Zhou Xiaochuan: reconstruction of Bretton Woods system to deal with global problems

 Zhou Xiaochuan: reconstruction of Bretton Woods system to deal with global problems

He shared that in recent months, the group of 20 (G20) has launched discussions on the issue of heavily indebted poor countries (HIPCs) and put forward the Debt Relief Initiative (DSSI). Last month, the group of 20 (G20) issued a common framework on the follow-up debt treatment of the DSSI, which he believed was multilateral measures to deal with the new epidemic.

But Zhou Xiaochuan also said that many economists and policy makers believe that DSSI may not be enough to deal with the high debt problem, especially under the impact of the epidemic.

The G20 has therefore focused on the possibility of using special drawing rights (SDRs). One idea is to let some countries put their unused SDRs in the pool, and others can use them. This increases flexibility in the use of SDRs. Although there is no consensus on this issue, we can indeed reconsider and reshape the support mechanism to deal with global problems such as the new coronation Zhou Xiaochuan said.

Zhou also shared views on the shortcomings of current global institutions in dealing with global issues. He believes that many countries are boosting their economies through quantitative easing or expanding fiscal deficits. However, there is no international mechanism with the functions of central bank or financial department.

In some cases novel coronavirus pneumonia or other financial stability problems, or financial institutions bankruptcy, we should have corresponding mechanisms and institutions to deal with such problems. But in the past so many years, we are not ready for that. Zhou Xiaochuan said.

Taking the International Monetary Fund (IMF) as an example, Zhou Xiaochuan said that the IMF has no relevant capacity in terms of organization or definition. Many people want to see SDR play a greater role, but so far, progress has been limited.

I have always suggested that the SDR should be used as an accounting unit for financial reporting and statistical systems. If the use of SDRs is considered, there should be an exchange rate for SDRs against major currencies. However, todays financial markets do not have such exchange rates. Therefore, it can be considered to move forward gradually in this respect. He said.

Zhou added that at present, the atmosphere of globalization is not good and many countries are facing serious financial problems. The global crisis brought about by the epidemic has further increased the fiscal deficits and public debt levels of many countries. So we need new ideas to push some multilateral institutions forward in small steps.

In his view, the world really needs to consider whether the Bretton Woods institutions can be allowed to have the capacity to expand the money supply in a limited way.

Zhou also stressed that the world can learn a lot from the process of EU integration and the functions of the European investment bank.

Globally, we are not as highly integrated as the European Union, but globalization also means that countries are increasingly interconnected, and Asian economies are actively promoting greater connectivity. Based on this, Zhou suggested that all countries learn how to promote globalization from the integration of the EU.