Zhou Xiaochuan - International Monetary System Reform

International Monetary System Reform

On March 24, 2009, Zhou gave a speech entitled Reform the International Monetary System, in which he argued that the ongoing financial crisis was made more severe by inherent weaknesses of the current international monetary system and called for a gradual move towards using IMF special drawing rights (SDRs) as a centrally managed global reserve currency. He argued that this would address the inadequacies of using a national currency as a global reserve currency, particularly the Triffin dilemma—the dilemma faced by issuing countries in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency. Zhou explained global currency diversification was needed because an over-concentration of foreign assets denominated in the dollar may bring about undesired consequences. Zhou argued that it was regrettable that John Maynard Keynes's "farsighted" bancor proposal was not adopted at Bretton Woods in the 1940s.

Zhou also asserted China's increasing confidence in its own financial governance philosophies. He criticized western leaders for letting their banking sectors go astray due to loose regulations.