(Bloomberg) -- A UK Treasury minister lobbied the previous Conservative administration for the financial sector to water down proposed restrictions on Chinese business activity, highlighting support in Keir Starmer’s government for maintaining ties with Beijing amid a fresh spying scandal.
Emma Reynolds, 47, was named a minister in the Treasury by Starmer after Labour’s election win in July, when she returned to Parliament after a 4 1/2-year absence. Until May, she was the managing director of public affairs at TheCityUK, a trade group representing banks in the City of London.
It was in that role that she was part of a campaign to convince the then government not to impose tougher rules on those doing business with China, according to people familiar with the matter who asked not to be named discussing sensitive matters.
Those efforts centered on national security legislation introduced by former premier Boris Johnson and enacted during his successor Rishi Sunak’s tenure, which aimed to increase transparency of any dealings with nations posing a “potential risk to UK safety.” Executives lobbied ministers not to include China in the strictest risk category, known as the “enhanced tier,” arguing the onerous disclosure rules would impede investment and generate negative publicity, Bloomberg previously reported.
In a statement published on its website last week, TheCityUK said it had worked with industry and the government with the aim of “taking our members out of the scope of the primary tier” of a proposed register of people classed as being under the influence of foreign governments. The group said it had “supported commercial diplomacy with key growth markets” including China. Bloomberg’s earlier reporting revealed that banks including HSBC Holdings Plc and Standard Chartered Plc were concerned about any notion that China might be included in the top tier.
A spokesperson for TheCityUK told Bloomberg: “Industry has been focused on these proposals for some time. Emma was part of a wider team of members and colleagues who engaged with government on this issue.” The Treasury did not respond to requests for comment.
Reynolds declined to comment and referred questions to the Labour Party. A Labour spokesperson said the government would “take a consistent, long-term and strategic approach to managing the UK’s relations with China.” A party official said she was not involved in the government’s China policy.
Speaking to broadcasters on Wednesday morning, Chancellor of the Exchequer Rachel Reeves said the UK would take a “pragmatic” approach to relations with Beijing. “Like other countries around the world, we should trade and seek investment when it is in our national interest to do so,” Reeves said.
Reynolds’ current ministerial role straddles the Treasury and Department for Work and Pensions, with a remit for pensions, the “net zero” goal on climate change, and various arms-length bodies.
Calls for restrictions have increased in the wake of revelations that a Chinese business adviser to Prince Andrew had been barred from the UK over unspecified national security concerns. While the adviser has denied any role in spying, his access to the highest level of the British establishment, including meetings with at least two former prime ministers, has been cited by China hawks as a case study in the need for greater vigilance.
Relations between London and Beijing have been strained over issues ranging from China’s approach to governing Hong Kong to mutual allegations of spying. Still, Starmer is seeking a thaw with China aimed at boosting trade with one of the world’s great economic engines in wake of Britain’s exit from the European Union.
“We have to be alert to the risks and challenges of China, and we are alert,” Starmer said on Tuesday during a visit to Estonia. “But we do have a strategy of engagement and that means where we co-operate on important issues like climate, we must do so. But we must also challenge, and we do on important issues like human rights, with frank discussions as I have had on a number of occasions, and of course compete when it comes to trade.”
Starmer’s effort to deepen ties with Chinese President Xi Jinping runs against political currents in both Washington and Brussels. While US President-elect Donald Trump has packed his cabinet with China hawks and pledged sweeping tariffs, the European Union has also been inching toward a more assertive policy toward Beijing over its industrial subsidies and support for Russia’s full-scale invasion of Ukraine.
The proposed new rules — known as the Foreign Influence Registration Scheme — are yet to come into force. Starmer’s administration is now weighing whether to put China in the enhanced tier, a decision Sunak put off before the UK general election this summer.
Security Minister Dan Jarvis told the House of Commons on Monday that the government has been “working hard” on implementing the registration program. “We will say more about that soon, but we intend to lay regulations in the new year and commence the scheme in the summer,” he said.
While the decision is ultimately one for the prime minister, Reynolds’ past role will draw scrutiny because behind the scenes the government is divided on how to handle the relationship with China. The Treasury, in which she holds a key role, is opposed to hitting Chinese business activity with the harshest proposal for restrictions, which would require those working at Beijing’s direction to declare a wide scope of activity in Britain, while the Home Office wants tighter scrutiny, people familiar with the matter said.
“I find it very worrying, the lack of understanding of the Chinese Communist Party, its aims and methods, unless it is willful blindness,” Charles Parton, a former British diplomat who worked in China and is now a fellow at the Council on Geostrategy, told Bloomberg. “We can afford to defend our interests and principles.”
--With assistance from Harry Wilson.
(Updates with Rachel Reeves comments in eighth paragraph.)
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