A UK chancellor visiting China always had the potential to be a controversial trip. The last holder of the office to do so was Philip Hammond in 2019 back when the Tories were still talking about a golden era.
Since then, relations have soured – thanks to the pandemic, espionage claims and human rights abuses. Rachel Reeves’ trip to Beijing has proved so contentious that there were demands to call it off before she even stepped foot on the plane.
But the main issue is not the concerns about China, but the state of the UK economy. A rise in government borrowing costs and a fall in the value of the pound has seen opposition politicians ask: “Where’s Rachel?” Surely, the Tories and Lib Dems argue, Reeves should have cancelled her trip and addressed parliament to reassure the country that she has a plan for economic stability. In truth, however, it was a no-win situation.
With the trip publicly known, cancelling it would have been seen as a sign of panic with comparisons inevitably drawn with Denis Healey in 1976 with the then Chancellor turning back at Heathrow – aborting a planned trip to Hong Kong as the pound plunged – became the defining symbol of the economic crisis.
It’s one of the reasons Reeves’s team were adamant the trip ought to go ahead. They are keen to show it is business as usual and to signal that this is also not the same as the 2022 Liz Truss mini-Budget.
What’s more, Reeves’s trip to China is meant to help with all the above by boosting growth. Without that, the Government is heading for some hard decisions and that’s before you even take in the consequences of the bond market jitters. That means cosying up to countries that might fall short in other areas.
Or as junior foreign minister Catherine West put it this week rather bluntly: Britain’s “rather exposed position” after Brexit means it has to be “outwardly looking in our economy if we want our residents and our constituents to get away from food banks”. That, she went on, means the UK must “sometimes be involved” with nations whose values “may not completely align with ours”. The comments come as Labour also seeks stronger economic and defence ties with the UAE and Saudi Arabia.
That answer is not the preferred public line from Labour – but it ultimately points to the calculation. On two of Keir Starmer’s growth missions – economic growth and clean power by 2030 – engagement with Beijing is viewed as a price worth paying despite the potential issues when it comes to alleged human rights concerns and the question of security. Every time there is a security concern where Beijing is accused, ministers will come under pressure over whether getting closer to President Xi is such a wise move.
There’s also the diplomatic question. With less than a fortnight to go until Donald Trump returns to the White House, there are questions over the wisdom of cosying up to China when the incoming US administration is so sceptical of Beijing. Similarly, the last-minute push to get the Chagos Islands deal – that cedes UK sovereignty in return for a lease of the military strategic base – over the line before the US inauguration is a risky move given so many Republican politicians have raised concerns.
Foreign policy veterans fear the UK Government is being naïve at best. After all, one of the first things they promised to do was a China audit which was meant to “bring a long-term and strategic approach” to managing relations and allow the UK to “respond to the challenges and opportunities China poses”.
The general view of foreign policy experts was that the Labour Government should complete the audit, and then start re-engagement with China – clear on what they wanted to achieve. Yet the audit is still going and David Lammy, the Foreign Secretary has already visited, and Reeves is now there. “It’s not joined up at all,” complains a party figure.
Yet, if Reeves can secure investment and closer ties with China she – and Starmer – will likely be willing to look the other way as right now the economy is their main problem. The Chancellor faces the unappetising prospect of having to plan tax rises or extra spending cuts in the spring if the increase in borrowing costs is sustained. The economic picture is deteriorating – which is a big problem for a government that has bet its future on growth.
It means the grumbles about Reeves within Labour are growing louder. Ministers complain that the Treasury has had too much sway to date – pointing to the decision to axe the winter fuel allowance in the summer as one of the first big mistakes. “It’s not clear it will even bring in much money,” says one Labour MP. Now they fear that economic turbulence will see Reeves resort to a form of austerity when they have promised higher living standards.
“We’ve inherited a bad situation but I’m not sure the public see it like that,” adds one Labour MP. Ministers, too, are suggesting Reeves needs to improve her team which “needs to be sharper so we avoid anymore self forced errors”. As Reeves’s Beijing charm offensive gets underway, the Chancellor knows she can’t afford to sniff at opportunities for growth – however complicated they may be.
Katy Balls is political editor at The Spectator magazine
Liz Truss needs to take her own advice, and cease and desist