Zhang Monan is economics researcher with China’s State Information Center and frequently appears on China Daily with her “big picture” takes on the global financial system. She is worthwhile following if you wish to understand how China sees the jostling of control between the now currently dominant developed countries and the emerging developing countries for a fairer share of wealth. In her 2010-07-05 article, “Towards new financial order,” she summarizes the inevitable competition (or “cooperatition” if you will) from developing countries in reshaping our worlds financial institutions. Below are snippets from her article:
In the aftermath of the financial crisis, emerging economies, showing expanded domestic demand and government spending, have played a major role in leading the recovery.
For example, China’s economy registered a year-on-year increase of 11.9 percent in the first quarter of this year. India’s economy expanded 8.6 percent and Brazil 9 percent, all of which were faster than that of the developed world.
The rapid rise in the stature of developing countries and simultaneous decline of the wealthy economies provide an opportunity to break the traditional governance framework dominated by the rich club.
Against this backdrop, the G20, after three successful summits, has finally replaced the G8 and stepped into the center of global governance.
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Developing countries mainly depend on booming industrial production and trade, while developed[edited] countries rely on virtual financial transactions.
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Such an increasingly interdependent global division system has made global production more efficient and contributed much to the 20-year prosperity of the global economy. But it has also aggravated the global wealth distribution imbalance.
Judging from a variety of standards, the US dollar is still the world’s most important currency. The current utilization rates of dollar in international trade valuation, foreign exchange reserves and international financial transactions are 48 percent, 61.3 percent and 83.6 percent respectively.
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On reforming the international financial system, the US is willing to accept only minor changes to international financial institutions, such as moderate tightening of financial oversight and symbolic increase in developing countries’ voting power in the IMF and the World Bank.
The US has set two benchmarks on the issue – that no country be allowed to weaken its dominance over the international financial system and no reform should alter the dollar’s status as the world’s leading currency.
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While pinning their hopes on emerging economies to sustain recovery, developed countries should show more respect for the long-term interests of developing countries.