China and Global Financing Summit and the Way Forward

Editor's Note: The author is Executive Director of the Center for South Asia & International Studies (CSAIS) Islamabad and Regional Expert on China, BRI & CPEC. The article reflects the author's opinions and not necessarily the views of Gwadar Pro.

Chinese policymakers have always advocated a fair and systematic adjustment of the financial structure in global financial governance in order to promote the stability and sustainable development of the world economy and society. At present, the widening gap in economic development between the North and the South has reached an alarming level, which requires a series of key policy adjustments by international financial organizations such as the World Bank and the International Monetary Fund to provide financial support for developing countries to get rid of their debt difficulties.

Moreover, the current multiple crises in the world, including the unending Russia-Ukraine conflict, Fed rate hikes, high inflation, energy and food crises, and the global warming, demand that all countries, especially developing countries, immediately carry out financial restructuring and further mutually beneficial financial integration.

In this regard, China rightly pledges practical support for developing countries at global financing summit most recently held in Paris. Chinese delegation supported to build a new consensus for a more inclusive international financial system to fight inequalities, finance the climate transition and bring closer to achieving the Sustainable Development Goals.

According to the various reports of the World Bank, nearly 70 countries including Pakistan, Sri Lanka and Zambia are facing debt crises, with many of them also on the frontline of extreme weather events and struggling to meet the UN Sustainable Development Goals, a collection of 17 targets adopted by all United Nations’ member states in 2015.

On its part, China insists that the multilateral development banks (MDBs) and other lenders should also provide debt relief and restructuring to all the developing countries.

Critical analysis reveals that the MDBs policies remained inconsistent with green and inclusive development. Developing countries still lack reasonable representation in these MDBs. 

The MDBs traditionally oblige the global North to borrow with interest rates between one and four percent. Ironically, the interest rates for loaning for the global South constantly remained at higher side i.e., 10 to 14 percent, which should be rectified as soon as possible.

In this regard, assurance of the Chinese Premier Li Qiang at the closing ceremony of the Summit for a New Global Financing Pact in Paris to continue to take practical steps to support its fellow developing countries has become a global ray of hope. Li’s emphasizing on joint efforts to combat climate change, protect biodiversity, address the debt problems of developing countries and promote sustainable development around the world has outlined a way forward rescuing countries and communities grappling with poverty, climate change and high inflation.

Unfortunately, the existing global financial system do not respond in a timely manner to the urgent need for financial support in many developing countries. It seems that the global financial architecture has become outdated, dysfunctional, and unjust hurting the hopes of developing countries for better future around the globe. This system, which should promote global economic integration and fair development, has become a tool for the United States and the West to use financial hegemony to manipulate the world, exacerbating poverty, inequality, social chaos, and food crises.

On the other hand, the Chinese wise leadership has been spreading message of joint efforts, structural reforms in terms of quotas and voting rights, and increases the voice of emerging markets and developing countries. In this context, China has been striving hard to build a new global financial system based on trade and investment liberalization and facilitation, and opposes protectionism, decoupling and disrupting supply chains in any form.

There is an urgent need to build a more open, transparent, interactive, integrated and supportive global financial system to overcome the socio-economic emerging problems in the world. The multilateral development banks (MDBs) should align its policies and resources towards the socio-economic development of the developing countries to cope with the threats of global warming, increasing ratios of debts, poverty, inequalities, geopolitical discriminations and geostrategic destructions in the world in which the Chinese Model of Poverty Eradication, Global Development Initiative, Global Security Initiative and last but not least, Global Civilizational Initiative would be the main drivers in the 21th century.