Sunday 24 July 2016 8:43 pm

Chancellor Philip Hammond says UK is seeking an ambitious new free trade deal with China in the aftermath of last month's Brexit vote

Chancellor Philip Hammond has launched talks over an ambitious new free trade deal as part of his visit to China.

Hammond visited Beijing and Hong Kong ahead of the G20 finance ministers meeting in Chengdu, and yesterday said that both sides would want to ink a bilateral deal in the aftermath of Brexit.

Asked specifically about a free trade deal by the BBC, the chancellor said: "Definitely I could see such a thing.

"We have hugely increased our trade with China, investment both by British companies into China and by Chinese entities into the UK

"That's about as far as we can go while we are members of the European Union," he said.

"But once we are out of the European Union then I have no doubt on both sides we will want to cement that relationship into a firmer structure in a bilateral way that's appropriate.

"That's something we will have to explore in the future."

China invested over £3.8bn in the UK in 2014.

Theresa May repeatedly stated last week that she would not activate formal processes for leaving the EU until next year.

The EU's Article 50 legislation grants the UK two years to secure a new trading relationship with Europe before quitting the union.

That means that deal with partners including China and the US may not be secured until early 2019.

Read More: Britain has a moral duty to lead the world on free trade

However, Hammond denied that European nations would seek to make Britain's trade negotiations with the EU more difficult.

"I don't think they are in punishment mode," he said.

"I have no doubt that everyone would want to see a very close relationship between the UK and the EU going forward because that will be good for the economies of the European Union and the economy of the UK.

"The challenge for us is to make sure that other politicians who are not so narrowly focused on the economic agenda also share that view and recognise that it is important not just for Britain but for Europe as well that we continue working closely together."