David Cameron's mission to change the focus of British foreign policy by boosting trade links suffered a setback after Downing Street was forced to abandon a trip to China as Beijing punished the prime minister for meeting the Dalai Lama.

In a blow to Cameron, who had hoped to hold an annual summit with the Chinese leadership, the French president François Hollande was on Friday feted in Shanghai on a full state visit a few weeks after the prime minister was due to visit China.

Cameron is understood to have abandoned the planned trip after Beijing indicated that he was unlikely to be granted meetings with senior figures. He is now expected to visit in the autumn, two years after his first and only visit as prime minister.

Britain accepts that Beijing is exacting punishment after Cameron met the Dalai Lama, the spiritual leader of Tibet, at St Paul's Cathedral last May. The meeting, which was similar to Gordon Brown's discussions with the Dalai Lama at Lambeth Palace in 2008, was designed to minimise offence in China by showing that Britain regards him as a spiritual leader. Downing Street has made clear to Beijing that it accepts Tibet is part of the People's Republic of China.

Government sources said that tentative plans for the prime minister to visit China this month were put on hold before his visit to India in February for the simple reason that the new Chinese leadership only took over in March. Cameron spoke to Li Keqiang, his new Chinese counterpart, after his appointment.

But the Guardian understands from diplomatic sources that a visit was firmly placed in the prime minister's diary for earlier this month. This was abandoned when it became clear that the prime minister would be denied the access usually granted to a G8 leader.

Douglas Alexander, the shadow foreign secretary who has just returned from China, told the Guardian: "David Cameron came to office claiming he would prioritise the UK's diplomatic and trade relationship with China, and yet the real difficulties in relations have now been laid bare. I was in China this week and it is clear that the new Chinese leadership are focused on the French president's visit, along with a large number of French companies looking for business.

"In the past, UK prime ministers have met with the Dalai Lama without the deterioration in relations with China that we are now seeing. For all of their initial boasts and bluster, the UK government has lacked a strategic or a joined-up approach to China since it came to office, and that's now showing."

A No 10 source said: "Of course, as any good diary planner would, we pencil in early on dates when the prime minister could potentially travel overseas without going firm on destinations. We decided several weeks ago that we wanted to visit some European capitals in the time we had earlier this month. When the prime minister and Premier Li Keqiang spoke in March they looked forward to meeting in due course."

Officials said trade with China is still rising and the two countries are on course to achieve £1bn in bilateral trade by 2015. Exports to China grew 13.4% last year.

But the decision to abandon the visit is a personal setback for Cameron, who said after coming to office that he would place trade at the heart of foreign policy, with a particular emphasis on the so-called Bric countries of Brazil, Russia, India and China. A visit to India in February fell flat after private complaints that the prime minister appeared to regard the country as a trading opportunity rather than an emerging world power.

Hollande was greeted by Xi Jinping, the new Chinese president, when he arrived in Beijing with his partner Valerie Trierweiler on Thursday. They agreed to hold an annual summit – Cameron's original aspiration when he first visited China in November 2010 – after Hollande said he hoped to build a "multipolar" world. This is the classic French ambition to ensure the US cannot dominate the world in a "unipolar" world.

Cui Hongjian, director of European Studies at the China Institute of International Studies, a foreign ministry thinktank, told the South China Morning Post that this message was well received in Beijing. "France sometimes has different ideas from the US. China may co-operate with France."