Dialogue places china-UK relations on firmer ground
The 11th China-UK Economic and Financial Dialogue, held in Beijing on Saturday, has provided a much-needed opportunity to recalibrate the bilateral relationship and establish a stronger foundation for cooperation. Both nations have agreed to deepen collaboration in key areas of mutual benefit, fostering a renewed momentum for their partnership.
Strengthening strategic partnership
Chinese Vice-Premier he lifeng emphasised China’s willingness to work alongside the United Kingdom to implement the consensus reached by the two nations’ leaders. He highlighted the importance of maintaining their strategic partnership, bolstering communication and dialogue, and expanding economic and financial cooperation to ensure stable, mutually beneficial relations.
Meanwhile, British Chancellor of the Exchequer Rachel Reeves expressed the UK’s commitment to fostering practical economic and financial ties with China. She called for a relationship characterised by consistency, longevity, and mutual respect, setting the stage for a robust bilateral framework.
China’s economic challenges and opportunities
China continues to grapple with domestic challenges, including local government and property-related debt, exacerbated by external pressures such as tariffs and sanctions. In response, the nation has embraced its dual-circulation economic strategy, focusing on self-sufficiency while integrating domestic and international markets.
The next phase of China’s economic development centres on moving up the value chain, prioritising increased consumption, high-value growth, and innovation. Recent commitments to modernisation and reform, reaffirmed at the third plenary session of the 20th Communist Party of China Central Committee, necessitate broader and deeper capital markets — an area where the UK could play a pivotal role.
Fields of cooperation
The dialogue identified five critical areas for future economic success: technology, green finance, digitalisation, financial inclusion, and pensions. These sectors represent opportunities for collaborative growth, with the UK taking a strategic, long-term approach that balances competition, challenges, and cooperation.
The UK is keen to see increased inward investment from China and to restart the UK-China Joint Economic and Trade Commission, which has been dormant since 2018. As one of the world’s leading service economies and home to a globally significant financial centre, the UK stands to benefit greatly from stronger economic ties with China.
Offshore renminbi market
London’s ambitions for expanding the offshore renminbi market remain central to its focus. While the global use of the renminbi is relatively low compared to China’s share in world trade, its trade invoiced in the currency has seen a marked increase over the past year. However, regional variations and limited offshore liquidity in London remain obstacles.
For the UK’s offshore renminbi market to grow, it would require more “dim sum” bond issuance, higher renminbi deposits and loans, increased trading and clearing, and enhanced cross-border renminbi transactions. Encouragingly, London already has the necessary infrastructure, including a bilateral swap line and a clearing bank, to support this growth.
In 2014, the UK became the first western nation to issue a renminbi-denominated sovereign bond, signalling its commitment to the bilateral relationship. Similarly, London’s bid to host the Asian Infrastructure Investment Bank’s European funding hub highlights its aspirations to strengthen its financial connectivity with China.
Enhancing connectivity
The dialogue aims to boost two-way capital flows, which could yield substantial benefits for both nations. Initiatives like the Shanghai-London Stock Connect programme facilitate dual listings, while UK-based asset managers and insurers see potential for greater access to China’s markets.
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China’s bond market, one of the largest in the world, is another area for enhanced collaboration. Further opening up this market would likely attract increased foreign interest, cementing UK-China financial ties.
Advancing the green agenda
Green finance emerged as another critical area for cooperation. The UK is already witnessing strong investor interest in green assets but requires a deeper liquidity pool to meet demand. Increasing renminbi bond listings in London, developing carbon market links, and exploring dual-currency green bonds are among the innovations that could strengthen green finance ties.
In September, the Bank of China and the UK government renewed a memorandum of understanding on green and biodiversity finance cooperation, highlighting their shared commitment to sustainability.
Future prospects
The 11th China-UK economic and financial dialogue has laid the groundwork for a renewed partnership, offering numerous avenues for collaboration. From advancing green finance to boosting connectivity and expanding the offshore renminbi market, both nations have much to gain from deepening ties. As the dialogue progresses, it will likely unlock further opportunities for cooperation, strengthening the economic and financial relationship between China and the UK.
