Chinese vice premier Hu Chunhua has told Philip Hammond of his regret that the South China Sea issue has harmed relations between his country and the UK.
The Chancellor, on a visit to Beijing, said he also regretted that there had been “some difficulties in advancing the positive course of the relationship that our leaders have set out”.
Mr Hammond said the UK takes “no position” in relation to the issues in the South China Sea, where Beijing has been involved in a dispute over navigation rights and territorial claims.
Speaking at the start of a meeting, Mr Hu told the Chancellor: “It is regrettable that since August last year the relations between our two countries witnessed some fluctuations because of the South China Sea issue and a series of institutional dialogues and cooperation projects had to pause.”
Mr Hammond added: “Of course you understand that the UK takes no position in relation to the issues in the South China Sea.”
Mr Hammond’s trip to China in February was pulled after Defence Secretary Gavin Williamson threatened to deploy a warship in the Pacific.
The Chancellor announced a UK-China economic and financial summit will take place in London in June.
Mr Hammond said: “Working with partners across the world to boost jobs, businesses and prosperity at home is key to our post-Brexit future.
“The UK’s world-leading financial sector, along with our unrivalled expertise in areas such as design, engineering, financing, and legal services, mean we are natural partners for global infrastructure initiatives.
“And our leadership on high standards and the sustainable development agenda puts us at the forefront of responsible investing.
“The forthcoming Economic and Financial Dialogue in June will continue the golden era of relations between China and the UK.
“By deepening our co-operation on financial services, trade, and investment with international partners, we can ensure Britain’s global future.”