Advancing reforms

The fact China, a developing country, is forced to provide low-interest loans to the United States and other developed countries shows its status as a creditor nation is exaggerated, Ba said. The root cause of this dilemma is in the defective international monetary regime. The financial crisis has awakened the international community to the need to reform the current international monetary system in a creative way and to make international reserve currencies stable in value, orderly in supply and adjustable in total amount. Only in this way can global economic and financial stability be ensured.

Ba said he thought countries should advance the reform of the international monetary regime, promote the diversity of international currencies and let different currencies compete with each other. When fundamental imbalances occur in international payments, countries issuing major currencies should undertake the responsibility of tackling the imbalances, along with other countries.

At the same time, the international community should step up reforms in the International Monetary Fund (IMF). More professionals from emerging markets and developing countries should be allowed to assume executive posts in international financial institutions to enhance the voice of developing countries.

Countries should also reform the current international payments balancing system. As the issuing country of a major international currency, the United States should be held responsible for balancing international payments. It should adopt a fiscal policy that balances consumption and savings while boosting hi-tech exports and increasing domestic savings.

China should take an active part in the reforms of the international monetary regime and the IMF as well, Ba said. It should make itself better represented, heard and informed about in the international financial system. At the same time, it should try to make the yuan an international currency.

In the short term, China should participate in Group of 20 efforts to promote global recovery and international cooperation under the dollar-dominated international monetary regime while trying to improve the regime's specific arrangements. This approach would not only be conducive to the stability of the international financial order, but also serve China's national interests.

(China News and Report, No. 17, 2010)