Zhou Xiaochuan's latest statement: Four key areas where there is still a strong need for international cooperation

Zhou Xiaochuan On-Site Image

Source: Tencent Finance By: Bai Xue, Editor: Liu Peng

On March 24, during the Boao Forum for Asia Annual Conference 2026, Zhou Xiaochuan, former vice chairman of the Boao Forum for Asia and former governor of the People’s Bank of China, delivered an in-depth explanation on the theme sub-forum “Strengthening Regional Linkages to Maintain Financial Security and Stability,” discussing the challenges and opportunities faced by current international financial coordination.

Zhou Xiaochuan pointed out that the scale of capital flows has significantly expanded, cross-border financing has become increasingly common, and the interconnectivity of capital markets continues to advance. Whether it is China’s Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect, or the integration process of European capital markets, it indicates that the interdependence between economies has changed significantly.

In Zhou Xiaochuan’s view, macroeconomic policy, monetary policy, and fiscal policy traditionally belong to the realm of domestic affairs of each country.

For a considerable period, the international community did not have a strong demand for transnational policy coordination. Currency is domestic currency, inflation is domestic inflation, and issues related to balance of payments and fiscal matters are primarily addressed within a domestic framework. However, with the deepening of globalization, this pattern is undergoing fundamental changes.

The outbreak of financial crises has been a direct catalyst for promoting international coordination. After the Asian financial crisis in 1998, the G20 formally launched the ministerial-level meetings of finance ministers and central bank governors in 1999; after the outbreak of the global financial crisis in 2008, the G20 was elevated to a leaders’ summit. Zhou Xiaochuan sees this as a typical case of “crisis-driven policy coordination,” meaning that it was the financial crisis that prompted all parties to come together to discuss policy formulation and coordination.

However, he also candidly admitted that crises will eventually fade, and the urgency for coordination will consequently decrease. Currently, regional conflicts are frequent, with their roots often lying in domestic factors, and the role of international intervention and mediation remains unclear. “However, it seems that no one is urgently calling on the G20 to pay attention to and provide solutions for ending wars. These regional conflicts may actually exacerbate tensions between major powers and increase each country’s focus on domestic interests rather than the need for international coordination. At this stage, I believe coordination is an important issue, but it is more complicated to handle than in the past.”

In this context, Zhou Xiaochuan proposed four key areas where there is still a strong demand for international cooperation.

First, climate change. Although the United States has withdrawn from the Paris Agreement, most countries globally, especially in Europe and Asia, including Japan, South Korea, and ASEAN countries, are paying close attention to it. They hope to make regional efforts to reduce carbon dioxide emissions and mitigate the impacts of climate change.

Second, payment systems. Zhou Xiaochuan views payment systems and digital currencies as financial infrastructure, believing it should not rely solely on commercial banks or private platforms. Countries like Singapore and other ASEAN nations have made positive progress in cross-border payments. In the future, scenarios involving tourist spending, online merchants, and small-to-medium trade settlements are expected to achieve convenient interconnectivity through cross-border payment systems.

Third, debt issues. After the COVID-19 pandemic, some developing countries still face heavy debt burdens. The debt deferral policy launched by the G20 in 2020 and the subsequent debt restructuring framework have responded to this demand to some extent, but the issue has yet to be satisfactorily resolved.

Fourth, global imbalances. Zhou Xiaochuan stated, “For example, in terms of our exchange rate mechanism, with global development, we see more discussions about whether the IMF (International Monetary Fund) should play a greater role in addressing global imbalances. Of course, these imbalances take different forms, including investment imbalances and imbalances in capital flows. We need multilateral solutions, not just bilateral or regional measures, to address various global imbalance issues. Unfortunately, we see that the United States is indeed in such a global imbalance situation, but the U.S. has chosen not to use the exchange rate mechanism or similar mechanisms to address this imbalance, but instead uses taxation to solve this imbalance problem. However, tax issues are tricky, and I believe we should use the IMF’s framework measures to address the imbalance issues.”

During the forum’s dialogue session, regarding why Asian economies generally tend to favor exchange rate stability instead of floating exchange rates, Zhou Xiaochuan provided explanations on two levels.

On one hand, countries like China, which have a history of planned economies, traditionally lean towards price stability and commonly use purchasing power parity to measure the reasonableness of exchange rates. They believe that since purchasing power parity has not changed, the exchange rate does not need to fluctuate significantly, which is a historical continuation of planned economic thinking.

On the other hand, in Zhou Xiaochuan’s view: “Many countries pay attention to the confidence of domestic economic entities; they are concerned about abnormal capital flows. If this confidence changes, there may be significant capital inflows or outflows, meaning its flow scale could exceed expectations. Such capital flows can actually exacerbate economic problems, whether in terms of balance of payments or other issues. Therefore, when exchange rates fluctuate, regardless of whether it is a 30% or 50% change, from an economic perspective, we would consider that the required adjustment would not be that large, meaning the exchange rate fluctuation exceeds the necessary adjustment range, which can put considerable pressure on decision-makers.”

(Editor: Wenjing)

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                                                            Zhou Xiaochuan