World Economy

UK Explores Ambitious Free Trade Deal With China

UK Explores Ambitious Free Trade Deal With ChinaUK Explores Ambitious Free Trade Deal With China

British Chancellor Philip Hammond has begun discussions with China on an ambitious free trade deal which could see greater access for major Chinese banks and businesses to the UK economy.

The chancellor told the BBC it was time to explore “new opportunities” across the world, including with China, one of the UK’s biggest inward investors. That is despite a short term economic shock from leaving the European Union.

He added that the EU is not in “punishment mode” over the Brexit vote. “What we now need to do is to get on with it in a way that minimizes the economic impact on the UK economy in the short term and maximizes the benefit in the long term,” Hammond said, admitting that there had been “global disappointment” about the Brexit vote.

Chinese state media reported earlier in the month that the Chinese Ministry of Commerce wants to do a UK free trade deal.

Hammond has now revealed that Britain is also keen.

It will be the first time the UK has embarked on such a major project with the second largest economy in the world. This will raise concerns about cheap manufactured goods entering the UK more easily.

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In return for greater access to the UK for its manufactured products and investment, China would reduce barriers to Britain’s service industries like banking and insurance as well as UK goods.

That would be an important source of export income for Britain.

“The mood music that I have heard here is very much that this will mean more opportunity for countries like China that are outside the European Union to do business with Britain,” Hammond said.

“And as Britain leaves the European Union and is not bound by the rules of the European Union perhaps it will be easier to do deals with Britain in the future.”

On the sidelines of the G20 finance ministers meeting in Chengdu, China, BBC asked if that could mean a free trade deal, bilaterally agreed with China which invested over $5 billion in the UK in 2014. Hammond said, “Definitely I could see such a thing. We already have a strategic partnership with China.

“We have hugely increased our trade with China, investment both by British companies into China and by Chinese entities into the UK.

“That’s about as far as we can go while we are members of the European Union. But once we are out of the European Union, then I have no doubt on both sides we will want to cement that relationship into a firmer structure in a bilateral way that’s appropriate. That’s something we will have to explore in the future.”