China Proposes a New Global Financial Governance: Between Reform and the Redefinition of Power Balances

An article by Pan Gongsheng, governor of the People's Bank of China, published today on Guancha, outlines Beijing's vision for a radical reform of global financial governance. Drawing from the Global Governance Initiative proposed by Xi Jinping, the text explores four key areas: reform of the international monetary system, improvement of cross-border payments, strengthening of financial stability, and the overhaul of international financial organizations. The analysis reveals China's clear desire for a more multipolar system, less dependent on the US dollar and more representative of the growing economic weight of emerging markets. The article positions itself as a manifesto for a new global financial order, in which China claims a leading role in its definition and implementation.

I. Promoting a New Multipolar Monetary System

The article acknowledges the historical role of dominant currencies like the Dutch guilder, the British pound, and especially the US dollar, but highlights their inherent vulnerabilities. China believes that over-reliance on a single sovereign currency is problematic for three main reasons:

1. Prioritization of national interests: The dominant currency will always prioritize the interests of the issuing country, at the expense of its role as a global public good.

2. Global repercussions: Internal problems of the issuing country can trigger global financial crises.

3. Weaponization: The currency can be used as a weapon in geopolitical conflicts.

In response to these criticisms, Pan Gongsheng proposes a multipolar international monetary system, with two main directions:

• Coexistence of strong currencies: The article advocates for the coexistence and healthy competition among a limited number of strong sovereign currencies. It explicitly names the euro and the renminbi (RMB) as key players in this shift. The renminbi is already the third largest currency for payments and holds a significant weight in the IMF's Special Drawing Rights (SDRs). This approach is seen as a way to strengthen the resilience of the global financial system.

• Supranational currency: The article revives the debate on the IMF's Special Drawing Rights (SDRs) as a potential dominant international currency. While acknowledging practical challenges (lack of political consensus and liquidity), China suggests strengthening their role by increasing regular issuance and promoting their use in international trade and investment. This proposal, though theoretical, aims to overcome the instability problems associated with sovereign currencies.

II. Improving the Global Cross-Border Payment System

The governor acknowledges the vital role of cross-border payment systems as the "arteries of global monetary flows" and highlights their current shortcomings, which require urgent improvement. The article mentions that traditional systems are inefficient, costly, and vulnerable to weaponization in a geopolitical context of unilateral sanctions. Beijing's proposed solution is based on three pillars:

• Diversification: Promote the use of multiple currencies and payment channels, breaking the dominance of a single currency and the traditional "correspondent bank" model. China has already built its own cross-border RMB payment network, offering an alternative.

• Interoperability: Advocate for interconnection among fast payment systems, particularly through the development of QR code payments in Asia, which improve efficiency and reduce costs.

• Emerging technologies: Accelerate the application of technologies like blockchain and Central Bank Digital Currencies (CBDCs) to shorten payment chains and reshape the system, while also acknowledging the challenges this poses for global regulation.

III. Strengthening the Global Financial Stability System

Pan Gongsheng reviews the existing financial stability framework, which consists of the IMF's financial safety net and post-2008 crisis regulatory standards. The article highlights the People's Bank of China's role in this network, with over 30 bilateral swap agreements with foreign central banks, and underscores China's role in implementing Basel III.

However, the text identifies three new challenges that threaten stability:

• Regulatory fragmentation: The implementation of international standards like Basel III has become inconsistent due to domestic political factors, creating a risk of "regulatory arbitrage."

• Regulatory gaps in emerging sectors: Digital finance, cryptocurrencies, and artificial intelligence lack unified global regulatory standards, leading to fluctuations and strong political influence.

• Weak regulation of non-bank intermediaries: The growth of the "shadow banking system" requires greater supervision.

China proposes greater regulatory consistency and strengthened global coordination to address these shortcomings, with the IMF at the center of a more diversified and efficient financial safety net.

IV. Improving the Governance of International Financial Organizations

The fourth point is the most explicit in terms of redefining power balances. The article argues that the current structure of international financial organizations, particularly the International Monetary Fund (IMF) and the World Bank, no longer reflects the global economic reality. The quotas and voting rights of emerging markets and developing countries are "significantly lower" than their actual position.

Pan Gongsheng criticizes the unilateralism of individual states that "unduly interfere in the governance" of these organizations and proposes an urgent reform to:

• Fair representation: Accelerate the adjustment of IMF quotas to reflect the economic weight of its members, especially emerging markets.

• Legitimacy and efficiency: A greater balance of power would make these organizations more legitimate and capable of upholding true multilateralism.

• Strengthened oversight: The organizations should strengthen their economic and financial oversight to guide countries in maintaining economic globalization and the multilateral trading system.

In conclusion, the article outlines China's vision as a "steadfast advocate" of these initiatives, ready to "actively play the leading role of a major country." Beijing's proposal for a new global financial order is a direct challenge to the current Western-led system, with the goal of building a more "equitable, just, inclusive, and resilient" governance—but, implicitly, with greater Chinese influence.