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China’s Role in the Global Financial Architecture: Finding Common Ground

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China’s Role in the Global Financial Architecture: Finding Common Ground

China is an indispensable part of the global financial architecture, both as a member of existing international institutions and as a builder of new ones. Our recent report, authored by Paola Subacchi, explores areas where China can be a constructive partner, fostering mutual engagement within the global order.

The structure of the international financial system has evolved significantly since its inception in 1944. The rise of China, both as an active participant and as a driving force for new institutions, has brought about considerable changes. As G7 countries navigate their relationships with China within these institutions, growing geopolitical tensions are adding to the complexity.

Paola Subacchi's report, titled China and the Global Financial Architecture - Keeping Two Tracks on One Path, provides essential background on understanding China’s role in this evolving landscape. Her analysis highlights that reforming the Bretton Woods Institutions is crucial to accommodate China effectively. These institutions need to offer better-distributed governance while integrating new structures for inclusivity.

Subacchi suggests identifying areas of common interest to foster collaboration between old and new institutions. Key areas include development finance, infrastructure investment, debt relief, domestic macroeconomic frameworks, economic growth with environmental sustnability, and a robust financial safety net.

The report emphasizes that the G7, along with like-minded countries in the G20, must find ways to work constructively with China. By focusing on shared interests rather than shared values, mutual engagement can lead to positive outcomes. Areas of potential cooperation include economic development, where China's gradual transition towards a more advanced economy requires an inclusive institutional framework.

Ultimately, successful integration deps on harmonious coexistence through collaborative efforts on global economic issues. This requires identifying low-hanging fruits and focusing on specific areas with established collaboration, such as development finance and infrastructure investment.

Subacchi concludes that encouraging China to be a productive and engaged partner is essential for mntning an inclusive and rules-based international system.

This report is part of the FES publication series examining Chinese approaches in various global policy fields. The overarching theme focuses on multilateralism amidst China's rising influence and increasing competition over values and norms. It seeks to initiate constructive dialogue between Europe and China, identifying areas where cooperation can be strengthened.

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