Opportunity knocks for UK to reset relations

Most of the pledges the United Kingdom's Labour Party made in its manifesto before its victory in the general election in July, including enhancing the National Health Service, social care, education and child care pensions, depend on a resilient economy.

However, the British economy grew just 0.1 percent in the third quarter compared to the previous quarter. That's below the 0.2 percent growth expected by economists and follows an expansion of 0.5 percent in the second quarter of the year. And the UK economy shrank for the second month in a row in October as concerns about the Budget continued to weigh on confidence. Official figures showed a 0.1 percent drop, despite expectations that the economy would return to growth after a fall in September. Yet prices in the UK went up by 2.6 percent in the 12 months to November, the highest level for eight months.

That has apparently served to end Labour's honeymoon period earlier than expected, especially after a wave of far-right, anti-immigration protests and riots occurred in England and Northern Ireland from July 30 to Aug 4. The aftermath of the COVID-19 pandemic, the post-Brexit repercussions, and the impacts of the volatile world situation have all weighed heavily on the UK's economy, prompting the Keir Starmer government to reach out to the world's second-largest economy, laying aside the UK's concerns about the country in other fields.

In 2022, then prime minister Rishi Sunak, the Conservative leader, declared the end of a "golden era" of relations with China. Despite this, trade and other economic engagement between the UK and China are still sizable. China bought£32 billion ($40 billion) worth of UK goods in the year to the end of June, UK government data show. Chinese inward foreign direct investment stocks in the UK are worth£4.3 billion.

Although the UK is largely exempted from the European Union's close following of the Joe Biden administration's call for de-risking against China, bilateral relations suffered substantially as a result of the Sunak government's one-sided pro-US policy.

That explains the haste with which the Starmer government has tried to repair ties with China. After UK Foreign Secretary David Lammy's visit to Beijing in October and Starmer's in-person meeting with the top Chinese leader on the sidelines of the G20 Summit in Rio de Janeiro last month, during which Starmer pledged to be "a predictable and pragmatic partner", Chancellor of the Exchequer Rachel Reeves will reportedly visit China next month, leading a large delegation, which looks set to add meat on the bones in that regard.

According to multiple media reports, the two sides are expected to reinstall the China-UK Economic and Financial Dialogue that has been suspended for more than five years, and hold a financial services meeting attended by UK and Chinese companies.

Previously, such talks resulted in the London-Shanghai stock connect scheme, the UK joining the Beijing-based Asian Infrastructure Investment Bank, and joint investment in green technologies, including the UK's Hinkley Point C nuclear power plant.

Reeves said after the Labour Party's election victory: "We are a small open trading economy and we benefit from those trade links with countries around the world, both for exports and imports, but also for foreign direct investment ... We benefit from those trade links around the world, including with China."

If the desired results from Reeve's visit materialize, which is highly likely given the Chinese side's readiness to open up to developed economies, her visit will play an important role in putting the otherwise sound Sino-UK ties back on the right track of development. The two countries have broad space for mutually beneficial cooperation in trade and investment, clean energy, financial services, medical care and people's livelihoods.