The chancellor’s gamble with China: What price is Rachel Reeves willing to pay for closer trading ties?
Given gilt yields are rising, the pound is falling and, all things considered, markets look pretty hairy back in the UK, it’s quite likely Rachel Reeves’s trip to China gets overshadowed by noises off.
There’s a chance the dominant narrative is not about China itself, but about why she didn’t cancel the trip.
But make no mistake: this visit is a big deal. A very big deal – potentially one of the single most interesting moments in recent British economic policy.
Why? Because the UK is doing something very interesting and quite counterintuitive here. It is taking a gamble. For even as nearly every other country in the developed world cuts ties and imposes tariffs on China, this new Labour government is doing the opposite – trying to get closer to the world’s second-biggest economy.
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How much do we trade with China?
The chancellor‘s three-day visit to Beijing and Shanghai marks the first time a UK finance minister has travelled to China since Philip Hammond‘s 2017 trip, which in turn followed a very grand mission from George Osborne in 2015.
Back then, the UK was attempting to double down on its economic relationship with China. It was encouraging Chinese companies to invest in this country, helping to build our next generation of nuclear power plants and our telephone infrastructure.
But since then the relationship has soured. Huawei has been banned from providing that telecoms infrastructure and China is no longer building our next power plants. There has been no “economic and financial dialogue” – the name for these missions – since 2019, when Chinese officials came to the UK. And the story has been much the same elsewhere in the developed world.
In the intervening period, G7 nations, led by the US, have imposed various tariffs on Chinese goods, sparking a slow-burn trade war between East and West. The latest of these tariffs were on Chinese electric vehicles. The US and Canada imposed 100% tariffs, while the EU and a swathe of other nations, from India to Turkey, introduced their own, slightly lower tariffs.
But (save for Japan, whose consumers tend not to buy many Chinese cars anyway) there is one developed nation which has, so far at least, stood alone, refusing to impose these extra tariffs on China: the UK.
The UK sticks out then – diplomatically (especially as the new US president comes into office, threatening even higher and wider tariffs on China) and economically. Right now no other developed market in the world looks as attractive to Chinese car companies as the UK does. Chinese producers, able thanks to expertise and a host of subsidies to produce cars far cheaper than those made domestically, have targeted the UK as an incredibly attractive prospect in the coming years.
And while the European strategy is to impose tariffs designed to taper down if Chinese car companies commit to building factories in the EU, there is less incentive, as far as anyone can make out, for Chinese firms to do likewise in the UK. The upshot is that domestic producers, who have already seen China leapfrog every other nation save for Germany, will struggle even more in the coming year to contend with cheap Chinese imports.
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Why is Rachel Reeves flying to China?
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Whether this is a price the chancellor is willing to pay for greater access to the Chinese market is unclear. Certainly, while the UK imports more than twice as many goods from China as it sends there, the country is an attractive market for British financial services firms. Indeed, there are a host of bank executives travelling out with the chancellor for the dialogue. They are hoping to boost British exports of financial services in the coming years.
Still – many questions remain unanswered:
• Is the chancellor getting closer to China with half an eye on future trade negotiations with the US?
• Is she ready to reverse on this relationship if it helps procure a deal with Donald Trump?
• Is she comfortable with the impending influx of cheap Chinese electric vehicles in the coming months and years?
• Is she prepared for the potential impact on the domestic car industry, which is already struggling in the face of a host of other challenges?
• Is that a price worth paying for more financial access to China?
• What, in short, is the grand strategy here?
These are all important questions. Unfortunately, unlike in 2015 or 2017, the Treasury has decided not to bring any press with it. So our opportunities to find answers are far more limited than usual. Given the significance of this economic moment, and of this trip itself, that is desperately disappointing.
A crew has entered the International Space Station (ISS) to replace the astronauts who were stranded there for nine months.
A SpaceX capsule delivered four astronauts on Sunday on a mission to allow Butch Wilmore and Suni Williams – who have been on the ISS since June 2024 – to return home.
The Dragon craft, with the Crew-10 astronauts inside, docked with the orbiting laboratory at 4.04am UK time, around 29 hours after it had been launched on the top of the Falcon 9 rocket from NASA’s Kennedy Space Center in Florida.
Butch Wilmore (back row centre) and Suni Williams (back row right) celebrate with the rest of the astronauts replacing them on the International Space Station.
The replacement crew, including Russia’s Kirill Peskov (centre), were welcomed on board the International Space Station (ISS). Pic: NASA
NASA’s Anne McClain and Nichole Ayers, both military pilots, along with Japan’s Takuya Onishi and Russia’s Kirill Peskov, both former airline pilots, will spend the next six months at the space station.
Their mission will allow four members of Crew-9, which includes Mr Wilmore and Ms Williams, to return to Earth.
Suni Williams and Butch Wilmore during their unplanned nine month stay in space.
File pic: NASA/AP
It took several minutes for Dragon to safely dock at the ISS, in what is an automated process.
But there was about 1 hour and 45 minutes of additional safety checks before the hatch could be opened.
Mr Wilmore swung open the space station’s hatch and rang the ship’s bell as the arrivals floated in one by one and were greeted with hugs and handshakes.
How they were stranded
Mr Wilmore and Ms Williams originally planned to go to space for just eight days but got stuck on the station after their Boeing Starliner spacecraft started experiencing problems.
Technical issues left them stranded, and various attempts to bring them home were unsuccessful.
The craft encountered so many problems that NASA insisted it return to Earth empty, leaving the pilots behind until now.
‘You can hardly even put it into words’
“It was a wonderful day. Great to see our friends arrive,” Ms Williams told Mission Control after the new astronauts had been welcomed aboard.
The moments after docking with Suni Williams, centre, finally facing the prospect of returning back to Earth.
Pic: NASA/AP
The astronauts, including Japan’s Takuya Onishi, greeting one another after arrival on the International Space Station.
Pic: NASA/AP
Speaking after the successful docking, Ms McClain added: “Crew-10 has had a great journey up here and I cannot tell you the immense joy of our crew when we looked out the window and we saw the space station for the first time.
“That is such an amazing journey. You can hardly even put it into words.”
The dragon capsule was manoeuvred towards ISS before it docked. Pic: NASA
The view from the ISS as the Dragon capsule edged closer and docked. Pic: NASA
The journey back to Earth
The four newcomers will spend the next few days learning the station’s ins and outs from Mr Wilmore and Ms Williams.
Then the two of them will strap into their own capsule later in the week, one that has been up there since last year, to close out the unexpected extended mission.
The pair’s ride back arrived in late September with a downsized crew of two and two empty seats reserved for the leg back.
The Dragon capsule safely docked with the International Space Station. Pic: NASA
But more delays emerged when their replacements’ brand new capsule needed extensive battery repairs.
An older capsule took its place, pushing up their return by a couple of weeks to mid-March.
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Weather permitting, the SpaceX capsule carrying them and two other astronauts will undock no earlier than Wednesday and splash down off Florida’s coast.
World
Nine Palestinians killed, including three journalists, in Israeli airstrike, Gaza health ministry says
An Israeli airstrike in Gaza has killed at least nine Palestinians, including three local journalists, the territory’s health ministry has said.
The strike hit a car, with casualties inside and outside the vehicle, and several people were critically injured, according to officials in the Gaza Strip.
Six volunteers from the Al Khair Foundation were “deliberately targeted” and killed while on their way to deliver aid in the northern town of Beit Lahia, said the UK-based international non-governmental organisation (NGO).
Among the six were the three journalists – Mahmoud al Sarraj, Mahmoud Isleem, and Bilal Abu Matar – who were recording humanitarian relief efforts for those affected by the war in Gaza, the foundation said.
The other three victims have been named as Bilal Akeela, Mohammad al Ghafir, and Hazem Gharib.
The foundation said: “The first strike injured one team member, prompting them to move away, but a drone followed them and struck their vehicle directly with a second strike, killing them all.”
What has Israel’s military said?
In a statement, the Israeli military said it had struck two individuals who it identified as “terrorists” operating a drone that it said posed a threat to forces in Beit Lahiya.
The military later struck several other suspects who it said had collected the drone equipment and entered a vehicle.
The military did not say how it had established that the individuals it had struck were “terrorists” or provide details about the threat that the drone had posed to its troops.
Gaza official denies army’s claims
Salama Marouf, the head of the Hamas-run Gaza government media office, denied the Israeli army’s allegations.
“The team was made of civilians and worked in an area near a shelter on a mission sponsored by a charity. They didn’t exist in a prohibited area and didn’t pose any danger of any kind to the occupation army,” Marouf said in a statement.
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Thousands call for longer ceasefire deal for hostages
Saturday’s incident underscores the fragility of the 19 January ceasefire agreement that halted large-scale fighting in the Gaza Strip. Palestinian health officials say dozens of people have been killed by Israeli fire despite the truce.
The airstrike coincided with a visit to Egypt’s capital Cairo by Hamas’s exiled Gaza chief, Khalil al Hayya, for further truce talks aimed at resolving disputes with Israel.
Read more:
Israel accused of ‘genocidal acts’ against Palestinians in UN report
Palestinian officials say Israel kills eight in Gaza and five in West Bank
The militant group has accused Israel of attempting to renege on the ceasefire agreement, putting the number of Palestinians killed since 19 January, it says, at 150.
Hamas urged mediators to compel Israel to move ahead with the implementation of the phased ceasefire deal, blaming Israel’s Prime Minister Benjamin Netanyahu for the current impasse.
What next for ceasefire deal?
The temporary first phase, where Hamas released dozens of Israeli hostages in return for around 1,500 Palestinian prisoners being freed from Israeli jails, expired on 2 March.
Israeli Prime Minister Benjamin Netanyahu. File pic: AP
But Israel says it wants to extend the first phase, a proposal backed by US envoy Steve Witkoff.
Hamas says it will only resume freeing hostages under the second phase.
Israel has rejected opening the second phase of talks, which would require it to negotiate over a permanent end to the war, which is Hamas’s main demand.
The war began when Hamas militants carried out a cross-border raid into southern Israel on 7 October 2023, killing 1,200 people and capturing around 250 hostages, according to Israeli officials.
Israel responded by launching an air and ground offensive in Gaza which has killed more than 48,000 Palestinians, say Gaza health officials.
The Gaza health ministry does not distinguish between civilians and combatants in its count but said more than half of the fatalities were women and children.
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