Tailoring for Development: China's Post‐crisis Influence in Global Financial Governance
| Date | 01 November 2018 |
| Author | Julian Gruin,Jiajun Xu,Peter Knaack |
| Published date | 01 November 2018 |
| DOI | http://doi.org/10.1111/1758-5899.12566 |
Tailoring for Development: China’s Post-crisis
Influence in Global Financial Governance
Julian Gruin
University of Amsterdam and University of Warwick
Peter Knaack
Blavatnik School of Government, University of Oxford
Jiajun Xu
Peking University
Abstract
China’s increasing engagement in global financial governance since the 2008 crisis has potentially significant ramifications for
global financial rule-making and standard-setting. This article presents a novel analysis of China’s growing influence on the
international stage and its consequences for the financial rules and standards that constrain policy makers in developing
countries. We draw upon literature from international political economy and development studies to develop a framework for
assessing whether China’s rise has catalyzed a shift in global financial governance towards a tailored approach that responds
to country-specific developmental circumstances and needs. We argue that China’s status as a rising power that still has
idiosyncratic developmental priorities is leading it to push for rules and standards that are more flexible and sensitive to speci-
fic national development conditions. We illustrate this argument in three case studies, deploying the framework to explain
variation in the post-crisis evolution of rules in prudential banking regulation, capital flow management, and debt sustainabil-
ity surveillance.
Policy Implications
•While insisting on cross-border harmonization in financial rules and standards is a convenient choice for the international
financial institutions (IFIs), they should consider moving further away from a one-size-fits-all approach that unduly con-
strains the policy choices of developing countries.
•China’s growing influence in global financial governance enables developing country governments to exert more discre-
tion in tailoring financial policies to their development needs and idiosyncratic circumstances.
•As financial policy discretion is a mixed blessing, policy makers need to devise guidelines that harness the benefitof
greater autonomy while safeguarding against the risk of a ‘race-to-the-bottom’.
•Decision-makers in IFIs can take lessons from China’s domestic development challenges to formulate a unique set of prin-
ciples for sound financial management that is agnostic regarding the institutional setup to achieve it.
1. Introduction
China’s growing engagement with global financial gover-
nance (GFG) has led to a rapidly burgeoning literature on
the impact of China’s rise upon the US-led hegemonic inter-
national economic order (Henning and Walter, 2016; Xu,
2017; Zhang, 2017). Political economists disagree on the
degree to which the global financial crisis of 2007–09 has
precipitated a change in vision of how to organize and gov-
ern global capitalism, and China’s role in this process. But
while many analysts focus on the repercussions of changes
in GFG for the world’s core economies, their effect on devel-
oping countries in the periphery has been largely neglected.
Meanwhile, a parallel debate focuses on what kind of finan-
cial policies decision-makers in developing countries should
adopt to foster growth and prosperity. Development scholars
and practitioners weigh the advantages and disadvantages of
a shift away from a singular set of global best practices and
towards an approach that lets developing countries tailor
monetary, fiscal, prudential regulatory and other financial
policies to their specific national developmental needs and
conditions. Today’s rules and standards of GFG may endorse
such a tailored approach to development to a greater degree
than before the financial crisis, but it is unclear what role Chi-
na’s rise has played in this transformation.
In this article we seek to bridge these two fields of study
–international political economy and development studies
–to investigate whether China is influencing global financial
governance by promoting a tailored approach, one sensitive
to the different needs of countries at different stages of
Global Policy (2018) 9:4 doi: 10.1111/1758-5899.12566 ©2018 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 9 . Issue 4 . November 2018 467
Research Article
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