With its deepening reform and opening up and its rising economic strength, China has become more integrated into the global financial governance system. However, there have been many challenges and difficulties in proposing and implementing a “Chinese solution” for this governance system and promoting China’s international financial power. There is a long way to go before the country is deeply integrated into global financial governance.
Since the reform and opening up, China has accelerated its integration into the global financial governance system. First of all, China has become a member of most professional global financial governance institutions, such as the International Monetary Fund, the Financial Stability Board, the Bank for International Settlements and its subordinate institutions, the International Association of Insurance Supervisors, and the International Organization of Securities Commissions. In addition, China has obeyed or enforced the major international rules of global financial governance, such as Basel III and the Principles for Financial Market Infrastructures. But this doesn’t mean China has become a leader in global financial governance. China’s economic rise also doesn’t necessarily mean that it’s risen in the governance system.
China needs to resolve three problems to become deeply integrated into global financial governance. First, how will RMB internationalization contribute to the already troubled international monetary system reform? The flaws in this system are widely considered important contributors to the 2008 global financial crisis. Emerging countries strive to reform the international monetary system through international monetary diversification. RMB internationalization has created a new impetus for the gradual reform of this system by providing a new international currency option and stimulating competition to be the standard among major currencies. Amid the big changes in the international pattern, controlling conflicts and seeking a peaceful development environment are prerequisites for China’s deeper integration.
Second, as the impact of the 2008 global financial crisis dissipates, the role of the G20 agenda in global financial governance is gradually weakening while cooperation in this field is fading away. How will China continue to help seek more impetuses and opportunities for cooperation among countries? The G20 Ministerial Conferences and Summits were originally designed to tackle financial crises and enhance financial governance. In recent years, the issues addressed at the G20 summits have been expanded to such fields as global economy, trade and investment, innovation, employment, environment, and energy. Those related to global financial governance tend to be marginalized. The reform of the international monetary system is facing a dilemma while macro-prudential financial supervisory policy framework problems are emerging. In this context, China has created impetuses and chances for cooperation in global financial governance, such as by urging the reform of international financial institutions and the international monetary system, launching the Belt and Road initiative, and advocating the Asian Infrastructure Investment Bank. Continuing to do this is an important step for China’s deeper integration.
Third, how will China participate in the formulation of the core agendas and specific rules of global financial governance and propose a feasible Chinese solution? Since the end of World War II, the core agendas have undergone four stages. China didn’t join in the formulation of these agendas. After the 1997 Asian financial crisis, China became a founding member of the G20 Ministerial Conference and later became a member of most other global financial governance institutions. As for international governance rules, China has been more of a subject than an author. Providing Chinese wisdom and a Chinese solution for global financial governance based on China’s developmental practices and experience will be key to becoming integrated into the governance.
Zhang Falin is an associate professor from the Zhou Enlai School of Government at Nankai University.