China and EU Trade Talks Included the Potential Cooperation of Central Bank Digital Currencies

The European Union and China recently had trade and economic discussions regarding topics including central bank digital currencies (CBDC) and supply chain. 

During the video conference, according to the Ministry of Commerce of China, the two parties discussed the strategic cooperation of the steady recovery and growth of the global economy post-pandemic. 

According to the official report, “a series of fruitful results and consensus have been reached in the negotiation of China-EU investment agreement,” including the expansion of the digital economy, and other financial cooperations. The official report said:

“The two sides agreed to strengthen cooperation in green finance and promote the convergence of standards. Agreed to strengthen information sharing and exchanges and cooperation in the fields of digital currency and financial technology.”

The Chinese officials stated that the country is looking forward to singing a memorandum of understanding on bilateral supervision cooperation and to support each other in building international financial centers. The European Union, however, expressed that there will be more reciprocity needed from China before making further progress.

Executive Vice-President of the European Union Valdis Dombrovskis said:

“The current crisis gives us no other option but to work hand in hand with our global partners, including China. By pulling together we can recover more quickly economically, and make progress on areas of mutual interest such as trade and investment relations. However, we also need to address sticking points such as reciprocity in the way our companies are treated. We will need to make further progress on these and other issues ahead of the next leaders' summit in the autumn.”

The European Commission also stated that a range of regulatory issues in the financial services sector were discussed, including cooperation on green finance, and the international role of the Euro and the Renminbi. 

Experimenting with central bank digital currencies

China’s central bank has been rolling out a central bank digital currency, also known as digital currency electronic payment (DCEP). The People’s Bank of China has many times announced that its CBDC was ready, however, it is still currently being tested. 

In May 2020, local government employees in the city of Suzhou have received China’s DCEP. The Suzhou municipal government employees will be receiving 50 percent of their transportation subsidies for May in DCEP. The DCEP will be issued to the employees by the nation’s four state-owned banks, including the Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, and China Construction Bank. The employees were asked to download digital wallets developed by the banks to be able to receive their subsidies.

Earlier this year, Banque de France, the French central bank launched a program of experiments to test out the potential central bank digital money aimed for interbank settlements.

Potential participants have been invited to submit their applications to experiment with the digital euro, and Banque de France announced the 8 successful applicants: Accenture, Euroclear, HSBC, Iznes, LiquidShare, ProsperUS, Seba bank, and Société Générale Forge.

The three main objectives of the CBDC experiment includes identifying benefits, analyzing potential risks, and modeling as CBDC-based interbank settlement. The French central bank will be working closely with the 8 successful applicants to carry out the experiments in the coming months.