Since 2018, the "America First" isolationist policy of the Trump administration of the United States has continuously created troubles for China and the EU in terms of trade and even national sovereignty. This clearly reveals the nature of Trump as a businessman; Trump tried to use the U.S. military and financial advantages, continually squeezing the interests of other countries, and even its old European allies are the targets. This kind of conflict has recently been concentrated on the issue of sanctions against Iran by the United States. France and Germany have no option but starting to devise independent currency settlement system in order to ensure that European companies in Iran are not punished by the United States and guarantee the EU autonomy in the economic, trade and financial areas. Such a system is to realize the EU's independence and autonomy in finance.
Although the global settlement payment system SWIFT is headquartered in Brussels, Belgium, SWIFT's governance structure shows that it does not take orders from the EU, but is controlled by banking institutions from the United States, and likely to be used to sanction European companies in Iran. SWIFT, which was established half a century ago, has played a significant role in the globalization of trade and the facilitation of financial payment settlement. However, as the United States pursues trade protectionism, the disadvantages of global financial U.S. dollar dominance are increasingly apparent; the EU has the claim and ability to confront such dominance.
With the rapid development of information technology, it is not difficult to establish a global financial payment network with the same efficacy and even higher technology content as SWIFT. However, the forming of "allies" that can compete with SWIFT is anything but easy. The SWIFT system is joined by 11,000 financial institutions in more than 200 countries around the world, and it can be said that all systemic financial institutions are included. Successful financial services must be based on the real economy, and successful international financial platforms must be based on actual global trade and monetary investment. In the contemporary global trade and investment, the biggest challenge for EU finance to achieve independence and autonomy is that it does not have sufficient "allies". Therefore, the EU's latest statement is not difficult to comprehend; France and Germany both expressed their willingness to jointly work with China and Russia to build a currency payment system that is not controlled by the United States and undoubtedly this provides the right time window for the improvement of China-EU financial cooperation.
China and the EU are quite complementary in the development of the financial industry: China has the world's largest industrialized production base. The pricing of major commodities, from crude oil to soybeans, basically depends on the Chinese market, but due to the short development time of China's industrialization and urbanization, the development of the Chinese financial markets, especially capital market, is still at an early stage. Many Chinese companies with new economies and new formats have to go to the U.S. stock market for financing. Though being the birthplace of the world's first modern stock exchange, European finance is lack of market growth. Objectively speaking, the U.S. stock market has an advantage over the European counterpart in the past two decades, and China's "growth story" has contributed a lot in this. European financial institutions do not have the shortage of money; instead, they are lack of the huge market of China's "consumption upgrading and segmentation", which also includes vast capital needs for the construction of the Belt and Road Initiative.
Therefore, China as the world's second largest economy, and the euro as the second largest major currency in the world, both parties have the strong foundation for cooperation and such cooperation will inevitably bring rapid growth opportunities for the internationalization of the RMB and the upgrading of European financial services. China and the EU can jointly build a global currency payment, clearing and settlement system, which should actively unite countries and economic alliances like the Middle East, Russia, ASEAN, Africa, and others to use the financial leverage of the "RMB+Euro" credit system, while finding the support of the "third party" that includes oil dollar to be free from the U.S. financial hegemony.
To achieve this goal, in addition to actively discussing with the EU to establish a new global payment institution, China should also take advantage of the financial innovation of the free trade zone and the establishment of the Belt and Road Initiative. For instance, the global financial service platform jointly built by China and the EU can consider being based in Hainan, China's largest free trade zone. With the island's natural advantages of trade, port and logistics in the free trade zone, the financial service radius of bulk commodity trading and pricing can effectively be expanded. At the same time, as an international tourist destination, Hainan attracts the oil dollar institutions in Russia and the Middle East around the year, and it can easily establish a new type of global financial alliance. In addition, the industrialization and urbanization of countries along the Belt and Road Initiative is also a huge potential market for financial cooperation between China and Europe. Online shopping convenience is making trade borderless; the volume of e-commerce trade between China and Europe has multipled recent years, making it imperative for e-commerce finance to get rid of the USD-based settlement.
Final Analysis Conclusion:
In the future, e-commerce financial channels, financial innovation in coastal free trade zone's commodity benchmark pricing, and the "RMB + euro" base currency system will connect trade settlement, bill clearing, securities investment, as well as other modern financial services to the world which will be China's best strategic response to the United States on the trade war; this will also be the best financial path for China's economy to reach the new level.
