China and the global financial order after the COVID pandemic

The COVID pandemic which originated in China shook the world. Established forms of global governance were under strain. Many aspects of global order needed to be reconfigured including financial markets. The People’s Republic of China (China; PRC) had long played a minor role in the global financial order. After decades of seclusion, the PRC joined the Bretton Woods system in the 1980s, kept a low-profile, built-up expertise, and developed a better understanding of global financial governance. Despite the increasingly far-reaching economic and social reforms under Deng Xiaoping, China’s financial system was kept under the tight control of the party-state. Its integration into global capital markets remained limited, and the issue of financial reforms remained heavily contested. The Asian Financial Crisis of 1997, China’s admission into the WTO in 2001 and the Global Financial Crisis of 2008 triggered domestic reforms yet left the priority of “control” over “opening up” intact. The integration of China into the global financial order proceeded much slower than many observers expected but gained dynamic under the leadership of Xi Jinping. Today, China challenges existing norms and standards, advances its interests and creates new international institutions – without a full-flung opening of its domestic system. Over the last few years, China has followed a multi-faceted approach to establish itself in global financial institutions, the global currency system and as a leading innovator in financial technology (fintech). Building upon increasingly competitive, well-protected domestic financial service providers, an ever better trained echelon of financial experts and an explicit policy of offering global leadership, China has become a driving force in the globalised financial order. This marks a fundamental change in both China’s position and China’s role in global finance. Therefore, we apply a basic role theoretical approach to track both the changes in the concepts of the Chinese leadership (“National role conception”) and the resulting changes in China’s interactions with its most important counterparts (“national role”). We interpret China’s positioning towards the reform of the Bretton Woods system, the internationalisation of the RMB, the foundation of new multi-lateral development banks and the increased activities of Chinese actors who are developing, establishing and promoting new business models and new technologies in the area of financial services (fintech) as steps towards offering an alternative leadership in global finance.