George Osborne hailed the "momentous progress" in links between the UK and China as he set out his ambitions for the City of London to be the major offshore hub for trade in the Chinese currency.
The Chancellor said the increasing importance of the renminbi (RMB) could lead to a historic shake-up of the global financial system and he wanted the UK to play a central role.
Chinese premier Li Keqiang, appearing alongside the Chancellor, urged the UK to "seize this momentum" to consolidate its place as "one of the most important offshore RMB markets outside Asia".
The joint appearance by Mr Osborne and Mr Li came as China Construction Bank in London was appointed as the first clearing bank for RMB outside Asia as one of a series of deals announced to coincide with the premier's visit to the UK.
In a speech at Lancaster House in London, Mr Osborne said: "I believe the emergence of the Chinese currency as one of the world's leading currencies will be the next huge change in global finance.
"Quite bluntly, I want the City of London to facilitate that change and to be central to it."
As part of the move to closer ties between the countries' financial sectors, Chinese banks will be able to apply to set up wholesale branches in the UK and UK Export Finance will provide guarantees for transactions denominated in RMB.
The People's Bank of China will also launch direct trading between sterling and RMB on the China foreign exchange trading system.
Mr Osborne said Hong Kong and Shanghai were developing plans to connect their stock exchanges "and I want London to be able to explore something similar".
He wants Chinese firms to be able to invest RMB into London's capital markets and more British firms to grow in China.
Mr Osborne said he wanted London to be the "most attractive" place for Chinese firms to set up international HQs.
Mr Osborne said: "We need to export to fast-growing economies like China, and attract more investment to our shores.
"To do that, we need to make sure China's currency, as it emerges on to the world stage, is used and traded here - as that will not only be good for China, but good for UK jobs and investment too."
The Lancaster House meeting of the UK-China financial forum comes after the signing yesterday of trade deals between the two countries worth £14 billion.
Speaking through an interpreter, Mr Li said: "China is an emerging major financial country and its financial development and reform is under way, while the UK, as a well-established financial power, has very open and vast and time-honoured financial markets and institutions.
"We have much to offer each other."
Earlier on the final full day of his visit to the UK, Mr Li said China's continuing programme of economic modernisation will open up enormous opportunities for British firms.
Mr Li said China would need trillions of dollars-worth of imports as it pressed ahead with its twin programmes of industrialisation and urbanisation.
"China and the UK should view each other's development as an opportunity," he said in a speech to the International Institute for Strategic Studies and Chatham House think-tanks at the Mansion House in the City of London.
"We should have a win-win co-operation, a partnership for growth and inclusive development for the benefit of our two peoples and the whole world."
He welcomed Britain's decision to relax visa restrictions for Chinese visitors and said Beijing was pushing ahead with structural reforms to improve market access for foreign firms.
Mr Li insisted that while China's previous double-digit growth rate had slowed in recent years, the country was not heading for an economic "hard landing".
"This will not happen," he said.
He said that China still expected to see "medium to high-level" rates of growth in the long run, with a minimum annual growth rate of 7.5%.