China’s former central bank head urges greater central bank coordination to prepare for future crises

China should push for greater international coordination to deal with the effects of US rate cuts, capital flow concerns and structural weak points in global financial regulation that have been exposed by Facebook’s Libra, a former governor of China’s central bank said on Friday.

“The need for policy coordination among central banks is rising,” Zhou told the Caixin Summit at the Diaoyutai State Guesthouse in Beijing.

Although central banks are divided on whether a new financial crisis is imminent, Zhou insisted there was a need to prepare, saying that the unilateralism had already undermined the foundation of collaboration, which was vital to battling the 2008 financial crisis.

“Due to trade friction and a variety of other problems, there is much distrust between China and the United States,” Zhou said. “Multilateralism is now challenged and going downhill.”

Zhou did not specify what a new global coordination mechanism would look like, but China – now the world’s second largest economy – would have a bigger say.

The remarks reiterate recent calls from the Chinese government for the advancement of free trade and globalisation in the face of US President Donald Trump’s “America First” principle that has dampened global trade and investment.

“Some might say there is already a framework for central banks to enhance policy coordination. But I think there’s actually not,” he said, hinting at the limits of the Bretton Woods system, including the International Monetary Fund (IMF), the World Bank and the World Trade Organisation.