Pan Gongsheng makes a significant statement! Involving the transformation of the monetary policy framework, stablecoins are mentioned for the first time

On June 18, Wednesday, the 2025 Lujiazui Forum officially opened in Shanghai, with People's Bank of China Governor Pan Gongsheng attending to deliver the opening speech and keynote address.

In his speech, Pan Gongsheng stated that over the past year, the central bank's monetary policy framework transformation has been effectively advanced. The central bank has maintained a supportive monetary policy stance and introduced multiple monetary policy measures from the perspectives of quantity, price, and structure, effectively supporting the continuous recovery and improvement of the economy and the stability of the financial market.

Pan Gongsheng mentioned that there is increasing discussion internationally about reforming the monetary system. In the future, the international monetary system may continue to evolve towards a pattern of coexistence, competition, and mutual checks among a few sovereign currencies. Whether it is a single sovereign currency or a few sovereign currencies as the dominant international currencies, the countries issuing sovereign currencies need to assume corresponding responsibilities, strengthen domestic fiscal discipline and financial regulation, and promote structural economic reforms.

When discussing the accelerated application of emerging technologies in the field of cross-border payments, Pan Gongsheng mentioned stablecoins for the first time. He pointed out that emerging technologies such as blockchain and distributed ledger technology have driven the vigorous development of central bank digital currencies and stablecoins, achieving "payment equals settlement," fundamentally reshaping the traditional payment system, significantly shortening the cross-border payment chain, while also posing significant challenges to financial regulation.

The following is the full text of Pan Gongsheng's speech:

"Dear Secretary Ji Ning, former Governor of the People's Bank of China Mr. Ogawa, Mayor Gong Zheng, esteemed comrades Wang Jiang, Yun Ze, Wu Qing, Hai Feng, He Xin, and distinguished guests:

Hello everyone!

I would like to express my sincere gratitude to the Shanghai Municipal Party Committee, the Municipal Government, especially Secretary Chen and Mayor Gong, for their concern and support for the financial sector and the People's Bank of China. It is a great honor to serve as the co-chair of this forum. After years of effort, the Lujiazui Forum has become a communication platform with strong international influence and market dissemination power. On behalf of the People's Bank of China and the organizers, I extend a warm welcome and heartfelt thanks to all of you!

At last year's Lujiazui Forum, I reported on China's monetary policy stance and the evolution of the future monetary policy framework. Over the past year, the People's Bank of China has adhered to a supportive monetary policy stance, introducing multiple monetary policy measures from the perspectives of quantity, price, and structure, effectively supporting the continuous recovery and improvement of the economy and the stability of the financial market. At the same time, we have improved the monetary policy framework, optimized the intermediate variables of monetary policy, cultivated policy interest rates, enhanced the transmission efficiency of monetary policy, enriched the monetary policy toolbox, and effectively communicated policies and guided expectations. The transformation of the monetary policy framework is a gradual and continuous process, and we will continue to assess and improve it in the future.

Next, I would like to share some thoughts on "Several Reflections on Global Financial Governance." Global financial governance is a very broad topic. Today, I will mainly focus on four issues: the international monetary system, the cross-border payment system, the global financial stability system, and the governance of international financial organizations, and share some of my views with you.

The first issue is about the international monetary system. From a historical perspective, the international monetary system has always been evolving, and the replacement of international dominant currencies reflects profound changes in the international landscape and the iteration of national competitiveness. In the 17th century, the Dutch guilder became an early international currency; from the late 18th century to the first half of the 20th century, the British pound became the dominant international currency; after World War II, the US dollar established its dominant position and has continued to this day.

The international dominant currency has the attributes of a global public good, borne by a sovereign currency of a country, which inherently comes with some internal instability issues. First, when the interests of the sovereign currency country conflict with the global public good attributes, the sovereign currency country will prioritize its own interests, affecting the provision of global public goods. Second, the accumulation of fiscal and financial regulatory issues and internal structural economic contradictions in the sovereign currency country can spill over globally in the form of financial risks, potentially evolving into an international financial crisis. Third, when geopolitical conflicts, national security considerations, or even wars arise, the international dominant currency can easily be weaponized or used as a tool.

Due to the existence of the above issues, there has been increasing discussion internationally about reforming the monetary system. Over the past decade, the driving force behind the transformation of the international monetary system has mainly come from the economic and financial aspects following the international financial crisis, and related discussions have primarily focused on these areas; the current new round of discussions is more driven by geopolitical considerations. These discussions generally have two directions.

The first direction is how to weaken the excessive dependence on a single sovereign currency and its negative impacts, forming a healthy competition and incentive constraint mechanism among a few strong sovereign currencies. The development of a multipolar international monetary system can help encourage sovereign currency countries to strengthen policy constraints, enhance the resilience of the international monetary system, and more effectively maintain global economic and financial stability. Recently, European Central Bank President Christine Lagarde gave a speech in which she stated that the global system based on multilateral cooperation is fracturing, the uncertainty of the dollar's dominant position is rising, and the euro is expected to play a more important role in the global monetary system.

In the past 20 years, the evolution of the international monetary system has had two significant characteristics. First, the euro was born in 1999 and currently accounts for about 20% of global foreign exchange reserves, second only to the dollar. Second, after the 2008 international financial crisis, the international status of the renminbi has steadily risen. The renminbi has become the second-largest trade financing currency globally; when calculated on a comprehensive basis, it has become the third-largest payment currency globally; in the International Monetary Fund (IMF) Special Drawing Rights (SDR) currency basket, its weight ranks third in the world.

In the future, the international monetary system may continue to evolve towards a pattern of coexistence, competition, and mutual checks among a few sovereign currencies. Whether a single sovereign currency or a few sovereign currencies serve as the international dominant currency, the sovereign currency countries need to assume corresponding responsibilities, strengthen domestic fiscal discipline and financial regulation, and promote structural economic reforms.

The second direction of discussion is the possibility of a super-sovereign currency serving as the international dominant currency, with much discussion focused on the IMF Special Drawing Rights (SDR). Mr. Zhou Xiaochuan, former governor of the People's Bank of China, raised this issue in 2009. Theoretically, the SDR can better overcome the inherent problems of a single sovereign currency as the international dominant currency, possessing greater stability, better fulfilling the functions of global public goods, regulating global liquidity, and implementing crisis relief, thus having the characteristics of becoming a super-sovereign international currency SDR has become an internationally dominant currency, but it faces challenges in terms of international consensus and driving forces at the political level. Currently, the market's scale, depth, and liquidity are insufficient, limiting its role. To promote SDR as an international dominant currency, member countries need to build political consensus, which is not easy in the current international environment. On the operational level, it is necessary to optimize mechanisms and gradually expand the use of SDR. Regarding the distribution and issuance mechanism, the IMF currently allocates SDR mainly for crisis response, often through one-time large issuances. In the future, regular SDR issuances can be increased, and the issuance scale can be expanded. In terms of usage, it is essential to actively promote the participation of the private sector and various market entities, widely using SDR in international trade and investment activities, issuing SDR-denominated bonds, enhancing the role of SDR as a reserve asset, and establishing an SDR settlement mechanism suitable for large-scale use.

The second issue is about the cross-border payment system.

The cross-border payment system is the "artery" of global currency and capital flow, an important support for promoting international trade and investment, maintaining financial stability, and a crucial pillar of the international monetary system. The evolution of the international monetary system towards a coexistence of a few sovereign currencies and the rapid development of digital technology will promote the diversified development of the cross-border payment system; in turn, a diversified cross-border payment system will accelerate the transformation of the international monetary system.

In recent years, the problems faced by traditional cross-border payment systems have become increasingly prominent. First, there is a generational gap between traditional cross-border payment methods and emerging digital technologies, with issues such as low efficiency, high costs, and poor accessibility that urgently need improvement. Second, cross-border payments require coordination of different legal and regulatory frameworks and more stakeholders, and international cooperation needs to be strengthened. In response, international organizations such as the G20 have paid close attention and specifically developed a roadmap to improve cross-border payments. Third, geopolitical games have intensified, and traditional cross-border payment infrastructure is easily politicized and weaponized, used as a tool for unilateral sanctions, undermining the international economic and financial order.

Against this backdrop, there is a growing global call to improve the cross-border payment system, with emerging payment infrastructures and settlement methods continuously emerging, driving the global cross-border payment system towards a more efficient, secure, inclusive, and diverse direction. This trend is expected to continue to strengthen in the future.

First, the cross-border payment system is developing towards diversification. In terms of currencies, more and more countries and regions are using local currency settlements, promoting the international use of more currencies, and the dominance of a single sovereign currency in cross-border payments is gradually changing. In terms of channels, in addition to traditional correspondent banking models, emerging cross-border payment systems and regional multilateral payment systems are emerging, making settlement channels more diverse and further improving cross-border payment efficiency. After more than a decade of construction and development, China has initially established a multi-channel, widely covered cross-border payment clearing network for the renminbi.

Second, the interoperability of payment systems and ecosystems is continuously improving. More countries and regions are extending the operating hours of payment systems, adopting internationally standardized messaging, and promoting the interconnection of fast payment systems to improve the efficiency of cross-border payments and reduce transaction costs. Countries and regions represented by Asia have significantly improved the interoperability of retail payment ecosystems through QR code payment interconnectivity, greatly facilitating residents' cross-border payments Third, emerging technologies are accelerating their application in the field of cross-border payments. Emerging technologies such as blockchain and distributed ledger are driving the vigorous development of central bank digital currencies and stablecoins, achieving "payment as settlement," fundamentally reshaping the traditional payment system, significantly shortening the cross-border payment chain, while also posing significant challenges to financial regulation. Technologies such as smart contracts and decentralized finance will continue to drive the evolution and development of the cross-border payment system.

The third issue is about the global financial stability system.

Before the 2008 financial crisis, the international community mainly relied on the global financial safety net led by the IMF for mid-term and post-event assistance. After the crisis, financial regulatory rules and other preventive mechanisms were further strengthened.

On the one hand, the multi-layered financial safety net continues to improve. At the Boao Forum for Asia last March, I delivered a speech on strengthening the construction of the financial safety net. At the global level, in recent years, the IMF has continuously enhanced its crisis assistance capabilities, strengthened its policy oversight functions, and expanded the scope of policy supervision. At the regional level, the European Stability Fund, Latin American Reserve Fund, Chiang Mai Initiative, and Arab Monetary Fund have been established successively, becoming important supports for financial stability in their respective regions. At the bilateral level, central banks of major developed economies, such as the Federal Reserve and the European Central Bank, inject liquidity into the market during crises through currency swap mechanisms. Cooperation on local currency swaps among emerging markets is also steadily advancing. Currently, the People's Bank of China has signed bilateral local currency swap agreements with more than 30 countries and regions, becoming an important component of the global financial safety net.

On the other hand, the crisis prevention system based on regulatory rules is continuously improving. After the financial crisis, the international community undertook a series of significant reforms to the global financial regulatory system, including the issuance of the Basel III Accord, enhancing the robustness of banking institutions, and strengthening the regulation of systemically important financial institutions. China has actively participated in the formulation and implementation of international financial regulatory standards and is one of the few economies to fully implement Basel III; it has established a regulatory framework for systemically important financial institutions, and the total loss-absorbing capacity of China's systemically important banks has fully met the standards; a deposit insurance system has been established, providing full protection for over 99% of depositors; and new asset management regulations have been introduced and fully implemented, significantly reducing risks from shadow banking.

Currently, the global financial stability system is facing some new challenges.

First, the regulatory framework remains fragmented, and there is even a tendency for "competitive bottoming." Recently, the implementation of international regulatory rules such as Basel III has fluctuated due to domestic political factors in member countries, which may lead to regulatory arbitrage and weaken the global financial stability system. The international community should actively implement the agreed regulatory reform measures to prevent regulatory arbitrage and cross-border risk transmission.

Second, there is insufficient regulation in some emerging areas such as digital finance. For example, there is a lack of global regulatory coordination for the rapidly expanding cryptocurrency market and climate risk-related regulatory frameworks, with regulatory orientations fluctuating significantly and being overly driven by politics; the application of artificial intelligence in the financial sector lacks unified regulatory standards. There is a need for global regulatory collaboration to address regulatory shortcomings.

Third, regulation of non-bank intermediaries remains weak. Over the past 20 years, the proportion of non-bank intermediaries in global financing has significantly increased. This type of financing is less stable, has lower transparency, and is characterized by rising leverage levels, indicating a need for strengthened regulation We believe that building a diverse and efficient global financial safety net centered around a strong International Monetary Fund (IMF), and maintaining the consistency and authority of global financial regulatory rules, is a key pathway for crisis prevention and resolution, and should continue to be the direction we pursue.

The fourth issue is about the governance of international financial organizations.

After World War II, the international community started with the IMF and the World Bank, gradually establishing a multi-layered and multi-dimensional system of international financial organizations that covers areas such as international policy coordination, financial regulatory rule-making, and multilateral development institutions. This system has become the main institutional platform for conducting international financial governance, playing an important role in promoting global economic and trade growth and maintaining global financial stability.

With the changes in the global economic landscape, the shares and voting rights of major international financial organizations such as the IMF and the World Bank, as well as some regional financial organizations, have long lacked substantial adjustments. The proportion of emerging markets and developing countries is significantly lower than their actual position in the global economy. The international community should also pay attention to the fact that the unilateral policy orientation of certain member countries has interfered with and influenced the governance and operation of international financial organizations. International financial organizations need to keep pace with the times and promote governance reforms that dynamically reflect the relative positions of member countries in the global economy, enhance the voice and representation of emerging markets and developing countries, uphold and practice true multilateralism, and improve governance efficiency.

Among various international financial organizations, the IMF holds a core position and plays an important role in global economic and financial governance. The IMF is an international financial organization based on quotas. The size of the quotas determines the IMF's crisis assistance capacity, and the quota share determines the voting rights of member countries in the organization and the scale of financing they can obtain. Currently, the quota share of the IMF does not reflect the relative positions of member countries in the global economy. According to the consensus reached, promoting the adjustment of quota shares as soon as possible is key to improving the IMF's governance and enhancing its legitimacy and representation.

Currently, the global economy faces high uncertainty. While improving governance structures, major international financial organizations should further strengthen their economic oversight functions, objectively assess the risks faced by the global economy and individual countries, and actively guide countries to firmly support economic globalization and the multilateral trading system. Strengthening policy guidance for countries, enhancing macroeconomic policy coordination, and maintaining the stability of the international financial system are essential.

Dear guests:

Improving global financial governance requires all parties to strengthen dialogue and cooperation. We will adhere to the path of reform and opening up, the path of multilateralism, and actively play a constructive role in contributing to the establishment of a more equitable, just, inclusive, and resilient global financial governance system.

Finally, I wish the Lujiazui Forum a complete success. Thank you all!