Cameron team seals £2.6bn deals with China

David Cameron and Li Keqiang China’s vice-premier, have agreed trade deals between the UK and China worth £2.6bn, in what Downing Street says is an “important step change” in Britain’s trade relationship with one of the world’s fastest-growing economies.

As Britain gave an elaborate welcome to the man who is expected to become Chinese prime minister in 2013, the UK and China signed some 15 separate deals which will help the government meet its goal of doubling the annual trade in goods and services with Beijing by 2015.

Among the most significant agreements approved on Monday were a move to increase sales of Jaguar Land Rover vehicles to China; an announcement by BP and the China National Offshore Oil Corporation on deepwater exploration in the South China Sea; and a framework deal between PetroChina and the private British company Ineos to form refining joint ventures.

British officials acknowledged that the deals signed with Mr Li were a long way from indicating that Britain was being singled out by the Chinese for special favour inside the European Union.

Mr Li has arrived in London after high-profile trips to Spain and Germany, where he has signed packages of deals worth $7.5bn and $11.3bn respectively – well above those sealed in the UK.

However, British government officials said the main goal for the coalition was to build a close relationship with the man expected to succeed Wen Jiabao as Chinese premier, a move that would make him the second most powerful figure in the Beijing government.

As well as the prime minister, Mr Li met Nick Clegg, deputy prime minister, and George Osborne, chancellor. He will also meet William Hague, foreign secretary.

“The thing that is important is that we’re getting a serious amount of face time with Li,” said a senior Whitehall official. “The number of secretaries of state the Chinese vice-premier is meeting in London is six. In the other countries he’s visited he’s seen no more than three.”

British officials also insist the size of the deals is not as important as the potential for them to grow. “The agreement between BP and the Chinese on oil exploration in the South China Sea doesn’t have any kind of number attached to it at the moment,” said one Whitehall official. “But if there are decent oil finds, this could potentially generate a massive amount of revenue.”

In its first six months in office, Mr Cameron’s coalition has set huge store on the need to boost trade links with China as a means to boost the UK economy at a time of slow growth.

Mr Cameron led the largest ever UK trade delegation to Beijing in November. On that occasion, he set a goal for the UK nearly to double its annual trade in goods and services with China from $52bn in 2009 to $100bn in 2015.

But in spite of those efforts, business chiefs say the UK has some way to go to match the relationship Germany has built up with the Chinese. “Undoubtedly, there is a perception that Germany and France are doing better in China than we are,” said Stephen Phillips, chief executive of the China-British trade council. “Germany’s manufacture of machine tools and equipment has in recent years matched where China has been economically. Germany exports precisely the kind of kit China needs to become a global manufacturer.”

But Mr Phillips is confident that Britain can improve its performance. “As the Chinese economy grows, the UK’s strengths in high technology, services, advanced engineering and education will become more complementary to what the Chinese need.”

In order to improve the trade relationship, British officials believe China must end restrictions faced by UK companies aiming to enter Chinese markets.

“There are still certain sectors where there are restrictions to trade in China, such as financial services, mining, automotives and food and drink,” they said.

Some of these concerns were raised by Mr Cameron in his meeting in Number 10 with Mr Li, according to British officials.