Chinas central bank governor Zhou Xiaochuan yesterday
stepped up his calls for a radical overhaul of global
governance including a greater say for developing
nations in a bid to shape next weeks G20 meeting
of leading industrialized and developing nations.
China will insist on financial sector reform, including
regulatory reform, and we expect there maybe some reform agenda
for international financial institutions including the Fund,
the bank and other development banks, Zhou said in
response to a question from Emerging Markets.
He said China, which has the worlds largest surplus,
would give active consideration to any request to
increase the IMFs capitalization, while urging
adjustments to increase the voice of emerging
Leaders of the 20 largest industrial and developing nations are
jockeying for influence ahead of a make-or-break summit in
London on Thursday that will seek to breathe life into global
markets and lay the cornerstones for reform of international
Speaking to reporters in Medellin, Zhou said: From the
medium to the long-term, we need to consider a more
diversified, multi-polar financial system. And that is in the
interests for many countries, especially the US.
Zhou, who last week suggested the US dollar could be replaced
as the worlds major reserve currency by the IMFs
Special Drawing Rights, said he hopes to meet US Treasury
Secretary Tim Geithner in Medellin today.
Zhous proposal for monetary reform stems from the idea
that the dollars status as pre-eminent global reserve
currency allowed the US to spend excessively which has
contributed to global economic imbalances at the heart of
His suggestion also reflected concern about the security of
Chinas investments in the US and its continued purchases
of US Treasuries.
China is now taking the offensive and attempting to set a
framework on measures to avoid the systemic risks of global
imbalances, after years of American chastisement about the
undervalued yuan and Chinas high savings rate.
This Chinese proposal is just a smokescreen for what it
is really trying to achieve: greater leverage over the
US, said Simon Johnson, former chief economist at the
Asked if China intended to push its own currency, the yuan, as
an international reserve currency, Zhou said: It is still
a long way to go for the renminbi to play a more important
But he noted: Some of our neighbour countries would like
to use our currency for the purpose of promoting trade
especially border trade, tourism and some monetary
China has recently signed currency-swap agreements with Hong
Kong, Malaysia and Indonesia. Zhou said there was growing
regional demand for settling some trade in yuan rather than
dollars but promoting the Chinese currency as a new global
currency was not currently a policy aim.
Asked if Chinas slowdown had come to an end, Zhou - who
is representing China for the first time as a full member of
the IDB at the annual meetings - said: it still very much
depends if this global financial crisis reached bottom. Up to
now it is still uncertain. We dont know yet.