The world's two largest economies are set to embark on a new chapter deepening their financial ties. The China-U.S. phase one trade agreement has laid the foundation for financial institutions on both sides of the Pacific to receive better access to each other's financial markets.

The deal covers banking, credit rating, e-payments, asset management, insurance, securities, fund management and futures services.

Among the many commitments made, Washington is to consider swiftly the requests made in the U.S. by three of China's largest financial institutions, CITIC Group, China International Capital Corporation and China Reinsurance Group.

On China's part, Beijing will take into consideration the assets of a U.S. financial institution's parent company, rather than just its subsidiary, when it comes to fulfilling asset requirements in China.

However, it is also important to point out that the financial services provision in the trade agreement is a reflection of China's own moves to further open up its financial sector in recent years.

In fact, Beijing's own measure to open up financial services is actually broader, deeper and more systematic than those contained in the phase one trade agreement.

Long before the phase one deal, Chinese policymakers already made clear arrangements in 2017 to reform and open up financial services. This ranged from lifting foreign equity caps to eliminating business scope restrictions in the sector – all of which are reflected in the trade agreement.

China has learned from experience that opening up its economy promotes reforms and leads to higher-quality development. Doing so in the financial sector boosts the competitiveness of Chinese financial institutions at home and abroad, pushes forth capital market reforms and strengthens financial sector resiliency. All of this better links finance in the country to serving the real economy.

But despite China's financial opening up, the measures do not come at the expense of financial stability or increasing systemic risk.

In 2019 China's leverage ratio was stable, shadow banking assets have been slashed and regulators have supported commercial banks in disposing of non-performing loans. These moves occurred with credit risks not spilling over into the wider financial system. A more open Chinese financial sector will not equate to increasing financial risks.

The phase one trade agreement better links the world's two largest economies in financial services and this is a positive for global financial stability.