With inflation stagnating and growth slowing, Beijing quietly turns to European banks for insight into navigating prolonged periods of ultra-low rates.

China’s central bank is reaching out to its European counterparts for advice on managing the economic consequences of prolonged low interest rates, as the country faces mounting signs of a structural slowdown and the risk of long-term low inflation.

According to senior financial sources, the People’s Bank of China (PBoC) has held discreet discussions with several major European financial institutions and central banks over recent months, requesting insight into the eurozone’s experience with low and even negative interest rates during the post-2008 recovery.

The move underscores Beijing’s growing concern over the sustainability of its current monetary policy. Despite a series of rate cuts and liquidity injections aimed at stimulating lending and investment, consumer prices have remained flat, while core inflation has hovered just above zero for months.

“It’s a quiet but significant development,” said a senior executive at a European investment bank with direct knowledge of the exchanges. “China is trying to understand what tools work, what the unintended consequences are, and how to avoid the stagnation that has plagued parts of Europe.”

For much of the past decade, China has been seen as a global engine of growth. But following the pandemic, a faltering property sector, weak consumer confidence, and demographic headwinds have combined to drag down momentum. Analysts say the government’s reluctance to deploy large-scale fiscal stimulus, coupled with cautious monetary easing, has deepened the deflationary pressures.

Europe’s experience offers both lessons and warnings. The European Central Bank’s prolonged negative rate environment helped stabilize financial markets but also strained commercial bank profitability, distorted asset prices, and failed to lift inflation meaningfully for years.

Chinese officials are reportedly examining these effects closely, particularly how to shield domestic banks from margin compression and how to encourage consumer spending when expectations of price stability — or even falling prices — take hold.

“Once deflationary psychology sets in, it’s hard to reverse,” said Dr. Emily Zheng, a monetary policy expert at the London School of Economics. “That’s the trap China is now trying to avoid.”

Beijing’s outreach to European financial institutions also reflects a broader shift in its global economic engagement. With relations with Washington increasingly fraught, Chinese policymakers have deepened cooperation with European stakeholders on financial stability, green investment, and regulatory frameworks.

The People’s Bank of China has not commented publicly on the consultations, but analysts say the institution is navigating a delicate balance — trying to stimulate growth without over-reliance on debt or triggering capital outflows.

So far, the central bank has opted for modest policy rate reductions and increased credit support for small businesses and the housing sector. But with inflation remaining subdued and youth unemployment at record levels, economists say more decisive action may be needed.

“There’s a growing recognition that China’s economic model is at a turning point,” said Louis Marechal, chief Asia strategist at BNP Paribas. “Monetary policy alone won’t be enough — but how it’s managed will shape the next decade.”

As China studies Europe’s past, global markets are watching closely. The world’s second-largest economy may be on the brink of a new monetary era — one marked not by overheating, but by the quiet, persistent chill of stagnation.