China EU Discuss Financial Cooperation Amid Global Monetary Shifts

Chinese Premier Li Qiang and European Central Bank (ECB) President Christine Lagarde held a significant meeting in Beijing on June 12 to discuss financial cooperation between China and the EU, as well as the evolving structure of the global monetary system. The meeting marked the 50th anniversary of China-EU diplomatic ties, with both sides emphasizing the importance of stable financial cooperation.

Li Qiang expressed support for deeper ECB engagement, particularly on global monetary reform and multilateral alignment. He highlighted the complementary nature of the Chinese and European economies and China's willingness to enhance market connectivity and industrial coordination to drive mutual development. Li also referenced China’s recent macroeconomic efforts to stimulate consumption and offset external pressures, reiterating Beijing’s commitment to opening up its markets and supporting global financial stability.

Lagarde, on the other hand, emphasized the importance of sustained EU-China dialogue amid rising geopolitical risks and trade tensions. She welcomed closer technical cooperation between the ECB and Chinese regulators and pointed to the recent launch of a central bank governor dialogue mechanism. Lagarde also stated that China’s innovation-driven development is evident, and the ECB looks forward to deepening engagement with China’s financial institutions.

During the meeting, a Memorandum of Understanding (MoU) was signed between Lagarde and Pan Gongsheng, Governor of the People’s Bank of China. This MoU updates the previous agreement and includes a framework for the regular exchange and cooperation between the two institutions. The conversation did not yield any new policy declarations but was framed as part of a longer-term strategy to stabilize cross-border capital flows and strengthen communication across monetary authorities.

Lagarde called for broader cooperation to maintain open markets and safeguard institutional channels, stating that tariffs and trade wars were detrimental to all sides. The meeting also touched on the role of bilateral trade in expanding local currency settlement. Li reiterated that China will continue to broaden access to its markets, which could support greater international usage of the yuan. China is also assessing offshore digital currency channels to support cross-border use of the yuan, with recent proposals from economists including issuing yuan-backed stablecoins to facilitate trade without affecting domestic capital controls.

Through official talks and digital finance pilots, China is testing new ways to expand the yuan’s role in global transactions while managing regulatory boundaries and reducing the reliance on the US dollar. Local currency use could reduce dependence on intermediary currencies, lower transaction costs, and improve resilience in financial flows during external shocks. Both sides are studying digital finance tools, and shared priorities in this space could shape how new currency models are integrated globally.

With growing interest in local currency settlements and alternative payment systems, central banks are reassessing the infrastructure that supports cross-border value exchange. This meeting underscores the strategic importance of the China-ECB alliance in reshaping the global monetary landscape and potentially challenging the dominance of the US dollar.