China and Japan agreed to step up financial cooperation amid rising economic headwinds and market vulnerabilities due to trade friction from US President Donald Trump’s protectionist measures, top officials from both sides said.

As the top two Asian economies, “China and Japan have agreed to deepen regional fiscal and financial cooperation and maintain economic and financial stability” as they face growing threats from unilateralism and protectionism, Minister of Finance Liu Kun said at a news briefing in Beijing after the seventh China-Japan finance ministers’ dialogue.

Liu said he and Japan’s Deputy Prime Minister and Finance Minister Taro Aso held healthy and fruitful discussions that outlined clear steps for the next stage of cooperation between the two sides.

“We agreed to support multilateralism and maintain an open global economic stance against unilateralism and protectionism, and jointly maintain free trade and economic globalization under the framework of G20 and 10+3 (ASEAN plus China, Japan and the Republic of Korea) multilateral mechanisms,” said Liu, adding that the eighth round of China-Japan finance ministers’ dialogue would be held in Japan next year.

At the meetings, delegates from both countries discussed several issues such as budget and public debt management, and tax reforms. They agreed that fiscal policy plays an important role in coping with financial risks and supporting economic development.

This was also the first time that delegates from both countries’ central banks and financial regulatory institutions joined the talk and discussed financial cooperation in broad areas. They have reached several agreements on further opening-up financial markets and enhancing bilateral financial regulatory cooperation.

On Aug 31, the finance ministries of the two countries jointly issued a research report on pension fund reform, and decided to continually study important issues together in the future.

“I have personally witnessed the improvement in Sino-Japanese ties and feel that it is important to further strengthen fiscal and financial cooperation,” Liu said during the opening session of the dialogue.

He suggested that the two countries join hands to deal with the risks and challenges related to global and regional development.

“The mood was extremely positive,” said Aso. “We have noticed the influences from developed countries’ financial policy normalization, along with the interest rate hikes. Asset prices have become more volatile.”

China and Japan must strengthen bilateral cooperation under the multilateral regime of G20 and 10+3, to proactively cope with the challenges, he said. “The consolidated relationship between the two countries is very important.”

Ties between the two countries have improved significantly after Premier Li Keqiang’s visit to Japan in May this year.

But there is still enough room for the two countries to strengthen their financial relationship, including further opening-up the financial markets, said Liu Rui, a researcher at the Japan Research Institution under the Chinese Academy of Social Sciences.

“The two sides also indicated keenness in reviving the currency swap arrangement and expanding the swap volume, setting up a renminbi settlement and clearing center in Tokyo, and increasing holdings of each other’s treasury bonds,” said Liu. “Stronger ties in the financial sector could enhance both countries’ ability to offset market vulnerabilities.”