Liu Chang, PhD candidate of China Foreign Affairs University

Chinese President Xi Jinping is paying a state visit to the United Kingdom, October 19-23, Meanwhile, recent news reports have disclosed that, London will issue billions of RMB treasury bonds.

Such bonds which would be issued after the issue of short-term debts by the People's Bank of China (PBoC, China's Central Bank) had already occurred on a smaller scale. It's the first time Beijing would issue RMB treasury bonds overseas.

Moreover, it is reported that President Xi will attend China-UK Businesses Summit in London focusing on bilateral cooperation regarding to mutual investment, infrastructure construction and innovation on October 21, followed by visit to the Huawei's UK headquarters as another important event in his partnership-advancing journey to this country. Seen from this, we are sure that President Xi's visit will boost bilateral financial cooperation deals in the upcoming days. After the US broke the dollar's peg with gold in 1971, the internationalization of other national currencies has become more popular.

However, currency internationalization is risky and demands high investment. Only developed countries such as the US and members of the European Union (EU) hold the financial resources to play the game.

In the past decade especially after the global financial crisis in 2008, world financial markets have witnessed the growing strength of China's financial capabilities. The RMB internationalization has been welcomed by many countries. Beijing believes the UK could be a reliable partner for the global strategy.

London bankers have rich experience on financial sector governance. Beijing tends to take advantage of Britain's advanced ideas to upgrade its financial industry and to expand its currency. Meanwhile, the UK is America's best ally and the Commonwealth enjoys high status in the European Union.

In the wake of the TPP (Trans Pacific Partnership), a US-led trade deal could impact China in such areas of trade, monetary policy and infrastructure construction.

Therefore, Beijing may cooperate with London to counterbalance the US Pivot to Asia maneuver. China seeks to assert its influence in the European markets, while London serves as a long-standing financial hub in Europe and the Western world.

Despite rumors that Great Britain may support a referendum to disengage from the EU in 2017, it's China-oriented financial policy may urge other European capitals and financial centers – Berlin, Frankfurt, Paris, Amsterdam – to weigh in on their international monetary strategies and foreign policies more carefully.

From the Chinese perspective, RMB offshore market cooperation with the UK could be another stepping-stone. Observers in China and Great Britain contend that London wants to utilize its financial cooperation with Beijing to influence its global finance and to leverage against the U.S. position.

Shaun Breslin, a veteran China expert in Warwick University of Coventry, explains that the UK policy has been driven by the Treasury, not the Foreign Office, in order to open the West to China.

Yet, it's also about bringing more money into Britain to offset state spending. London is gaining a foothold in the Chinese service sector for the benefit of UK companies. The strategy is supported by a majority of U.K.-elected officials, and would bring far-reaching implications to the country.

The two countries should support London as the center for RMB offshore exchange and investment in Europe and even the entire Western world. However, there are some differences between Britain's financial policy as a nation-state and that of London as a financial city.

To solve the differences, the national and municipal policies should be coordinated in an effective manner to give full play to London's unique advantages.

British Chancellor of the Exchequer George Osborne announced that China Construction Bank (CCB) has become a new member of the London Stock Exchange when he visited China last month.

Shanghai and London are negotiating the launching of a "Shanghai-London Exchange". Consequently, more financial cooperation projects are expected to be announced during President Xi's UK visit.

Beijing and London can coordinate on the Asian Infrastructure Investment Bank (AIIB), a new-established multilateral financial institution. Despite hostility from Washington, the AIIB has gained popularity among America's allies.

However，Beijing and London face some difficulties to enhance financial cooperation. Will China, Britain and other countries establish a transparent, effective and reliable decision-making mechanism to coordinate on the interests of developing and developed members of the AIIB?

China is to promote its domestic financial and economic system reforms via the experience learned from its cooperation with the UK. President Xi is expected to chart promising prospects for China-UK cooperation within the AIIB.

Last but not least, developments in other sectors can facilitate financial collaboration. Sir Richard Leese, leader of the city council of Manchester, said, "Britain is planning to construct a high-speed railway from London to West Midlands and Manchester, and many British politicians and civilians hope Chinese companies can join in." Except for high-speed railway, more cooperation projects such as nuclear power stations, health and medicine, and food and beverage are expected to speed up thanks to President Xi's visit.

Leaders of both countries could make significant breakthroughs on other cooperation deals as well during Xi's visit, which would require a more mature financial structure. As Beijing boosts its "Belt and Road" initiative, more infrastructure projects could enter the China-UK cooperation basket.

President Xi's visit to the UK will open a new chapter for bilateral relations. From a strategic perspective, financial cooperation can be the key to herald another "Golden Age" of China-UK relations.