Macro-Finance Salon (No. 114) and Workshop on Emerging Countries in Global Financial Governance

On February 26, Macro-Finance Salon (No. 114) and Workshop on Emerging Countries in Global Financial Governance was held in Renmin University. Prof. C. Randall Henning from American University and Prof. Andrew Walter from Melbourne University presented their papers “Regional Financial Arrangements and the International Monetary Fund” and “Fragmentation and Resilience in Global Economic Governance: Emerging Countries and Financial Regulatory Standard-Setting” respectively. Discussants include Wei Benhua, Former Deputy Administrator-in-bureau of SAFE, Zhang Zhixiang, Former Director-General, International Department, PBoC, Zheng Liansheng, Research Fellow and Deputy Director, Research Center for Financial Law and Regulation, Institute of Finance and Banking, CASS, and Xiong Aizong, Research Fellow, Institute of World Economics and Politics, CASS. The meeting was chaired by Di Dongsheng, Associate Dean, School of International Studies, Renmin University. Prof. C. Randall Henning first presented his paper “Regional Financial Arrangements and the International Monetary Fund”. The study examines competition and cooperation among elements of the global financial safety net (GFSN), which many observers fear is becoming increasingly fragmented. It gives particular attention to the relationship between the IMF and the regional financial arrangements (RFAs). Overlap among these crisis-fighting institutions has benefits but also pitfalls, such as problems of inter-operability of lending instruments, moral hazard, and institutional coordination and conflict resolution. The study addresses these problems, reviews the RFAs in Latin America, East Asia and Europe, and concludes, among other things, that (a) institutional competition, while harmful in program conditionality, can be beneficial in economic analysis and surveillance, (b) moral hazard is critically dependent on institutional governance, and (c) IMF reform would have consequences for moral hazard and dispute resolution that are unintended. Prof. Henning also identifies the limits to cooperation among institutions and how our approach to institutional reform should adapt to them. In so doing, the paper critiques the findings of some of the other recent studies of the GFSN, including the G20 Eminent Persons Group Report and the Geneva Report. In Prof. Andrew Walter’s paper “Fragmentation and Resilience in Global Economic Governance: Emerging Countries and Financial Regulatory Standard-Setting”, he explores why the global financial standard-setting process has to date been more politically resilient than might have been expected. He argues that important among the reasons for this resilience is that some major emerging market countries see a number of continuing advantages in their membership of global standard-setting bodies. However, the variation in these perceived advantages and of preferences regarding global financial standard-setting among emerging countries may have grown since 2009. This inhibits the formation of a powerful bloc favouring the development of institutional alternatives, as has occurred in trade, development finance and a number of other areas. He also makes agreement on a common reform agenda difficult. After the presentations, the discussants expressed their opinions centering the role international institutions plays in global financial governance, participation of EMC in Basel, China-US trade war, etc.

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