At this year's China-EU Summit on April 9, the European and Chinese leaders announced that they could sign a treaty on investment by 2020 fostering reciprocal access to their domestic markets. It has furthered the consensus reached in 2018 that China and the European Union would stand together to promote multilateralism and reinforce the current rules-based trading system, and that they would increase cooperation to improve connectivity between Europe and Asia through China's Belt and Road Initiative and the EU's strategy for connecting Europe and Asia.

Beijing will soon host the second Belt and Road Forum for International Cooperation, which provides another opportunity for the two sides to discuss and further promote synergies between their respective initiatives.

China and the European Union already have a common financing vehicle: The China-EU Co-investment Fund. It has a total commitment of 500 million euros ($444.7 million), of which the Silk Road Fund and European Investment Fund have each contributed an equal share. While the amount is relatively low for now, one would expect an increase of the fund capacity going forward. Another idea would be to increase the synergies between the Belt and Road's financial capabilities and EU investment initiatives, such as the Juncker Plan that is worth 315 billion euros.

In terms of their financial integration, China and EU could cooperate more on foreign exchange, trade and investment. And they could work together to internationalize their currencies to reduce the dominance of the US dollar, which still represents 60 percent of foreign exchange reserves or international debt. The EU and China could take a joint approach to internationalizing their currencies, which could include the development of renminbi clearing arrangements in Europe and more powerful bilateral currency liquidity facilities between the European Central Bank and the People's Bank of China.

In terms of policy coordination, China and the EU could better coordinate their industrial policies. Both markets could adopt a collaborative strategy on industries that require large economies of scale and a large pool of financing. These include environment related industries such as renewable, green energy but also transport equipment. For example, in an attempt to align industrial strategies, the German and Chinese governments have developed high industrial parks, such as Sino-German Intelligent Equipment Manufacturing Park in Shenyang, Liaoning province, and Kunshan German Industrial Park in Jiangsu province.

Similar approaches should be encouraged at the EU level as a "European Industrial Policy Strategy" does exist. It is made up of 10 initiatives ranging from improving cybersecurity to modernizing the EU Intellectual Property Framework and bolstering the circular economy.

With regard to foreign direct investment, the Chinese government plans to release a new "negative list" to reduce the number of sectors restricting foreign direct investment. Financial integration between China and the EU should be at the forefront of that in order to reduce the often destabilizing dollar dependency.

Regarding trade between China and the Europe, first of all, as announced in their recent agreement, the EU and China are on the same wavelength in proposing reform of the World Trade Organization, in order to better promote multilateralism at a global level. Being unified on this issue would encourage other countries to join them.

Another area where they could make progress is credit insurance. China and the EU should promote a symmetric opening of their markets for insurance companies helping exporters insure short-term credit being vital for trade activities and growth. And last but not least, both being confronted with higher tariffs imposed by the United States, China and the EU should start envisaging further cuts to bilateral tariffs in order to promote trade.

As US President Donald Trump's "America First" policy has led to a retrenchment of the previous US-led multilateralism that emerged after the World War II, the EU and China have to revive multilateralism on the basis of a multidimensional cooperation ranging from investment, trade, and finance to infrastructure projects and environment protection.

The author is head of Macroeconomic Research at French trade credit insurance company Euler Hermes.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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