Pan Gongsheng’s keynote speech at the 2025 Lujiazui Forum: Some Thoughts on Global Financial Governance

Translated by: People 's Bank of China official account

Dear Secretary Jining , former President of the People's Bank of China, Mr. Ogawa, Mayor Gong Zheng , Dear Comrades Wang Jiang, Yunze, Wu Qing, Haifeng, Hexin, and Dear Guests:

Hello everyone!

I am very grateful to the Shanghai Municipal Party Committee , Municipal Government , especially Secretary Chen and Mayor Gong for their concern and support for the financial undertakings and the People's Bank of China. I am very honored to serve as the joint rotating chairman of this forum. After years of hard work, Lujiazui Forum has become a communication platform with strong international influence and market communication . On behalf of the People's Bank of China and the organizer, I would like to express my warm welcome and sincere thanks to everyone!

At the Lujiazui Forum last year , I reported on China 's monetary policy stance and the evolution of the future monetary policy framework . Over the past year, the People's Bank of China has adhered to a supportive monetary policy stance and introduced a number of monetary policy measures in terms of quantity, price, structure, etc., effectively supporting the sustained economic recovery and improvement of the economy and the stability of the financial market . At the same time, we improve the monetary policy framework, optimize the intermediate variables of monetary policy , cultivate policy interest rates, improve the efficiency of monetary policy transmission , enrich the monetary policy toolbox, and do a good job in policy communication and expected guidance. The transformation of the monetary policy framework is a gradual and continuous process, and we will continue to evaluate and improve it in the future.

Below, I will share with you the theme of " Several Thoughts on Global Financial Governance" . Global financial governance is a very broad topic. Today, I mainly focus on four issues: the international monetary system, cross-border payment system , global financial stability system, and international financial organization governance. I will share with you a few views .

The first question is about the international monetary system

Historically, the international monetary system has always been in evolution, and the replacement of international dominant currencies reflects the profound changes in the international pattern and the iteration of national competitiveness . In the 17th century, the Dutch guild became an early international common currency; from the end of the 18th century to the first half of the 20th century, the British pound became the dominant international currency; after World War II, the US dollar established its dominance and continued to this day.

International dominant currencies have the attributes of global public goods and are borne by a country's sovereign currency. There are inherent instability problems. First, when the sovereign currency countries have conflicts with the attributes of global public goods, the sovereign currency Congress considers its own interests more and affects the provision of global public goods. Second, the continuous accumulation of fiscal and financial regulatory issues and internal economic structural contradictions in sovereign currency countries will spill over into the global form of financial risks and even evolve into an international financial crisis. Third, when geopolitical conflicts, national security interests considerations and even wars arise, the international dominant currency is easily instrumentalized and weaponized.

Due to the above problems, there are more and more discussions on reforming the monetary system internationally . In the past decade, the driving force of the transformation of the international monetary system has mainly come from the economic and financial level after the international financial crisis, and related discussions are also mainly at the economic and financial level; the current new round of discussions comes more from the geopolitical level. These discussions generally have two directions.

The first direction is how to weaken the excessive dependence and negative impact on a single sovereign currency and form a benign competition and incentive and constraint mechanism for a few strong sovereign currencies. The development of the international monetary system towards multipolarization will help promote sovereign monetary countries to strengthen policy constraints, enhance the resilience of the international monetary system, and more effectively maintain global economic and financial stability. ECB President Ms. Lagarde recently gave a speech , saying that the global system based on multilateral cooperation is fission , and the uncertainty of the dominance of the US dollar is rising, and the euro is expected to play a more important role in the global monetary system.

Over the past 20 years, the evolution of the international monetary system has two important characteristics. First, the euro was born in 1999 and currently accounts for about 20% of global foreign exchange reserves, second only to the US dollar. Second, after the international financial crisis in 2008, the international status of the RMB steadily increased. The RMB has become the world's second largest trade financing currency; by full caliber, the RMB has become the world's third largest payment currency; it ranks third in the International Monetary Fund ( IMF ) Special Drawing Rights ( SDR) currency basket .

In the future , the international monetary system may continue to evolve towards a pattern of coexistence, competition, and checks and balances of a few sovereign currencies. Whether it is a single sovereign currency or a few sovereign currencies as the dominant international currency, sovereign currency countries need to assume corresponding responsibilities, strengthen domestic fiscal discipline and financial supervision, and promote economic structural reform.

The second direction of discussion is to use a supersovereign currency as the international dominant currency, and the IMF Special Drawing Rights (SDR) is discussed more frequently. Mr. Zhou Xiaochuan, former Governor of the People's Bank of China, raised this issue in 2009. Theoretically, SDR can better overcome the inherent problems of a single sovereign currency as an international dominant currency , have stronger stability, better assume the functions of global public goods, regulate global liquidity, and implement crisis relief , and have the characteristics of becoming a super-sovereign international currency.

SDR has become the dominant international currency and faces the problem of insufficient international consensus and driving force at the political level . Moreover, the current market size, depth and liquidity are insufficient, and its role is relatively limited . To promote SDR to become the dominant international currency, member states need to build consensus at the political level , and in the current international environment, it is not easy to do this. At the operational level, it is necessary to optimize mechanism arrangements and gradually expand the use of SDR . In terms of allocation and issuance mechanisms, the IMF currently allocates SDR mainly for crisis response, and adopts a one-time large-scale issuance method. In the future , normalized SDR issuance can be increased and the issuance scale can be expanded. In terms of scope of use, we actively promote the active participation of the private sector and various market entities, widely use SDR in international trade and investment and financing activities , issue bonds denominated in SDR, enhance the role of SDR as reserve assets, and establish an SDR settlement mechanism that is suitable for large- scale use .

The second question is about the cross-border payment system

The cross-border payment system is the "artery" of the operation of global monetary funds , an important support for promoting international trade, investment and financing , and maintaining financial stability , and an important support for the international monetary system . The evolution of the international monetary system to a few sovereign currencies and the rapid development of digital technology will promote the diversified development of the cross-border payment system; the diversified cross-border payment system will in turn accelerate the transformation of the international monetary system.

In recent years, the problems faced by traditional cross-border payment systems have gradually become prominent. First, there is a generation difference between traditional cross-border payment methods and emerging digital technologies, and problems such as low efficiency, high cost and poor popularity need to be improved. Second, cross-border payments need to coordinate different legal and regulatory frameworks and more stakeholders, and international cooperation needs to be strengthened. In this regard, international organizations such as G20 have paid close attention to this and have specially formulated a roadmap to improve cross-border payments. Third, geopolitical games are intensifying, and traditional cross-border payment infrastructure is easily politicized and weaponized, and is used as a tool for unilateral sanctions, disrupting the international economic and financial order.

Against this background, the world's calls for improving the cross-border payment system are rising, and emerging payment infrastructure and settlement methods are emerging, promoting the global cross-border payment system to develop in a more efficient, secure, inclusive and diverse direction. This trend will continue to strengthen in the future.

First, the cross-border payment system is developing towards diversification. In terms of currency, more and more countries and regions use local currency to settle, promoting the international use of more currencies, and the situation where a single sovereign currency leads to cross-border payments is gradually changing. In terms of channels, in addition to the traditional agency banking model, emerging cross-border payment systems, regional multilateral payment systems, etc. have emerged one after another, and settlement channels are more diverse, and cross-border payment efficiency has been further improved. After more than ten years of construction and development, China has initially built a multi-channel and wide-coverage RMB cross-border payment and clearing network.

Second, the interoperability of payment systems and ecosystems is constantly improving. More countries and regions will extend the operating time of payment system, adopt internationally-common messages, promote the interconnection of rapid payment systems, improve the efficiency of cross-border payments and reduce transaction costs. Countries and regions represented by Asia use QR code payment interconnection , which greatly improves the interoperability of the retail payment ecosystem and greatly facilitates cross -border payments for residents.

Third, emerging technologies are accelerating their application in the field of cross-border payments. Emerging technologies such as blockchain and distributed ledgers have promoted the vigorous development of central bank digital currencies and stablecoins, realizing "payment is settlement", reshaping the traditional payment system from the bottom layer, significantly shortening the cross-border payment chain , and posing huge challenges to financial supervision . Technologies such as smart contracts and decentralized finance will also continue to promote the evolution and development of the cross-border payment system.

The third question, about the global financial stability system

Before the 2008 financial crisis, the international community mainly relied on the global financial security network dominated by the IMF for on-site and post-event rescue. After the crisis, pre-prevention mechanisms such as financial regulatory rules were further strengthened .

On the one hand, the multi-level financial security network continues to be improved. At the Boao Forum for Asia in March last year , I gave a speech on strengthening the construction of the financial security network . At the global level, in recent years, the IMF has continuously enhanced its crisis relief capabilities, strengthened its policy supervision functions, and expanded the scope of policy supervision . At the regional level, European Stability Fund, Latin American Reserve Fund, Asian Chiang Mai Initiative, Arab Monetary Fund, etc. have been established one after another, becoming an important support for financial stability in related regions. At the bilateral level, central banks of major developed economies such as the Federal Reserve and the European Central Bank inject liquidity into the market during crisis times through currency swap mechanisms. Cooperation on local currency swaps in emerging markets is also steadily advancing. Currently, the People's Bank of China has signed bilateral local currency swap agreements with central banks or monetary authorities of more than 30 countries and regions, becoming an important part of the global financial security network .

On the other hand, the crisis prevention system based on regulatory rules is constantly being improved. After the financial crisis, the international community has carried out a series of major reforms to the global financial regulatory system , including the issuance of the Basel III , enhancing the stability of banking institutions and strengthening the supervision of systemically important financial institutions . China has been actively participating in the formulation and implementation of international financial regulatory standards and is one of the few economies to fully implement the Basel III ; a regulatory framework for systemically important financial institutions has been established, and the total loss absorption capacity of China's systemically important banks has met the standards; a deposit insurance system has been established, which can provide full protection for more than 99% of depositors; a new asset management regulations have been issued and fully implemented , and the risks of shadow banking have been greatly reduced .

At present, the global financial stability system is facing some new challenges.

First , the regulatory framework is still fragmented , and even a tendency to " competitively chasing the bottom " . Recently, the implementation of international regulatory rules such as Basel III has been swinging due to domestic political factors of member states , which may bring about regulatory arbitrage and weaken the global financial stability system . The international community should actively implement the agreed regulatory reform measures to prevent regulatory arbitrage and cross-border transmission of risks.

Second , there is insufficient supervision in some emerging fields such as digital finance . For example, for the rapidly expanding regulatory frameworks related to crypto asset markets and climate risks , global regulatory coordination is insufficient , the regulatory orientation is swinging sharply and is too strongly driven by politics ; the application of artificial intelligence in the financial field lacks unified regulatory standards. The world needs to strengthen regulatory coordination and make up for regulatory shortcomings.

Third , supervision of non-bank intermediaries remains weak. In the past 20 years, the proportion of non- bank intermediaries in global financing has increased significantly . This type of financing has weak stability, low transparency, and the leverage level continues to rise, and supervision needs to be strengthened.

We believe that building a diversified and efficient global financial security network with a strong International Monetary Fund as the core and maintaining the consistency and authority of global financial regulatory rules is the key path for crisis prevention and resolution, and it is also the direction that should be adhered to.

The fourth question , on the governance of international financial

organizations

After World War II, the international community started from the IMF and the World Bank and gradually established a multi-level and multi-dimensional international financial organization system, covering international policy coordination, financial regulatory rules formulation , multilateral development institutions and other fields, becoming the main institutional platform for international financial governance , playing an important role in promoting global economic and trade growth and maintaining global financial stability .

With the changes in the global economic landscape, the share and voting rights of major international financial organizations such as the IMF and the World Bank and some regional financial organizations have been lacking substantial adjustments in the shares and voting rights, and the proportion of emerging markets and developing countries is significantly lower than their actual position in the global economy. The international community should also pay attention to the fact that individual member states pursue a unilateral policy orientation, which has intervened and affected the governance and operation of international financial organizations. International financial organizations need to keep pace with the times to promote governance reform, dynamically reflect the relative position of member states in the global economy, improve the discourse power and representativeness of emerging markets and developing countries, safeguard and practice true multilateralism, and improve governance efficiency.

Among many international financial organizations , the IMF is at a core position and plays an important role in global economic and financial governance . The IMF is an international financial organization based on share. The size of the share determines the IMF 's crisis relief capacity, and the share proportion determines the voting rights of member countries in the IMF and the scale of financing. The current share of the IMF does not reflect the relative position of member countries in the global economy. In accordance with the consensus reached, promoting the adjustment of share proportion as soon as possible is the key to the IMF's improvement of governance and its own legitimacy and representation .

At present, the global economy is facing high uncertainty. While improving the governance structure, major international financial organizations should further strengthen their economic supervision functions, objectively assess the risks faced by the world and countries, and actively guide all countries to firmly support economic globalization and the multilateral trading system. Strengthen policy guidance for all countries, strengthen macroeconomic policy coordination, and maintain the stability of the international financial system.

Dear guests:

To improve global financial governance, all parties need to strengthen dialogue and cooperation . We will adhere to the path of reform and opening up and multilateralism, actively play a constructive role, and contribute to the construction of a more fair, just, inclusive and resilient global financial governance system.

Finally, I wish this Lujiazui Forum a great success. Thank you everyone!