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, Edited by: 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 elaboration on the challenges and opportunities facing international financial coordination at the sub-forum themed “Strengthening Regional Cooperation to Maintain Financial Security and Stability.”

Zhou Xiaochuan pointed out that current capital flows have significantly expanded, cross-border financing is becoming increasingly common, and the interconnectivity of capital markets is continuously advancing. Whether it’s China’s Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect, or the integration process of European capital markets, all signify that the interdependence among economies has changed dramatically.

In Zhou Xiaochuan’s view, macroeconomic policies, monetary policies, and fiscal policies traditionally fall within the domestic affairs of each country.

For a considerable period, the international community did not have a strong demand for multinational policy coordination. The currency is domestic currency, inflation is domestic inflation, and issues of balance of payments and fiscal matters are mainly handled within the 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 officially launched the ministerial meetings of finance ministers and central bank governors in 1999; following the outbreak of the international financial crisis in 2008, the G20 was upgraded to a leaders’ summit. Zhou Xiaochuan regards this as a typical case of “crisis-driven policy coordination,” where it is precisely the financial crisis that brings parties together to discuss policy formulation and coordination.

However, he also admitted that crises will eventually fade, and the urgency of coordination consequently decreases. Currently, regional conflicts are frequent, with many of their roots in domestic factors. The role of the international community in intervention and mediation remains unclear. “But it seems that no one is urgently calling for the G20 to pay attention to or provide solutions to end wars. These regional conflicts can actually exacerbate tensions between major powers and increase countries’ focus on domestic interests rather than the need for international coordination. At this stage, I think coordination is an important issue, but it is more challenging 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 very concerned. They hope to make regional efforts to reduce carbon dioxide emissions and mitigate the impacts of climate change.

Second, payment systems. Zhou Xiaochuan positions payment systems and digital currencies as financial infrastructure, believing they should not rely solely on commercial banks or private platforms. ASEAN countries like Singapore have made positive progress in cross-border payments, and in the future, scenarios such as tourist spending, online merchants, and small trade settlements are expected to achieve convenient connectivity through cross-border payment systems.

Third, debt issues. After the COVID-19 pandemic, some developing countries still face heavy debt problems. The debt deferral policy launched by the G20 in 2020 and the subsequent initiation of a debt restructuring framework have, to some extent, responded to this demand, but the issues have not yet been resolved satisfactorily.

Fourth, global imbalances. Zhou Xiaochuan stated: “For example, regarding our exchange rate mechanism, with global development, we see that there is more discussion about whether the IMF (International Monetary Fund) should play a larger role in addressing global imbalances. Of course, these imbalances take different forms, including imbalances in investment and 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 this global imbalance situation, but the U.S. has decided not to use the exchange rate mechanism or similar mechanisms to address this imbalance, but rather to address it through taxation. However, taxation is a tricky issue, and I think we should use the IMF’s framework measures to resolve the imbalance issues.”

During the forum’s dialogue session, in response to the question of why Asian economies generally prefer exchange rate stability over floating rates, Zhou Xiaochuan explained from two levels.

On one hand, countries like China, which have a history of planned economies, traditionally tend to favor price stability and often use purchasing power parity to measure the rationality of exchange rates, believing that since purchasing power parity has not changed, exchange rates need not fluctuate significantly. This reflects the historical continuation of planned economic thinking.

On the other hand, in Zhou Xiaochuan’s view: “Many countries are concerned about the confidence of domestic economic entities. They pay attention to abnormal capital flows; if this confidence changes, there may be significant capital inflows or outflows, meaning the scale of movement could be larger than expected. Such capital flows can actually exaggerate economic issues, whether in terms of balance of payments or other problems. Therefore, when exchange rates fluctuate, whether by 30% or 50%, from an economic perspective, we believe that the necessary adjustment should not be so large, meaning that exchange rate fluctuations have exceeded the necessary adjustment range, which can put significant pressure on decision-makers.”

(Edited by: Wen Jing)

Keywords: Zhou Xiaochuan