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Rachel Reeves will lead a delegation of leading bankers to Beijing next month to seek closer ties across a range of financial services, quietly ignoring security fears over UK-China relations.

According to government officials, the chancellor is leading opposition to China's inclusion in the "higher level" of a new plan that would force companies working for foreign entities to flag their work on a central register.

He fears that the inclusion of Chinese nationals in the scheme - which aims to allow the UK to monitor potential foreign influence - will stifle trade links with the People's Republic.

This week a scandal about alleged Chinese espionage at the center of the British establishment has become complicated Reeves' Visit in January.

The chancellor will be accompanied by City Minister Tulip Siddique and leading financial figures on the trip, which is expected to restart the UK-China Economic and Financial Dialogue, which was last held in 2019.

The talks will cover issues such as cooperation in capital markets, increased connectivity between financial markets and bond markets, cooperation on regulation and clean energy, according to people briefed on the agenda.

Yet leading Conservatives said this week's spying scandal showed Britain must take a much tougher line with Beijing.

Former Conservative security minister Tom Tugendhat said it was important china was placed at the "higher level" of the new "Foreign Influence Registration Scheme", which he devised.

The scheme is a two-tiered program that will force companies acting in some capacity for foreign powers or organizations to flag that activity in a central register. It aims to increase the UK Government's understanding of the nature and extent of foreign influence at home.

Loosely modeled on the US Foreign Agent Registration Act, the scheme was first proposed by Rishi Sunak with a view to becoming active this fall.

But this has been delayed since Labor entered office, as Sir Keir Starmer has grappled with the same debate that surrounded his Tory predecessors: whether to include China in a more stringent level.

Tugendhat said advice from MI5 this week was "very, very clear" that the scheme "wouldn't be viable" if Beijing was not in an enhanced level, which requires additional vetting of some foreign nationals.

Reeves and Jonathan Reynolds, the commerce secretary, are among those opposed to including China, according to government officials. "It will have a clear impact on the financial services sector," said one.

Reeves said on Monday that Britain would take a "pragmatic" approach to relations with China and that national security would be the top priority - but added that trade considerations were also vital.

"Like other countries around the world, we must trade and invest when it is in our national interest to do so, and that will be the approach of this government," he said.

City of London lobbyists decline to speak publicly for fear of inflaming the issue, but argue the plan would complicate trade with China and create a more rigid regime than seen in competitor countries.

One said: “It will capture a lot of day-to-day business. No consultation has actually been done. North Korea or Iran [who are both on the higher tier] Looking at the level of trade interaction, are very different from China.

Reeves' Beijing talks will focus on financial services. According to a document previously reported by Bloomberg News, they will include discussions on restarting the London-Shanghai stock connect — to allow dual listings — first proposed in 2015 and stalled in 2020.

Discussions will also consider improving the regulatory environment for financial technology firms and deepening cooperation between UK and Chinese asset management firms. Treasury declined to comment.