CHINA'S GLOBAL FINANCIAL ENGAGEMENT: CHALLENGES AND OPPORTUNITIES

Abstract

The international financial system has witnessed significant changes and challenges since the 1990s, prompting the need for comprehensive reform. This reform is essential to address the pressing financial issues in international monetary policy and establish a new global financial order. The existing system, rooted in the principles set by the Bretton Woods institutions, particularly the IMF, has led to certain Western nations dominating global financial markets. As emerging markets gain prominence and global financial crises continue to arise, there is an urgent call for restructuring the international financial and monetary system.

International literature on financial governance emphasizes cooperation, recognizing its significance despite potential discord. The concept of hegemonism highlights the role of dominant countries in shaping governance systems, advocating cooperation to reduce the cost of fulfilling international responsibilities. Neoliberals emphasize the importance of global economic interdependence and propose establishing effective multilateral consultation mechanisms.

Amidst the spread of financial crises, regulatory frameworks need to adapt. Macroprudential policies, including capital supervision, liquidity management, and oversight of credit rating agencies and over-the-counter derivatives, are essential components of effective financial governance. The existing governance structures, shaped by British and American models, have resulted in power imbalances and a failed reform of the international financial system.

To address these challenges, there is a growing consensus that emerging economies, led by China, should actively participate in international financial governance. This involvement includes enhancing negotiation capabilities, contributing to the development of international financial and monetary systems, and safeguarding financial security while pursuing positive economic development.