UK Prime Minister Rishi Sunak has said the self-described "golden era" between China and the UK "is over".
Speaking at the Lord Mayor's Banquet yesterday (28 November), Sunak said the UK needs to evolve its approach to China.
Sunak had been called out by Alice Kearns, the UK's chair of the Foreign Affairs Select Committee, earlier in the day on fulfilling his campaign promise of setting his new China policies.
In the address last night, Sunak said that as well as this relationship, the "naïve idea that trade would automatically lead to political and social reform" was also finished.
China's woes risk spilling over into the FTSE 100's heavyweights
This was the prime minister's first major stance on foreign policy outside of the Ukraine-Russia war since coming into office, and was made with the background of ongoing protests in China over Covid-19 lockdown policies.
The past few days have seen months of frustration at China's zero-Covid policy boil over among its population. These have ranged from candlelit vigils to clashes with the police, with a BBC reporter detained by Shanghai as they covered the protests.
In his address, Sunak said China posed a "systemic challenge to our values and interests, a challenge that grows more acute as it moves towards even greater authoritarianism".
He added that the media and parliamentarians should be able to call out the issues and human rights abuses "without sanctions", although he criticised the need for Cold War tactics.
Reports from the Financial Times stated the US has upped its pressure on Europe to take a tougher stance on China, with reports claiming the Joe Biden camp was pushing for Nato to make restrictions against Beijing a priority.
China makes up a significant portion of the global economy and its Covid policies have been widely criticised for dampening Chinese growth.
The geopolitical backdrop to these domestic protests forms part of a longer web about Western concerns around China's global influence, particularly led by the US as Biden made it a priority of this election campaign.
Political tensions 'will see all Chinese stocks delist from the US'
As the protests escalated yesterday, major Chinese markets fell as investors were spooked by the rare public outbursts.
David Townsend, managing director of EMEA business at Value Partners Group, called this a "dramatic change" in market sentiment in the past 14 days as the government eased policies around the much haggard property sector, a counter to the negative impact of the widespread Covid clashes.
"These, together with the lower than expected CPI figures in the US last month (which ignited renewed expectations of monetary policy pivoting in the US), have stimulated a strong ‘risk on' momentum in the China stock market," he said.
While Chinese equities slumped yesterday, it has rallied today, with data from the FT showing Hong Kong's Hang Seng index up around 2% and China's CSI 300 jumped 0.9%.
The Hang Seng China Enterprises index, which tracks the largest and most liquid mainland Chinese companies listed in the city, rose by a maximum of 2.4%.
The negative impact was felt outside of Chinese markets though, as the unrest dragged on global investor sentiment, sending the S&P 500 down 1.5% yesterday and the Nasdaq Composite down 1.6%.
