Hailey Johnson
The United States and China have a complex economic relationship, with ongoing discussions around financial policies and practices. In 2023, the two countries established an Economic Working Group and a Financial Working Group to facilitate information exchange and discussions on macroeconomic and financial developments. These groups aim to strengthen communication and address areas of cooperation and disagreement. While the US and China do collaborate on specific initiatives, such as anti-money laundering efforts, they also have differing economic policies and practices, including concerns around China's non-market practices. Additionally, the international role of China's currency, the renminbi, and its potential rivalry with the US dollar, is an area of interest, with China promoting its use globally. The effectiveness of Western sanctions on countries like Russia and the potential impact on cross-border payment systems further highlight the interconnectedness of the US and Chinese financial systems.
| Characteristics | Values |
|---|---|
| Bank information sharing between China and the US | The US and China have launched Economic and Financial Working Groups to facilitate the exchange of information on macroeconomic and financial developments |
| Objective | To deepen communication and advance the bilateral relationship across areas of cooperation and disagreement |
| Leadership | US Secretary of the Treasury Janet Yellen and Vice Premier He Lifeng |
| Groups | Economic Working Group (EWG) and Financial Working Group (FWG) |
| Areas of Discussion | Balanced growth in domestic and global economies, anti-money laundering, financial stability, banks' liquidity risk management, market developments, swap arrangement practices, cross-border payments and data |
| Participation | US Treasury, PBOC, and other agencies |
| Alternative Arrangements | China's Cross-Border Interbank Payment System (CIPS) as an alternative to SWIFT and CHIPS |
| Renminbi Internationalization | The Chinese renminbi remains a niche reserve currency, not close to overtaking the US dollar or euro |
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What You'll Learn
US-China Economic and Financial Working Groups
On September 22, 2023, the United States and the People's Republic of China launched the Economic and Financial Working Groups to deepen communication between the two countries. The groups are led by the US Secretary of the Treasury Janet Yellen and Vice Premier He Lifeng. The Economic Working Group (EWG) is led by the US Department of the Treasury and China's Ministry of Finance, while the Financial Working Group (FWG) is led by the US Department of the Treasury and the People's Bank of China.
The two working groups provide structured channels for discussions on economic and financial policy matters and the exchange of information on macroeconomic and financial developments. The EWG discusses matters related to economic policy, while the FWG focuses on financial stability and banking issues.
The EWG and FWG have met several times since their establishment. The EWG held its third meeting in Beijing in February 2024, with senior officials from both countries discussing domestic macroeconomic outlooks and cooperating on shared challenges such as debt issues in low-income and emerging economies. The FWG held its fourth meeting in April 2024, with discussions on banks' liquidity risk management, financial stability, market developments, and cross-border payments and data.
The two working groups aim to advance the bilateral relationship between the US and China and address areas of both cooperation and disagreement. They provide a platform for the discussion of economic policies, financial stability measures, and shared challenges, while also addressing concerns related to China's industrial overcapacity and its impact on the US economy and workers. The groups report directly to Secretary Yellen and Vice Premier He Lifeng, with a focus on implementing President Biden's directive to deepen communication and cooperation between the two countries.
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Joint anti-money laundering efforts
The United States and China have had a complex relationship concerning law enforcement and anti-money laundering (AML) efforts in recent years. In 2021, China ceased meaningful cooperation with the US in these areas. This was followed by China ending all counternarcotics and law enforcement cooperation with the US in 2022 in retaliation for then-House Speaker Nancy Pelosi's visit to Taiwan. During this period, China failed to adequately enforce measures against Chinese criminal networks laundering money for Mexican cartels.
However, during a November 2023 summit between President Joe Biden and President Xi Jinping, the two countries announced the restart of counternarcotics cooperation, including a joint commitment to tackle money laundering. This renewed collaboration includes the re-establishment of a joint counternarcotics working group and China's promise to cooperate with the US in AML efforts.
As part of this cooperation, the US Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has been working to combat Chinese money laundering networks (CMLNs) that pose a significant threat to the US financial system. FinCEN has issued advisories and conducted financial trend analyses to urge financial institutions to be vigilant in detecting the use of CMLNs by Mexico-based drug cartels. These cartels have been involved in drug trafficking, human trafficking, and other illicit activities, with Chinese citizens playing a significant role in laundering money for these criminal organizations.
The US-China Economic and Financial Working Groups, led by the US Secretary of the Treasury and the Vice Premier of China, have also been instrumental in advancing bilateral cooperation. During a meeting in April 2024, the Financial Working Group (FWG) discussed the new Joint Treasury-People's Bank of China Cooperation and Exchange on AML. This working group aims to provide a structured channel for discussions on financial policy matters and the exchange of information between the two countries.
In summary, while there have been periods of strained cooperation, the US and China have recently undertaken joint anti-money laundering efforts. These efforts include the re-establishment of working groups, information sharing, and financial institution vigilance to disrupt financial flows to criminal actors and gather intelligence on their networks. These collaborative measures are essential to combating the global threat posed by money laundering and maintaining the stability of the international financial system.
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US-China bilateral relationship
The US and China have had a complex and often tense bilateral relationship in recent years, with financial matters being a key area of both cooperation and disagreement. In 2023, the two countries launched an Economic Working Group and a Financial Working Group to facilitate discussions and information exchange on macroeconomic and financial developments. This move aimed to deepen communication and advance the bilateral relationship, following high-level meetings and directives from both President Biden and President Xi.
The US Secretary of the Treasury, Janet Yellen, has played a pivotal role in these discussions, meeting with the Economic Working Group (EWG) and Financial Working Group (FWG) in April 2024. These meetings addressed areas such as balanced growth in domestic and global economies, anti-money laundering initiatives, and financial stability. The US delegation also expressed concerns about China's non-market practices and industrial overcapacity, underscoring the ongoing tensions between the two economic powers.
One key aspect of the US-China financial relationship is the internationalization of the Chinese renminbi. While the renminbi remains a niche reserve currency, lagging behind major currencies like the US dollar, euro, and British pound, China has been pushing for its increased international usage. The establishment of China's Cross-Border Interbank Payments System (CIPS) in 2015 has supported the use of the renminbi in cross-border transactions. However, CIPS still lags behind Western payment platforms like SWIFT and CHIPS in terms of transaction volume and participation.
The US and China also interact financially through their involvement in global financial institutions. For example, US branches of Chinese banks participate indirectly in the Clearing House Interbank Payments System (CHIPS), which is used for clearing large-value payments. Additionally, the US Federal Reserve, as the central bank of the United States, plays a crucial role in maintaining the nation's monetary and financial stability, which intersects with global economic dynamics, including those related to China.
In summary, while the US and China have established channels for dialogue and cooperation in economic and financial matters, their relationship remains complex. The two countries continue to navigate areas of disagreement and tension while seeking opportunities for collaboration and the advancement of their respective economic interests on the global stage.
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Chinese renminbi internationalisation
There is no clear indication that China and the US share bank information. However, in April 2024, US Secretary of the Treasury Janet Yellen met with the Economic Working Group (EWG) and Financial Working Group (FWG) in Beijing and Guangzhou. The groups discussed how they could advance their bilateral relationship across areas of both cooperation and disagreement. The US delegation expressed concerns about China's non-market practices and industrial overcapacity.
The international role of the Chinese renminbi has received increased attention in recent years. Some have even speculated that the renminbi could rival the US dollar as the world's dominant international currency. However, as of August 2024, the renminbi's share of international currency usage was only 2.5%, far behind the US dollar's 66% share. It also ranked below the euro, the British pound, and the Japanese yen.
Despite this, there are several reasons why the renminbi's international role may increase in the coming years. Firstly, Western sanctions on Russia following the invasion of Ukraine have likely contributed to an increased use of the renminbi in international transactions, particularly with Russia. Over the long term, other countries may increase their use of the renminbi to lower their exposure to potential future Western sanctions. Secondly, the current international usage of the renminbi is low compared to China's share of world gross domestic product (GDP) and world trade, implying potential for an increase in renminbi usage. Thirdly, Chinese authorities are promoting the international role of the renminbi through various measures, including a network of dedicated renminbi clearing banks, the renminbi cross-border international payment system, and bilateral agreements with countries to increase renminbi usage in trade.
China has established a network of 31 designated offshore renminbi clearing banks in 27 countries, including most advanced economies and many large emerging economies. These clearing banks are typically local subsidiaries of Chinese banks, but they can also be subsidiaries of foreign banks. China has also extended bilateral renminbi swap lines with foreign central banks in 40 countries, allowing these banks to borrow renminbi using their own currency as collateral.
While successful internationalisation of the renminbi would offer China advantages such as lower borrowing costs and reduced exchange rate risk, it is important to note that deeply internationalised currencies are typically associated with open and liberalised economies, which contrasts with China's tightly controlled economic system. China's strict capital controls buffer the economy against instability but also inhibit the free movement of the renminbi, making it less attractive as an international currency.
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Cross-border interbank payments
The United States and China have established Economic and Financial Working Groups to facilitate discussions on economic and financial policy matters and to promote the exchange of information on macroeconomic and financial developments. The Financial Working Group (FWG) is co-led by the Assistant Secretary for International Finance at the US Treasury and the Deputy Governor of the People's Bank of China.
In terms of cross-border interbank payments, China has developed its own system called the Cross-Border Interbank Payment System (CIPS), which was launched in 2015. CIPS is a Chinese payment system that offers clearing and settlement services for cross-border Renminbi (RMB) payments and trade. It is supervised by the People's Bank of China, which is the largest shareholder with 16% equity, and has both Chinese and international shareholders, including HSBC, Standard Chartered, and Citigroup.
CIPS has seen significant growth in terms of transaction volume and the number of participating financial institutions. By the end of 2024, CIPS processed 8.2169 million transactions, totalling RMB175.49 trillion (US$24.47 trillion). As of June 2025, CIPS had 176 Direct Participants and 1514 Indirect Participants, reaching over 3000 banking institutions in 167 countries and regions.
The development of CIPS is part of China's efforts to internationalize the use of its currency, the Renminbi, and reduce reliance on the US dollar and Western clearinghouses. This is particularly relevant in the context of rising tensions between China and the United States, with countries like Russia exploring alternatives to the US dollar and SWIFT (Society for Worldwide Interbank Financial Telecommunication) for cross-border transactions.
While CIPS is still a limited alternative to SWIFT, it has signed a memorandum of understanding with SWIFT to allow the use of Chinese characters and improve content functionalities. The United States should be prepared for the continued development of alternative financial arrangements, including the increased use of CIPS, as financial sanctions may drive countries like China to foster the use of their own currencies and payment systems.
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Frequently asked questions
Yes, China and the US share bank information. In 2023, the US and China launched an Economic Working Group and a Financial Working Group to discuss matters of economic and financial policy and share information on macroeconomic and financial developments.
The Economic Working Group and Financial Working Group were established to deepen communication between the two countries and provide a structured channel for discussions on economic and financial matters. The groups aim to advance the bilateral relationship across areas of both cooperation and disagreement.
The Financial Working Group covers a range of topics, including anti-money laundering efforts, financial stability, banks' liquidity risk management, market developments, cross-border payments, and data sharing.
