PBOC Governor Pan Gongsheng: Some Thoughts on Global Financial Governance
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PBOC Governor Pan Gongsheng: Some Thoughts on Global Financial Governance
Improving global financial governance requires all parties to strengthen dialogue and cooperation.
Navigating Web3 tides with focused insightsSpeech: Pan Gongsheng
Respected Secretary Jianning, former PBC Governor Xiao Chuan, Mayor Gong Zheng, respected comrades Wang Jiang, Yunze, Wu Qing, Haifeng, Hexin, and distinguished guests:
Good morning!
I would like to express my heartfelt gratitude to the Shanghai Municipal Party Committee and Municipal Government—especially Secretary Chen and Mayor Gong—for their strong support of the financial sector and the People's Bank of China (PBC). I am deeply honored to serve as co-chair of this year’s forum. After years of effort, the Lujiazui Forum has become a highly influential international platform with significant market reach. On behalf of the PBC and the organizers, I warmly welcome all of you and extend our sincere appreciation!
Last year at the Lujiazui Forum, I shared the PBC’s stance on monetary policy and the evolution of China’s future monetary framework. Over the past year, the PBC has maintained a supportive monetary policy stance, implementing a series of measures in terms of quantity, price, and structure, effectively supporting the continuous recovery and improvement of the economy and ensuring stability in financial markets. At the same time, we have refined the monetary policy framework, optimized intermediate targets, cultivated policy interest rates, improved transmission efficiency, enriched our policy toolkit, and enhanced communication and expectations management. The transformation of the monetary policy framework is a gradual and ongoing process, and we will continue to evaluate and improve it going forward.
Today, I would like to share some thoughts with you on the topic of "Some Reflections on Global Financial Governance." Global financial governance is an extremely broad subject. Today, I will focus on four key issues: the international monetary system, cross-border payment systems, global financial stability mechanisms, and governance of international financial institutions.
The first issue concerns the international monetary system.
Historically, the international monetary system has continuously evolved. Shifts in dominant international currencies reflect profound changes in the global order and shifts in national competitiveness. In the 17th century, the Dutch guilder became an early international currency; from the late 18th century to the first half of the 20th century, the British pound dominated; after World War II, the U.S. dollar established its leading position—a status it maintains today.
A dominant international currency possesses characteristics of a global public good, yet when issued by a single sovereign nation, inherent instabilities arise. First, when a country's national interests conflict with the global public good function of its currency, it tends to prioritize domestic considerations, undermining the provision of that public good. Second, accumulating fiscal and financial regulatory problems and internal structural imbalances within the issuing country can spill over globally as financial risks—and even trigger international financial crises. Third, during geopolitical conflicts, national security calculations, or wars, dominant currencies may be instrumentalized or weaponized.
Due to these issues, discussions about reforming the international monetary system are gaining momentum. Over the past decade, drivers for change were primarily economic and financial, stemming from the aftermath of the global financial crisis. Today’s renewed debate is increasingly shaped by geopolitical factors. These discussions generally follow two directions.
The first direction focuses on reducing excessive dependence on a single sovereign currency and mitigating its negative impacts, aiming instead to foster healthy competition and balanced incentives among a few strong currencies. A more multipolar international monetary system could encourage greater policy discipline among issuer countries, enhance system resilience, and better safeguard global financial and economic stability. Recently, ECB President Christine Lagarde remarked that the multilateral global system is fragmenting, uncertainty over the dollar’s dominance is rising, and the euro has the potential to play a larger role in the global monetary architecture.
Over the past two decades, two major developments have shaped the evolution of the international monetary system. First, the euro was launched in 1999 and now accounts for approximately 20% of global foreign exchange reserves—second only to the U.S. dollar. Second, since the 2008 global financial crisis, the RMB’s international standing has steadily risen. The RMB has become the world’s second-largest currency for trade financing; measured by full口径 criteria, it ranks third in global payments; and its weight in the IMF’s Special Drawing Rights (SDR) basket ranks third globally.
Looking ahead, the international monetary system may continue evolving toward a configuration where several major sovereign currencies coexist, compete, and check each other. Whether under a unipolar or multipolar model, countries whose currencies serve as international anchors must assume corresponding responsibilities—strengthening domestic fiscal discipline, enhancing financial regulation, and advancing structural economic reforms.
The second direction involves adopting a supranational currency as the primary international reserve asset—an idea most commonly associated with the IMF’s Special Drawing Right (SDR). As former PBC Governor Zhou Xiaochuan pointed out back in 2009, SDRs theoretically offer a better solution to the intrinsic flaws of relying on a single sovereign currency. They promise greater stability, can perform global public good functions more effectively, help manage global liquidity, and provide tools for crisis relief—exhibiting many features of a true supranational currency.
However, making the SDR the dominant international currency faces political challenges, including insufficient international consensus and lack of driving force. Moreover, the current market size, depth, and liquidity of SDRs remain limited, constraining their practical use. Advancing the SDR requires political agreement among member states—an outcome difficult to achieve in today’s fragmented global environment. Operationally, mechanisms need optimization and SDR usage must be gradually expanded. Currently, the IMF allocates SDRs mainly in response to crises, typically through one-off large-scale issuances. Going forward, regular and larger-scale SDR issuances could be introduced. In terms of application, efforts should actively encourage private-sector participation and broader market adoption—promoting SDR use in international trade and investment, issuing SDR-denominated bonds, enhancing the SDR’s role as a reserve asset, and establishing settlement infrastructure capable of supporting large-scale SDR transactions.
The second issue concerns cross-border payment systems.
Cross-border payment systems are the “arteries” of global capital flows—critical enablers of international trade and investment, pillars of financial stability, and foundational supports for the international monetary system. The trend toward a multipolar currency system, coupled with rapid advances in digital technology, will drive diversification in cross-border payments. In turn, diversified payment systems will accelerate transformation of the international monetary system.
In recent years, limitations of traditional cross-border payment systems have become increasingly evident. First, there is a technological gap between legacy systems and emerging digital solutions, resulting in inefficiency, high costs, and low accessibility—all亟 to be addressed. Second, cross-border payments require coordination across different legal and regulatory regimes and involve numerous stakeholders, highlighting the need for stronger international cooperation. Recognizing this, international bodies such as the G20 have developed roadmaps specifically aimed at improving cross-border payments. Third, intensifying geopolitical competition has led to the politicization and weaponization of traditional payment infrastructure, which is sometimes used unilaterally as a sanction tool, disrupting the international economic and financial order.
Against this backdrop, global demand for better cross-border payment systems continues to grow. New payment infrastructures and settlement methods are emerging, driving the global system toward greater efficiency, security, inclusiveness, and diversity—a trend that will only strengthen in the future.
First, cross-border payment systems are becoming more diversified. In terms of currency, an increasing number of countries and regions are adopting local currency settlements, promoting wider international use of multiple currencies and gradually shifting away from reliance on a single dominant currency. In terms of channels, beyond traditional correspondent banking, new cross-border payment platforms and regional multilateral systems are being developed, expanding settlement options and improving efficiency. After more than a decade of development, China has preliminarily established a multi-channel, widely covered RMB cross-border payment and clearing network.
Second, interoperability among payment systems and ecosystems is improving. More jurisdictions are extending operating hours, adopting standardized messaging formats, and promoting connectivity among fast payment systems—boosting efficiency and lowering transaction costs. Countries in Asia and elsewhere have achieved significant progress in retail payment interoperability via QR code linkage, greatly facilitating cross-border payments for individuals.
Third, emerging technologies are accelerating their application in cross-border payments. Blockchain and distributed ledger technologies are fueling the growth of central bank digital currencies (CBDCs) and stablecoins, enabling “payment versus settlement” and fundamentally reshaping traditional architectures by shortening cross-border payment chains. These innovations also pose significant challenges for financial regulators. Smart contracts and decentralized finance (DeFi) will continue to shape the evolution of cross-border payment systems.
The third issue concerns the global financial stability system.
Prior to the 2008 financial crisis, the international community relied largely on the IMF-led global financial safety net for post-crisis rescue operations. Since then, greater emphasis has been placed on ex-ante prevention mechanisms, particularly strengthened financial regulation.
On one hand, multilayered financial safety nets continue to improve. At last year’s Boao Forum for Asia, I delivered a speech on strengthening financial safety nets. Globally, the IMF has enhanced its crisis response capacity, strengthened surveillance functions, and broadened the scope of policy oversight. Regionally, mechanisms such as the European Stability Mechanism, Latin American Reserve Fund, Chiang Mai Initiative Multilateralization (CMIM), and Arab Monetary Fund have been established, serving as vital pillars of regional financial stability. Bilaterally, major central banks like the Federal Reserve and the ECB have provided liquidity through currency swap lines during times of stress. Swap arrangements in local currencies among emerging markets are also progressing steadily. To date, the PBC has signed bilateral local currency swap agreements with over 30 countries and regions, forming an important component of the global financial safety net.
On the other hand, rule-based crisis prevention frameworks have been continuously strengthened. Following the financial crisis, the international community undertook major reforms in global financial regulation, including the introduction of Basel III, designed to strengthen bank resilience and tighten supervision of systemically important financial institutions (SIFIs). China has actively participated in setting and implementing international financial regulatory standards and is among the few economies to fully implement Basel III. We have established a regulatory framework for SIFIs, with all Chinese systemically important banks meeting total loss-absorbing capacity (TLAC) requirements. We have set up a deposit insurance system providing full protection for over 99% of depositors. We have introduced and fully implemented asset management regulations, significantly reducing shadow banking risks.
Nonetheless, the global financial stability system now faces new challenges.
First, regulatory frameworks remain fragmented, with signs of a “race to the bottom” in some areas. Recently, implementation of international rules such as Basel III has wavered due to domestic political pressures in certain member countries, creating opportunities for regulatory arbitrage and weakening the global financial stability architecture. The international community must proactively enforce agreed-upon regulatory reforms to prevent regulatory arbitrage and cross-border risk spillovers.
Second, oversight in emerging areas such as digital finance remains inadequate. For instance, global coordination is weak regarding rapidly expanding markets for crypto assets and climate-related financial risks, while regulatory approaches swing widely and are overly influenced by politics. Artificial intelligence applications in finance lack unified regulatory standards. There is an urgent need for stronger global regulatory coordination to close existing gaps.
Third, supervision of non-bank financial intermediaries remains insufficient. Over the past two decades, the share of non-bank intermediaries in global financing has risen sharply. These entities often exhibit lower funding stability, limited transparency, and rising leverage—areas requiring stronger oversight.
We believe that building a diverse and efficient global financial safety net centered on a strong International Monetary Fund, while maintaining consistency and authority in global regulatory standards, is the key path forward for crisis prevention and resolution—one that should continue to be pursued.
The fourth issue concerns governance of international financial institutions.
Since World War II, starting with the IMF and the World Bank, the international community has gradually built a multi-tiered, multidimensional system of international financial institutions covering areas such as international policy coordination, financial regulation, and multilateral development finance. These institutions serve as the primary institutional platforms for global financial governance and have played a crucial role in promoting global economic and trade growth and maintaining financial stability.
However, as the global economic landscape evolves, the quota shares and voting rights within major institutions like the IMF and the World Bank—as well as some regional financial organizations—have not undergone substantive adjustments for a long time. The representation of emerging markets and developing countries remains significantly below their actual weight in the global economy. Additionally, there are concerns that certain member countries pursue unilateralist policies that interfere with and influence the governance and operations of international financial institutions. To stay relevant, these organizations must advance governance reforms that dynamically reflect members’ relative positions in the global economy, enhance the voice and representation of emerging markets and developing countries, uphold and practice genuine multilateralism, and improve governance effectiveness.
Among all international financial institutions, the IMF occupies a central role in global economic and financial governance. As a quota-based organization, the size of a member’s quota determines the IMF’s overall lending capacity, while quota shares determine voting power and access to financing. Currently, the distribution of quotas does not accurately reflect members’ relative positions in the global economy. Promptly advancing quota reallocation in line with existing agreements is essential for enhancing the IMF’s legitimacy, representativeness, and effectiveness.
Today, the global economy faces heightened uncertainty. While improving governance structures, major international financial institutions should further strengthen their economic surveillance functions, objectively assess global and country-specific risks, and actively encourage countries to firmly support economic globalization and the multilateral trading system. They should enhance policy guidance, promote macroeconomic policy coordination, and safeguard the stability of the international financial system.
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