Zhou Xiaochuan, former governor of the People's Bank of China and vice chairman of the 12th National Committee of the Chinese People's Political Consultative Conference, spoke on the afternoon of June 17 at the 2026 Lujiazui Forum session on global financial governance reform and cooperation, stating that multilateral financial institutions were not originally designed for global governance roles and currently fall short of expectations. Zhou attributed the gap to insufficient representation requiring quota reforms, with emerging market quotas still inadequately adjusted despite ongoing efforts. The speech highlighted regulatory fragmentation across banking, insurance, and securities sectors, and the absence of a unified framework for global financial infrastructure and oversight of illicit activities including AI-enabled telecom fraud using cryptocurrency.
Zhou Xiaochuan Identifies Representation and Quota Reform Gaps in Multilateral Institutions
Zhou stated that representation in multilateral financial institutions remains inadequate, necessitating quota reviews and adjustments with particular focus on increasing emerging market shares. He noted these reforms are progressing with difficulty and remain incomplete. Zhou also pointed to functional gaps, observing that while a global central bank may not be necessary, certain functions lack clear institutional ownership, including the design of international monetary systems, lender-of-last-resort roles during crises, and coordination of financial infrastructure such as international clearing functions.
Regulatory Fragmentation Across Banking, Insurance, and Securities Sectors
Zhou described significant fragmentation in international regulatory cooperation, with banking supervision discussions occurring partly at the Bank for International Settlements (BIS), insurance oversight coordinated through the International Association of Insurance Supervisors (IAIS), and securities regulation handled by the International Organization of Securities Commissions (IOSCO). He observed that while these bodies perform well in their respective domains, many financial crises do not occur neatly within a single financial subsector.
Global Financial Infrastructure Lacks Unified Governance Framework
Zhou noted that when financial globalization and cross-border capital flows were less prominent, financial infrastructure operated primarily at national or limited regional levels. He stated that current needs require global-scale infrastructure, but no clear governance framework exists for such systems.
FATF Scope Excludes Cross-Border Gambling and Digital Fraud
Zhou pointed to the Financial Action Task Force (FATF) as the existing body addressing illicit finance, but noted its mandate covers only anti-money laundering and counter-terrorism financing, with its scope remaining subject to debate. He highlighted that China prioritizes cross-border gambling, which many countries do not regulate, illustrating gaps where certain activities fall outside any jurisdiction. Zhou stated that the emergence of cryptocurrency has enabled illegal fund transfers and fraud, and noted that telecom fraud in Southeast Asia has evolved beyond telecommunications into digitalized operations using cryptocurrency for transfers and employing artificial intelligence. He emphasized that existing fraud prevention structures consist only of FATF's anti-terrorism financing and anti-money laundering mandate, leaving the question of who oversees such malicious activities as an issue requiring attention in international economic and financial governance.
FAQ
What did Zhou Xiaochuan say about multilateral financial institutions on June 17?
Zhou Xiaochuan stated on the afternoon of June 17 at the 2026 Lujiazui Forum that multilateral financial institutions were not originally designed for global financial governance and currently fall short of expectations due to insufficient representation and incomplete quota reforms favoring emerging markets.
Why does Zhou Xiaochuan consider telecom fraud a global financial governance issue?
Zhou stated that telecom fraud has evolved into digitalized operations using cryptocurrency for illegal fund transfers and artificial intelligence, but the existing Financial Action Task Force only addresses anti-money laundering and counter-terrorism financing, leaving such fraud activities without clear international regulatory oversight.
