UK–China Economic and Financial Strategy Dialogue

Question

15:00:00

Asked by

To ask His Majesty’s Government what were the outcomes of the UK–China Economic and Financial Strategy Dialogue held in Beijing in January.

My Lords, the 2025 UK-China Economic and Financial Dialogue was the first since 2019. The Chancellor was joined by the Governor of the Bank of England, the chief executive of the Financial Conduct Authority, and representatives from Britain’s financial services firms. The dialogue unlocked agreements worth £600 million over the next five years, and secured new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives, and accountancy. In financial services, co-operation was agreed in areas such as capital markets, pensions and sustainable finance. The Chancellor also raised areas of concern to the UK, including trade imbalances, economic security, Russia’s illegal war in Ukraine, and human rights.

My Lords, I thank my noble friend the Minister for his response. I congratulate the Government on breaking the hiatus in the dialogue, which lasted for a long period of five years. Does my noble friend agree with me that the UK indisputably has a world-class financial services industry, which has delivered one-third of the service exports to China? Will he outline what is proposed by the Government to strengthen the relationship between China and the UK in financial services?

I am grateful to my noble and learned friend for his question. He is right: this was the first economic and financial dialogue since 2019. The Chancellor was absolutely clear that we cannot ignore the fact that China is the second-largest economy worldwide, and our fourth-largest trading partner. He is right that financial services are the jewel in the crown of our relationship with China. That is why our financial services were the key focus of the Chancellor’s visit, which secured significant outcomes in terms of a new green bond, new commercial licences and quota allocations, the UK-China wealth connect, and capital markets and financial regulatory co-operation. That co-operation will continue and be strengthened.

My Lords, could the Minister tell us whether the dialogue included a discussion of BRICS Pay? This is the alternate payment system that the BRICS countries have created in order to be able to move away from SWIFT. Obviously, it assists sanctions- busting, and it potentially destabilises the global financial system. What discussions were held on BRICS Pay?

I am aware of the issue raised by the noble Baroness, but I do not believe that discussions took place on that. The Government consider that it is up to each individual country to decide what international agreements it wants to be part of.

My Lords, does the Minister believe that there are any risks at all involved in importing large numbers of electronic vehicles manufactured in China, which would plug the gap in the falling number of Tesla vehicles that are being purchased in the UK?

The Government are committed to attracting investment into the UK to support our world-leading energy ambitions. Investment in the energy sector is subject to the highest levels of national security scrutiny, and we will not hesitate to use our powers to protect national security wherever we identify concerns.

My Lords, did His Majesty’s Government discuss with the Chinese authorities the imposition of 10% tariffs on Chinese exports by the United States?

It is not for the UK to comment on US-China relations.

My Lords, what assessment have the Government made of the potential risks associated with increased economic engagement with China? What strategies are in place to safeguard against such vulnerabilities?

I am grateful to the noble Baroness for her question. We must, and will, continue to engage with our international partners on trade and investment to grow our economy, while ensuring that our security and values are not compromised. That means finding the right way to build a stable and balanced relationship with China, one that recognises the importance of co-operation and addressing the global issues that we face, competing where interests differ and challenging robustly where we must.

Given the global financial and AI sector impacts of DeepSeek, what discussions were had about IP exfiltration as part of the national security discussions that the Minister has mentioned?

I am afraid that I am not aware of any such discussions.

I note my interest as president of the China-Britain Business Council and as having other China interests. Does the Minister agree with me that in total there are some £40 billion of UK exports going to China each year, including to Hong Kong, and those support 400,000 UK jobs? While the EFD marks a very important re-engagement with China, will he confirm that there will be other ministerial engagements at the top level, including Trade Ministers, to support British business growth?

I am grateful to the noble Lord for his question. I agree with the point that he sets out in terms of the number of jobs that are supported by trade between our two countries. Yes, I think that further such ministerial engagements are planned. The Secretary of State for Business and Trade and the Secretary of State for Energy Security and Net Zero are both, I think, due to attend similar discussions.

My Lords, does the Minister have any discomfiture at all about his Government going to China and begging for investment and trade while many parliamentarians in this Palace remain sanctioned by the Chinese regime?

I completely disagree with the noble Lord’s characterisation of the Chancellor’s visit to China. As I said, we must and will continue to engage with our international partners in trade and investment, and that includes engaging with China. We cannot ignore the fact that China is the second-largest economy worldwide and our fourth-largest trading partner, with exports supporting close to half a million jobs in the UK. We need to help British businesses export around the world, and that includes to China. On human rights and the parliamentary sanctions that the noble Lord talks about, the Chancellor did raise those—absolutely—but she believes that, unless we open that dialogue, we will be unable to raise the concerns that we have.

Were there any discussions at all about the Chinese merchant fleet and the use of certain ships by the Russians as the shadow fleet—and also the £7 trillion worth of trade that goes through the South China Sea and is threatened by Chinese actions?

Of course, I was not in the room, so I cannot entirely judge exactly whether those issues were raised—but certainly the Chancellor raised important issues of national security. She raised the concerns that the UK Government have about China, and Russia’s illegal war in Ukraine, so the issues that my noble friend raises would have been very much at the forefront of their discussions.

Does the Minister understand that the impact of fining our car companies huge sums for making vehicles that people want to buy, because they are not making sufficient electric cars, has the effect of handing our car industry to the Chinese, who are flooding the market with cheap electric cars—leading to the destruction of jobs throughout the Midlands and elsewhere?

I absolutely understand the point that the noble Lord raises. There are different priorities that we need to balance as we make policy and move forward. As he says, there is the industrial strategy priority of making sure that we have a competitive and thriving car industry in the UK, and there is also the objective of making sure that we achieve our net-zero objectives. Transport is a major component of that, so electric vehicles will play a very important part as we move towards our net-zero targets. Absolutely, we have to balance those objectives, and I am very aware of the issues that the noble Lord raises.

My Lords, the Minister told us that the Chancellor spoke about the sanctioning of Members of your Lordships’ House and the human rights implications of that appalling situation. Can he tell us whether there were any other discussions in the human rights context in the light of China’s appalling record on human rights?

I am grateful to the noble Baroness for her question. Yes, I reassure her that there absolutely were. The UK Government will stand firm on human rights in China and will continue to raise concerns at the highest level of the Chinese Government. In all our engagements with the Chinese Government, we continue to challenge them robustly on human rights violations and continue to raise our concerns at the highest level of the Government. The Prime Minister did so at his meeting at the G20 with President Xi and the Chancellor also raised concerns in a number of areas, including the case of British national Jimmy Lai, the restrictions on rights and freedoms in Hong Kong, human rights abuses and forced labour.

Given that climate change knows no boundaries and that there is a change of policy taking place in the USA in that regard, does the Minister see the possibility of us having more dialogue with China in this context as a way forward?

I am grateful to my noble friend for his question. Our journey towards net zero will remain vital for our energy security in this country, as well as our economic growth, so that will absolutely continue to play an important part in our economic policy. China will of course be part of that in how we move forward together, both in terms of its own journey towards net zero and in how it can help our journey towards net zero.