UK to step up financial services relationship with China to tune of £1bn
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Despite some major points of contention and political tensions between the two countries, the UK and China have agreed to strengthen links around financial services.

Rachel Reeves, UK Chancellor of the Exchequer, led a delegation to China over a few days last week, becoming the first British minister to visit the country since PM Theresa May in 2018. The visit concluded with the governments planning a number of financial services initiatives.

The two nations aim to build on an already extensive financial services relationship which has remained extensive despite the UK and China being politically opposed at times over the past decade. Various major British financial institutions include China has a high value target market.

For example, HSBC is one of the UK’s ‘Big Four’ banks and one of Forbes’ 20 largest global companies and has historically operated with a focus on East Asian markets, particularly China. Other major UK financial firms with a strong focus in the country include investment companies Schroders, abrdn and Aspect Capital.

HM Treasury states that new licences and quota allocations have been granted to these companies, and others with an interest in China, to enhance business links. Other moves include initiatives to improve capital market connectivity, counter illicit finance, boost sustainable finance cooperation, and work on pensions.

UK-China over-the-counter bond business will be stepped up in the former nation, while the government has also committed to enhancing the UK-China Stock Connect. The Stock Connect was first established in 2019, and allows Shanghai-listed Chinese companies to apply for admission on a ‘Shanghai Segment’ of the London Stock Exchange.

Though it remains one of the largest stock exchanges globally, the LSE has been losing business to some extent. Notably, Swedish fintech Klarna opted to apply for a listing on the New York Stock Exchange as opposed to the closer-to-home LSE, while Flutter Entertainment, the world’s largest gambling firm, has also made the NYSE its primary listing.

China’s global payments powerhouse

Following its victory in the general election last July, the UK’s Labour government has been putting a lot of effort into attracting overseas businesses to set up shop in the UK. These efforts have been geographically broad, with negotiations apparently occurring with Brazilian digital bank Nubank, which is considering a UK domicile.

Rachel Reeves. Source: UK Parliament

“The agreements we’ve reached show that pragmatic cooperation between the world’s largest economies can help us boost economic growth for the benefit of working people – a priority of our Plan for Change,” Reeves remarked.

“More widely, today is a platform for respectful and consistent future relations with China. One where we can be frank and open on areas where we disagree, protecting our values and security interests, and finding opportunities for safe trade and investment.”

Securing listings for Chinese finance firms, some of which rank among the most valuable in the world, could be a big victory for the government’s ‘Plan for Change’, which hinges heavily upon securing economic growth – which has slowed in recent months.

Perhaps the most obvious example of the global significance of Chinese finance is the worldwide performance of Alipay, an online payments platform owned by Ant Group, an affiliate of the Alibaba Group.

Alibaba is a hugely valuable company, recording revenue of CN¥941.168bn (US$130.35bn) in 2024. Meanwhile, AliPay has overtaken PayPal as the world’s most widely used mobile payments platform. This showcases the extent of Chinese financial services’ reach.

A sticking point in the government’s plans, however, will be the UK’s political stances and objectives which go against those of China. The Russo-Ukraine War in particular will be an issue, with the UK backing Ukraine while China, according to HM Treasury, continues to support Russia’s ‘defence industrial base’.

China also maintains sanctions against several British MPs from across the country’s political spectrum, due to these parliamentarians commenting on extensive reports of human rights abuses against Muslims in Xinjiang province.

HM Treasury states that Reeves and her delegation in China raised these concerns during the visit, and has called the sanctions against British MPs ‘unacceptable’.

In the face of these political tensions, the government remains confident that its financial arrangements with Beijing will generate £1bn for the UK economy, with £600m expected over the next five years.