Improved financial governance called for

BEIJING - The G20 should agree on a plan to improve the governance of international financing and to reform the world's regulation system, analysts said.

The eurozone's debt troubles are endangering its banking system and European governments are having trouble gathering together the money they need to prevent a Greek default, said Wei Min, a senior economist with the China Institute of International Studies, the think tank for China's Ministry of Foreign Affairs. "Once the banks' capital chain breaks down, another financial catastrophe will be inevitable."

Wei said that the Cannes G20 Summit is an opportunity to make progress in establishing a mechanism that can be used to prevent the debt troubles from infecting the banking system.

"It's urgent to make reforms to European economic governance and it will require cooperation from both developed and emerging countries," Wei said.

China, home to three of the five biggest banks in the world measured by market capitalization, should participate more in the world regulation system, he said.

A more effective International Monetary Fund (IMF) surveillance mechanism - especially for the financial industry and fiscal, monetary and exchange-rate policies - should be further discussed after the Cannes summit to help improve international cooperation on financial supervision and the world recovery, analysts said.

Zhang Tao, director of the international department of the People's Bank of China, said that Chinese authorities respect recent IMF reforms and look forward to the institution issuing more regulations to further diversify and stabilize the international monetary system.

Many economists have blamed unregulated or poorly regulated financial activities as being among the main causes of the global financial crisis as well as the eurozone's ongoing debt troubles.

Nicolas Veron, a senior fellow at the Brussels-based think tank Bruegel, said now is the time to shift some regulatory power away from Western countries and give it to emerging economies, such as China.

China Daily