Chancellor Rachel Reeves has defended her trip to China as she came under pressure to deal with the turmoil on the financial markets.

Ms Reeves said this morning that she had secured agreements worth £600 million to the British economy.

She met China’s Vice Premier He Lifeng in Beijing where both sides agreed to deeper cooperation across areas such as financial services, trade, investment, and the climate to support secure growth, while being frank and open on areas of disagreement.

The Treasury said the granting of new licences and quota allocations for UK firms such as HSBC, Schroders, abrdn and Aspect Capital will enhance their business in China.

Both sides have committed to speaking candidly about national and economic security. The Chancellor made clear UK concerns about imbalances in the Chinese economy, and both sides agreed to discuss industrial policy in support of a global level playing field.

The Treasury said the lifting of barriers that restricted export to China across a range of goods and services will support UK exports and innovation, particularly in the agri-food sector and to liberalise sectors that restrict foreign investment, such as education and culture.

Sir Douglas Flint, chairman of Edinburgh-based abrdn, said: “The resumption of high-level ministerial engagement after a gap of five years has been hugely constructive to opening dialogue to explore and fulfil business opportunities for mutual benefit.”

However, Ms Reeves arrival in Beijing, where she also met her counterpart Lan Fo’an, coincided with another fall in the pound against the dollar as the cost of government borrowing hit a 27-year high.

Investors have become nervous about the UK’s finances and sent bond yields soaring. The 30-year gilt yield hit 5.25% — its highest point since the 2008 financial crisis.

New concerns have emerged over the pace of interest rate cuts and inflation, with traders now saying both will remain higher for longer.

Two quarter per cent rate cuts had been pencilled in for 2025, but that is now looking less likely, which will also keep mortgage rates higher.

Hetal Mehta, head of economist research at St James’s Place, said: “The recent stubbornness of inflation and wage growth in the UK make it more difficult for the Bank to cut policy rates aggressively.”

George Buckley, an economist at Nomura, gave the Chancellor the benefit of the doubt, saying the jump in bond yields would tighten financial conditions and help push down on inflation in the UK.

He said the Bank would carry out four rate cuts this year and push the base rate to 3.5% by February next year.

Pressure has piled on Ms Reeves over her £40bn of tax rises in the October budget, with former Prime Minister Liz Truss claiming the situation is far worse than the impact of her mini-budget which sent the markets into a tailspin.

Concerns have developed around the prospect of stagflation — a combination of inflation and stagnant growth.

“The UK economy is staring down the barrel of the stagflation gun, with stagnant growth and persistent inflation combining to create one of the most challenging financial environments in over a decade,” said Nigel Green, CEO of deVere Group.

“For Chancellor Rachel Reeves, the situation is particularly dire. Her key fiscal rule—eliminating all non-investment borrowing by 2029—now hangs in the balance, as rising interest payments on debt eat into the Treasury’s capacity to act. 

“Achieving this goal will demand either politically challenging tax increases or deep public spending cuts. Both measures will hurt economic growth, amplifying the stagflationary spiral.” 

The Chancellor had been urged to postpone her trip to China and announce emergency measures to settle market nerves.

The SNP was among those calling on her to “urgently come to Parliament and outline emergency action” to get the economy back on track.

SNP Westminster Leader Stephen Flynn warned “the Labour government looks increasingly clueless and incompetent on the economy”.

Ms Reeves defended her visit to China, saying a new approach to the country was essential because of increasing global uncertainty.

“In a world in flux, I believe there can be no greater need for this approach [to engaging with China] than on our economy,” she said in an article.

“We cannot ignore the fact that China is the second-largest economy worldwide and our fourth-largest trading partner, with exports supporting close to half a million jobs in the UK.”

She continued: “China’s economy is expected to provide the largest driver of global growth this decade, from which there are significant opportunities that can benefit Britain. Choosing not to engage with China is therefore no choice at all.”

She sees Chinese investment — particularly in areas such as renewable energy — as critical to the government’s long-term economic plans.