Unlock Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newsletter.

Rachel Reeves will next month lead a delegation of top bankers to Beijing to seek closer ties across a range of financial services, while quietly brushing aside security fears over UK-China relations.

The chancellor has led opposition to China’s inclusion in the “enhanced level” of a new scheme that would force companies acting for foreign entities to flag their work in a central register, according to government officials.

He fears that the involvement of Chinese nationals in the scheme – which is intended to allow the UK to monitor potential foreign influence – will strain business relations with the People’s Republic.

A scandal over alleged Chinese spying at the heart of the British establishment this week took a turn for the worse Reeves‘ visit in January.

The chancellor will be joined by City minister Tulip Siddiq and leading finance figures on the trip, which is expected to relaunch the UK-China Economic and Financial Dialogue, which was last held in 2019.

The talks will include issues such as cooperation in capital markets, more connections between financial markets and bond markets, regulatory cooperation, and clean energy, according to people briefed on the agenda.

Yet leading Conservatives say this week’s spying scandal shows Britain needs to take a harder line with Beijing.

Tom Tugendhat, former Conservative security minister, said that was important China placed at the “enhanced level” of the new “foreign influence registration scheme”, which he created.

The scheme is a two-tiered program that would force companies operating in certain capacities for foreign powers or entities to flag that activity in a central registry. It is aimed at strengthening the UK government’s understanding of the nature and extent of foreign influence within the country.

Modeled after the US Foreign Agents Registration Act, the scheme was first proposed by Rishi Sunak with the intention of it becoming active this fall.

But it has been delayed since Labor took office, as Sir Keir Starmer wrestles with the same debate that plagued his Tory predecessors: whether to include China at a more restrictive level.

Tugendhat said this week that the advice from MI5 was “very clear” that the scheme was “not worth it” if Beijing was not at an enhanced level, which would require further scrutiny of some foreign nationals.

Reeves and Jonathan Reynolds, business secretary, are among those opposed to the inclusion of China, according to government officials. “This has a clear impact on the financial services sector,” said one.

Reeves said on Monday that Britain would take a “pragmatic” approach to relations with China and that national security was the top priority – but added that commercial considerations were also important.

“Like other countries around the world, we need to do business and seek investment if it is in our national interest to do so, and that is the approach of this government,” he said.

Lobbyists in the City of London declined to speak publicly for fear of escalating the issue, but argued the scheme would complicate business with China and create a more onerous regime than those seen in competing countries. .

One said: “It gets a lot of daily business. There is no consultation at all. North Korea or Iran (both at a high level) are very different from China, because of the level of commercial interaction.

Reeves’ talks in Beijing will focus on financial services. According to a document first reported by Bloomberg News, they will include discussing the continuation of the London-Shanghai Stock Connect – to allow dual listings – first proposed in 2015 and discontinued in 2020.

Discussions will also consider improving the regulatory environment for financial technology companies and deeper cooperation between UK and Chinese asset management companies. The Treasury declined to comment.