Jin Liqun on the Bretton Woods System and the Reform of Multilateral International Institutions
AIIB President highlights the immense contribution of Bretton Woods and introduces the developing countries-driven MDB where developed nations have a veto.
On November 12, the Shanghai Development Research Foundation (SDRF) and the Shanghai Representative Office of the German Friedrich Ebert Foundation co-hosted the "2024 Shanghai Global Financial Forum" with the theme "80th Anniversary of the Bretton Woods System: The International Financial System in the Current Geopolitical Environment." Jin Liqun, Chairman of the Board and President of the Asian Infrastructure Investment Bank (AIIB), delivered a keynote speech. [English] [Chinese]
Jin spoke in both English and Chinese. In English, he reflected on the decline and demise of the Bretton Woods system, emphasizing the value of its most significant legacy—multilateralism. He stressed that the AIIB's governance structure balances power between developing and developed members, ensuring inclusivity and partnership. While developed countries are minority shareholders, their voices remain influential due to the bank's consensus-driven decision-making process, avoiding overreliance on voting.
Jin also praised the recent initiatives at IMF and, interestingly, he reported a rapport between Ajay Banga, President of the World Bank Group, and Kristalina Georgieva， Managing Director of the International Monetary Fund, which he described as "chemistry and cooperation" that is "all too palpable."
Then, switching to Chinese to avoid getting "lost in translation," he emphasized again that although China, as the largest shareholder with 26% voting rights, holds veto power on major decisions, such as amending the charter or admitting new members, Western member countries collectively hold over 25% of the votes, granting them comparable veto power.
Below, The East is Read presents the transcript of Jin's speech based on the official audio recordings released by SDRF. When he spoke in English, we directly transcribed him. When he spoke in Chinese, we transcribed his Chinese and then translated it from Chinese to English.
金立群：论布雷顿森林体系和多边国际机构改革
Jin Liqun: On the Bretton Woods System and the Reform of Multilateral International Institutions
[Speaking in English]
I would like to speak both in Chinese and English in my speech today to suit the audience. I would speak in English as the working language of our international institution, but I would like to shift to Chinese if I think that part would be of special interest to the Chinese audience.
This year, 2024, marks the 80th anniversary of the founding of the Bretton Woods and its institutions. The Bretton Woods system is founded on a set of unified rules and policies that provide the framework necessary to create fixed international currency exchange rates. Essentially, the agreement called for the newly-created IMF to determine the fixed rate of exchange for currencies around the world. Those at Bretton Woods envisioned an international monetary system that would ensure exchange rate stability, thereby preventing competitive devaluations and promoting economic growth in all the participating economies.
In the real world, things never move along charted routes. Paradoxically, the Bretton Woods system did not survive long enough to provide currency stability as it is envisioned. To a certain extent, the system was victimized by its own success.
Thanks to the multilateral approach, free trade, and cross-border investment, European countries and other economies did not take long enough to recover from their war-ravaged economies and all sorts of predicaments. The terms of trade quickly improved with regard to the trade relations with the United States. Indeed, subtle but substantial changes began to take place in the global economic landscape. The Bretton Woods system could not hold on and was quickly destabilized, so much so that the system itself quickly collapsed when a fixed rate of 35 U.S. dollars for an ounce of gold could by no means be maintained.
In retrospect, the fact that eulogy giving place to elegy is not to be lamented that much. A global economic system, no matter how effective, will have to adapt to changed situations to sustain itself. The demise of the Bretton Woods system ushered in a new era, no matter how turbulent, which will regain its own balance amidst the rough and tumble of the global geopolitical situation.
Multilateralism is the most important and valuable legacy the founding parents of the Bretton Woods system bequeathed to their offspring. Indeed, it is getting more relevant to the international community. In the final analysis, multilateralism, or the institutionalized cooperation on a global scale to respond to a host of risks, hazards, and problems facing humanity is key to an effective solution. This is my definition of multilateralism.
Emerging market economies have every reason to acknowledge the immense contribution Bretton Woods institutions and other MDBs have made to their economic and social development. Multilateralism has been an unparalleled driver of economic growth, lifting hundreds of millions of people out of poverty; the transition from agrarian economies to industrial powerhouses, significantly improving living standards and contributions to global economic dynamism. The Asian countries are all members of the Bretton Woods institutions and have benefited from their generous support at different times over the last eight decades; I ought to say benefited enormously, including China.
The drastically changed topography of the political and economic landscape of this planet poses daunting challenges to the present-day world, which could hardly have been envisaged by the founding fathers of the Bretton Woods. G20 is one of the new mechanisms to deal with the lack of cooperation in the international arena. G20 provides leadership and guidance that is crucial, and the global economy needs multilateral development banks, or MDBs, to translate G20's instructions into actions: the world needs MBDs to do the real job on the ground.
Now I will go off the script to tell you a little bit about G20. In the late 1990s, when President Clinton called on 22 countries to have a meeting in Washington, D.C., and I was part of the Chinese delegation—a very small delegation. During the meeting, there were different kinds of views and points with regard to the rationale of holding such a meeting. The German delegation—we have German friends here—kept questioning, and you have to understand not the German language, but the underlying message under the German language. If I translate this under-message into plain English, it is: why do you Americans call all of us to come here and we have to come here? And if you say, you don't have to come here, if I am not here, I will miss out on all the important issues you're discussing. So you call us, we have to come here, we don't want to come, we have to come here.
So the next meeting, behind back doors, Germans and Americans discussed. The next meeting in Bonn, how many countries? 36. This huge conference room, thanks to the German organizers, and you have to use binoculars to see who is speaking. So, finally, we agreed on 20, which means efficiency and legitimacy. Legitimacy means you must have a sufficient number of countries participating. Efficiency: if you have too many, like the United Nations, it is not going to work. And then we have the G20. So that's the story—anecdote.
Over recent years, MDBs have been driven by motivations to initiate reforms. The motivations could be both extrinsic and intrinsic. Extrinsic because the need to provide financing to developing countries is vast, the call on MDBs to do more is deafeningly reverberating. In addition to poverty reduction and infrastructure investment, climate financing is getting increasingly demanding. Capital inadequacy has been a frequent issue, and MDBs have to appeal to their shareholders for general capital increases every seven or eight years—it's none other than a nightmare under the current budget constraints of most major shareholders.
Intrinsic, because the status quo implies losing relevance. For instance, the IMF could not expect to keep its business buoyancy by relying on its traditional business model of providing support to members in BOP stress. IMF did not have business to sustain itself in the 1990s and had to lay off its staff, and was almost forced to sell its gold.
Reform is to change the status quo, to shake the well-established system so as to have it take new shape, redistribute power, and re-balance the interests of the shareholders and stakeholders, even though for some of them this is excruciatingly painful. You know how painful it could be for the major shareholders of those institutions.
But, MDBs have to live with reality; there's no escape. To give you one example, the recent initiative made by IMF management to roll out its Resilience and Sustainability Trust (RST) and Resilience and Sustainability Facility (RSF) program is very much commendable. I really think Kristalina [Georgieva, IMF Managing Director] is doing a great job. IMF will work itself out of its outdated narrow strip of balance of payment support by this new initiative.
Furthermore, this will help reinforce the business of the World Bank rather than stepping on its turf. Turf fighting across the two Bretton Woods institutions across the 19th Street until recent years was legendary. During the recent IMF-World Bank annual meeting, the chemistry and cooperation between President Ajay Banga and Kristalina Georgieva is all too palpable. For the last four decades, I have never seen such a kind of rapport between the two heads of the Bretton Woods institutions. So I congratulate Ajay and Kristalina. Wonderful because the two institutions across 19th Street, which somebody thought of being enemies, are against fighting each other.
Now, the internal drive to reform is visible in all those MDBs created since the 1960s, all of them being more or less patterned after those Bretton Woods institutions in terms of governance structure, modus operandi, and principles and rules of operation. Perhaps the essential rationale for reforming the MDBs, an idea which is certainly appealing to many people directly or indirectly involved, is to render them more effective, and efficient, without losing their relevance.
MDBs' intrinsic motivations derived directly from the urge to maintain their vigor and vitality at a time when their relevance to the current global economy is put to a severe test when an increasing number of emerging market economies could have access to domestic capital markets for funding their development programs, and depend less and less on financing from MDBs.
When addressing a recent meeting in Washington, D.C., I raised a question: who needs whom more? Emerging market economies (EMEs) need MDBs more, or the other way around? My answer is that EMEs do not need MDBs as much as many people tend to imagine. Over the last couple of decades, the rapid growth of these Asian economies is not just a regional success story, but a testament to the power of multilateralism. By opening up markets, fostering trade, and encouraging the free flow of capital, regional and global cooperation has enabled these countries to harness their comparative advantages and achieve remarkable progress. This interconnectedness has not only fuelled economic growth but also facilitated the exchange of ideas, technology, and culture, enriching societies worldwide.
A direct consequence may be a bit gloomy to MDBs: unless they improve their service, cut the red tape, and prove themselves more responsive, those EMEs will be turning rightfully to capital markets, be they domestic or international, for funding. It would be a bit worrisome if MDBs do not have such a sense of crisis.
Emerging market economies are the backbone of MDBs. They are just like the middle class in a society; they serve as the ballast in an ocean-going vessel. While MDBs do not provide financial resources to EMEs for their development, these economies are important clients for MDBs, as they ensure the high quality of MDBs' assets and contribute to their sound financial foundation.
Financial institutions are different from other businesses, in that financial institutions need high-quality clients, whereas real-sector businesses only need to sell their products and services, and their buyers' financial conditions are not of their interest or concern at all. We in the AIIB can afford to provide financial resources to low-income and low-rated members in Asia and other regions, thanks to the high-quality assets we have built up through our lending to EMEs.
MDBs have a special role to play, that is, to serve as the platform for multilateral cooperation at a time of geopolitical tensions. The challenges of geoeconomic fragmentation extend beyond economic growth. They also threaten our collective efforts to combat climate change. Climate change is a global issue that requires coordinated action and shared solutions. Disruptions in trade and reduced international cooperation can slow down the deployment of green technologies and impede progress toward our climate goals. The economic opportunities presented by the green transition could become its own victim if we fail to maintain open and collaborative international relations.
It is imperative that we overcome these tensions and work together to combat climate change. We need avenues for trade, capital, and knowledge to continue flowing. While it's crucial to support the growth of local industries, we must avoid pitfalls of protectionism that can hinder global cooperation and technological exchange. The key is to strike a judicious balance.
At this crucial, critical juncture, the role of multilateral institutions like AIIB and forums like the EMF becomes even more essential. These institutions provide platforms for dialogue, cooperation, and coordination, helping to bridge differences and align efforts toward common goals. By fostering multilateral cooperation, they can mitigate the adverse effects of fragmentation and ensure no countries are left behind.
Perhaps I need to explain the EMF. The Emerging Markets Forum is a meeting such as what we are having today.
Multilateral development banks, in particular, have a pivotal role to play. AIIB was established shortly after the Paris Agreement was entered into in October 2015. The conceptualization of this bank incorporated the lessons and experiences of the legacy institutions. No institution can be authentic by trying to imitate some others' model—the best copy is nothing but imitation, not the original. AIIB remains in the gene pool of MDBs, but it is somewhat different from others. Reform was done while it was still a fetus. AIIB was born a reformed institution.
The AIIB's governance structure represents rebalanced power between the developing members and developed ones. Such a rebalance does not downplay the traditional role of developed members in this institution, even though they are the minority shareholders as a group. We in the AIIB do not resort to voting; instead, we make decisions through consensus reaching. Efforts must be exhausted before the directors have to vote, but their efforts have so far never been exhausted, and I do not think they will.
As you know, we now have 110 members. The majority of the shareholders are developing countries. Developed countries are just the minority, but why do developed countries want to join this institution even though they have minority shareholding? Because their voice will not be adversely affected because of the minority—we work together to reach a consensus.
That is why partnership is at the heart of AIIB's business model—partnership among members in our bank and partnership with our peers. At a time when the world is calling on MDBs to do more, for us to act together as a global system, to stave off the specter of weakly interconnected global threats, I consider it our bank's duty to work to strengthen our relationship with our multilateral peers and multilateral systems we all depend upon for global progress. Any specter, if not imagined, must emanate from something corporeal. Human society is confronted by threats which are real, not imagined. For instance, the consequences of climate change are all too palpable.
Furthermore, AIIB has been a proponent of the MDB reform agenda—MDBs must do more to work better as a system and to leverage our collective balance sheets without relying on further capital increases from our shareholders. In particular, as MDBs, we need to further develop innovative financial instruments and mechanisms that de-risk and attract private investors. We must enlist all partners, whether public development banks, sovereign wealth funds, state-owned enterprises, or private sector investors. By developing new tools and instruments, this will also require scaling up local currency financing. Without affordable hedging instruments, many local private-sector projects will not be bankable.
While the challenges of geoeconomic fragmentation are significant, the continued efforts of multilateral institutions and MDBs offer a pathway to overcome these obstacles; solidarity among MDBs is at a level I have not seen over the past 40 years since I first sat on the World Bank's board in the late 1980s and early 1990s. At a time when global geopolitical tensions and political fragmentation are on the rise, MDBs are working together as an enduring counterbalance for continued cooperation toward a better economy. By working together, we can maintain the momentum of globalization, drive sustainable development, and combat climate change. The strength of our cooperation will determine the success of our collective future.
When it comes to multilateralism, I would emphasize the point that MDBs should not be the only player in the global arena. All the shareholders and stakeholders should join hands in addressing the burning issues faced by humanity.
Thank you very much and let me now shift to Chinese.
[Speaking in Chinese]
布雷顿森林体系诞生了 70 年，这一个体系在推动战后经济复苏和全球合作发挥的重要的同时，也暴露成员代表性的不平衡、内在稳定性不够、全球公共产品供应链不足等缺陷。也就是在这一年，中国和其他 56 个国家一道，本着完善全球经济治理体系的共同愿望，启动了筹建亚投行这一开创性的工作。
On the 70th anniversary of the Bretton Woods system, while the system was instrumental in fostering post-war economic recovery and global cooperation, it also exposed shortcomings such as imbalanced member representation, insufficient internal stability, and an inadequate supply of global public goods. That same year, China, alongside 56 other nations, initiated the pioneering work of establishing the AIIB, driven by a shared desire to improve the global economic governance system.
中国领导人从筹建亚投行之初就对亚投行寄予很高的期望。习主席系统阐述了中国倡议创建亚投行的初衷、亚投行的初心和使命、亚投行运营管理原则等重大问题。习主席指出，倡议成立亚投行，使中国承担更多国际责任，推动完善现有国际经济体系、提供国际公共产品的建设性举动，有利于促进各方实现互利共赢。
From the very beginning of the initiative to establish the AIIB, Chinese leaders placed high expectations on the institution. President Xi Jinping systematically elaborated on the original intention behind China's proposal to create the AIIB, its founding objectives and mission, and the principles of its operation and management. He pointed out, "The initiative to establish the AIIB is a constructive move. It will enable China to undertake more international obligations, promote improvement of the current international economic system, and provide more international public goods. This is a move that will help bring mutual benefits and win-win outcomes to all sides."
成立亚投行的目的是推动亚洲地区基础设施建设和互联互通，深化区域合作，实现共同发展。亚投行秉承开放包容的区域主义，欢迎所有有兴趣的国家积极参与，实现合作共赢。亚投行应该成为构建人类命运共同体的新的平台，成为推进南南合作和南北合作的桥梁和纽带。亚投行应坚持国际型、规范性、高标准，确保专业运营，高效运作，透明廉洁，成为 21 世纪的新型的多边开发机构。
The purpose of establishing the AIIB is to promote infrastructure development and connectivity in the Asia-Pacific region, deepen regional cooperation, and achieve shared development. The AIIB is committed to an open and inclusive regionalism, welcoming all interested countries to actively participate and achieve mutual benefits. The AIIB shall become a new platform for building a shared future for mankind, serving as a bridge and link for advancing South-South and North-South cooperation. The AIIB shall adhere to high international standards, ensuring professional management, efficient operations, transparency, and integrity. It aims to become a new type of multilateral development institution in the 21st century.
今年是布雷顿森林体系建立 80 周年纪念，也就是亚投行筹建和运营第九年，我们明年是庆祝十周年。在各个成员的共同努力下，亚投行已经成为拥有 110个正式的成员，具有广泛和平衡代表性的重要全球性的多边开发机构，覆盖全球 81% 的人口和 65% 的GDP，投资项目现在达到了286个，业务规模超过 550 亿美元，汇集 37 个成员，我们有多少人？区区 600 人。
This year marks the 80th anniversary of the Bretton Woods system, and the 9th year since the AIIB's establishment and operation, with the 10th anniversary celebration set for next year. Thanks to the collective efforts of its members, the AIIB has become an important global multilateral development institution with 110 official members, with broad and balanced global representation. It covers 81% of the global population and 65% of global GDP. The bank currently has 286 investment projects, with a business scale exceeding 55 billion USD. And yet, how many staff members do we have? Only 600.
更重要的是亚投行所遵循的共建、共商、共享、平衡、开放、包容的合作范式为弥补全球治理赤字和发展赤字提供了有益的探索。在这一个平台上，发展中成员有 80 多个，投票权超过70%，是机构的主要力量，但重要的发达国家也均有代表。
More importantly, the cooperation paradigm followed by the AIIB—based on co-construction, co-discussion, sharing, balance, openness, and inclusiveness—offers valuable insights into addressing global governance and development deficits. On this platform, more than 80 developing members hold over 70% of the voting rights, making them the main force of the institution, while important developed countries are also represented.
中国作为第一大股东，投票权达到26%，什么意思呢？就是特别多数， 2/ 3 的成员， 3/ 4 的投票权。就是要修改章程，选举行长、接纳新成员、开除成员重大政策必须要 75% 的选票，中国一票就可以把他们给否了。西方成员的集体投票也超过了25%，他们一票也可以给否了。在重大事项的决策上都有否决权。
As the largest shareholder, China holds 26% of the voting rights. What does this mean? It means that because an absolute majority vote—approval from two-thirds of the member countries and 75% of the votes—is required for important decisions such as amending the charter, electing the president, admitting new members, or expelling members, China's voting power alone is sufficient to veto these decisions. Similarly, the combined votes of Western member countries exceed 25%, granting them the same veto power. Both have veto power in major decision-making matters.
每一个成员不论大小或贫富，都有机会在机构运营和管理当中发表他们的看法和诉求。提出的想法和建议只要有道理、符合实际需求，有助于增进共同利益，都会被采纳和实施。
Every member of the AIIB, regardless of size or wealth, has the opportunity to express their views and demands in the operation and management of the institution. Any ideas or suggestions that are reasonable, meet actual needs, and help enhance mutual benefits will be adopted and implemented.
亚投行筹建和运营的过程中，主要股东有领导力、愿担当，中小成员有尊严、愿积极参与，切实做到了大家的事大家商量着办，真正体现了多边主义精神。这也使得亚投行在复杂的地缘政治环境当中，能够有效地凝聚各方共识，不断地排除干扰和险情，始终将注意力聚焦在合作应对气候变化、推动可持续发展、加快基础设施互联互通等全球重大发展的议程上，发挥了推动南北合作和南南合作的桥梁和纽带的作用。所以这段话我用中文讲，不要 lost in translation。
Throughout the establishment and operation of the AIIB, major shareholders have demonstrated leadership and a willingness to take on responsibility, while small and medium-sized members have maintained their dignity and actively participated. The AIIB has genuinely embodied the spirit of multilateralism by allowing every member to discuss and address issues that affect all members. This approach has enabled the AIIB to effectively unite various parties in a complex geopolitical environment, continuously eliminate distractions and risks, and keep the focus on the global development agenda, such as cooperation to address climate change, promoting sustainable development, and accelerating infrastructure connectivity. The AIIB has played a vital role as a bridge and link for South-South and North-South cooperation. I have delivered this section in Chinese so that my message is not lost in translation.
[Speaking again in English]
Now, back to English. Finally, I would like to emphasize the need to address the challenges faced by all of us in a pragmatic way, recognizing the reality and approaching truth in an honest manner. I got some inspiration from Professor Hannah Arendt. She commented on the behavior of the Sophists, that is, those who indulge in speeches, reasoning, and moral skepticism.
Plato, in his famous fight against ancient Sophists, discovered that their universal art of enchanting the mind by arguments had nothing to do with truth but aimed at opinions which by their very nature are changing and which are valid only at a time of agreement and as long as the argument lasts. He also discovered the very insecure position of truth in the world, for from opinion comes persuasion, and not from truth. The most striking difference from ancient and modern Sophists is that ancients were satisfied with the passing victory of the argument at the expense of truth, whereas the moderns want a more lasting victory at the expense of reality. In other words, one destroys dignity for human thought, whereas the others destroy the dignity of human action.
In plain English, ancient Sophists enjoyed debating and trying to induce people to believe in their views, which have nothing to do with truth, whereas modern Sophists want to prove themselves constantly right regardless of reality. What we need is both truth and reality. It's time we walk out of such a primitive jungle of arguments and try to work out tough issues by standing firmly on the ground of reality.
The final question I would raise in conclusion: what should we offer on occasion of the 80th anniversary of Bretton Woods? Our adherence to multilateralism, nothing but multilateralism. Thank you very much.
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