The new Chancellor, Philip Hammond, has revealed that the UK has begun discussions with China on a free trade deal. This could see a reduction in existing barriers to UK goods and service industries, such as banking and insurance, with China receiving greater access to UK-manufactured products and investment.
Such a deal could only come into effect after Britain has exited the European Union, and would be the first time the UK has embarked on such a significant project with China, which has the second largest economy in the world.
Earlier in the month, Chinese state media reported that the Chinese Ministry of Commerce wanted to agree a free trade deal with the UK following the vote to leave the EU, and now Mr Hammond has confirmed that his Government is also interested.
Speaking in Chengdu, China, ahead of the G20 summit of finance ministers, he told the BBC: ‘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 EU.
‘But once we are out of the EU 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.’
Government officials are reportedly examining New Zealand’s free trade agreement with China as a potential model for a post-Brexit UK deal. That agreement took four years to negotiate and came into effect in 2008.
Mr Hammond also admitted that there had been ‘global disappointment’ about Britain’s decision to leave the EU, but insisted that other European leaders were not in ‘punishment mode’.
He added: ‘I have no doubt that everyone would want to see a very close relationship between the UK and the EU going forward because that will be good for the economies of the EU and the economy of the UK.’