MNI POLICY: Declining Multilateralism Limits Crisis Response

     BEIJING (MNI) - Global multilateral economic frameworks are under

challenges including the distrust between China and the U.S., thus limiting

coordinated effort of central banks to handle possible economic crisis, Zhou

Xiaochuan, a former governor of the People's Bank of China, told the 10th Caixin

Summit on Friday. 

     "It's worrisome" that the spirit and mechanisms for cooperation among

countries are lacking, compared to the periods following the 2008 financial

crisis and the 2011-2012 European sovereign debt crisis, said Zhou. 

     Here are other major takeaways of Zhou's speech: 

     - Central banks should consider the spill-over effects of their monetary

policies such as rate cuts. It is doubtful if the current coordination system

can work in case of another economic crisis.

     - The yuan internationalization is a gradual process. The process may speed

up if "certain countries with major reserved currencies" impose financial

sanctions increasingly, as such measures could prompt some economies to turn to

the yuan to bypass the sanctions. 

     - Central banks should provide better and more reliable financial

infrastructure as digital currencies gain acceptance. A big question for digital

currencies such as Libra is whether they could be prevented from being used for

speculation and how they provide proper public services.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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