he will act to achieve ‘non-negotiable’ budget rules

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Rachel Reeves has vowed to act if her financial plans are derailed by turmoil in the gilt market, as she announces a deal with China aimed at boosting Britain’s ailing economy.

The UK chancellor, speaking in Beijing on Saturday, insisted he would meet his budget rules which have come under pressure afterwards. Cost of borrowing 10 years in the UK last week it rose to the highest level since the global financial crisis.

“Those fiscal terms that I put in the October Budget are non-negotiable and we will take steps to ensure that we meet those fiscal terms,” ​​he told reporters.

Reeves has indicated that spending cuts may be necessary if the £9bn mortgage in his budget – that day-to-day spending is covered by tax receipts – is wiped out by rising borrowing costs.

The key issue will come on March 26 when the Office of Fiscal Accountability publishes new estimates. Reeves has indicated that he will not pay the tax at that time – an act usually reserved for the Budget.

He said: “I intend to have only one Budget a year and that Budget will be in the autumn.”

The UK Chancellor said “re-engagement with China” would add £1bn worth to the UK economy as he defended his budget plans.

He met with his counterpart Deputy Prime Minister He Lifeng to strike a deal that included an agreement to expand access to finance for UK firms and remove trade barriers to UK agricultural exports to China.

He said: “China has opened its doors, and will open even more to give the UK and other countries more opportunities for development.”

Reeves said: “Growth is the number one priority of this Labor government. It is to achieve growth that I am in China this weekend.”

Labor has been in favor of improving ties with China after a turbulent past few years under the Conservative government. Bilateral relations have eased after Prime Minister Keir Starmer and President Xi Jinping met on the sidelines of the G20 Summit in Brazil in November.

Reeves’ visit has been overshadowed by a sell-off in the bond market this week that has pushed Britain’s borrowing costs to their highest level since the fall of the 2008 financial crisis.

Investors are increasingly worried about government debt, the threat of a recession and price pressures. Conservatives and Liberal Democrats say he should have canceled his trip to Beijing.

The positive change in the relationship with China is the opposite of the damaged relationship with the Tories. Towards the end of the period, London and Beijing “didn’t know how to talk”, said Kerry Brown, Director of the Lau China Institute at King’s College.

Beijing was angered when former Prime Minister Rishi Sunak said China was the “biggest sovereign threat” to the UK’s economic security. Sunak highlighted state-sponsored cyber security attacks and criticized China’s authoritarianism at home and independence abroad.

“Workers are trying to get back to a permanent British relationship with China – a relationship that is not very warm or close, but important and balanced,” said Brown.

HSBC chairman Mark Tucker, who co-chaired the meeting, said the two sides were “working on ways to reach and encourage cross-border investment in renewable energy and new energy storage and transportation solutions where we have a lot to learn from others”.

Several leading Chinese renewable energy companies and electric car suppliers are preparing to invest in the UK, waiting for improved political ties before going ahead, according to people familiar with the matter.

Reeves said changes to UK listing rules would make it easier for Chinese companies to list in London. The City of London has been courting foreign companies to list on the London Stock Exchange following a move by companies that have their listings overseas or go private.

There was little agreement on how it would achieve £1bn growth in the UK. The two sides have agreed that China will issue its first green bond to London this year as the capital places itself at the center of green finance. In 2016, China gave its first foreign sovereign bond to London in the “Golden Era” of UK-China relations during David Cameron’s prime ministership.

Fast fashion company Shein has filed confidential papers to list in London after being rejected by US regulators. It is awaiting approval from UK and Chinese authorities before going ahead with an initial public offering with a proposed market value of £50bn.

The delegation included Andrew Bailey, governor of the Bank of England, Nikhil Rathi, chief executive of the Financial Conduct Authority, Schroders chief executive Richard Oldfield and José Viñals, chairman of Standard Chartered.

Reeves’ visit comes as parliament awaits the outcome of Labour’s UK-China review, which will assess the state of the relationship between the two countries and is expected to make recommendations on how to deal with China.

Sam Hogg, an expert at the Oxford China Policy Lab, said the analysis “could be a tick-box exercise”.