javier guzman calafell : global economic governance – recent progress and remaining challenges remarks by mr javier guzman calafell, deputy governor of the bank of mexico, at the panel on “ shift in global financial governance and china ’ s financial reform ”, organized by the shanghai development research foundation ( sdrf ), the reinventing bretton woods committee ( rbwc ), the pbc school of finance, tsinghua university ( pbcsf ), the shanghai advanced institute of finance ( saif ), and the triffin international foundation, shanghai, 31 october 2015. * * * the views expressed in this document are strictly personal. let me start by thanking the organizers for the kind invitation to participate in this important conference. a number of formal and informal organizations have been created over the course of more than eight decades, and particularly since the great depression, to provide strategic direction and a solid basis for collective action to face emerging challenges and achieve sustained economic growth at a global scale. the international monetary fund ( imf ), the world bank, the bank for international settlements ( bis ), the general agreement on tariffs and trade and its successor the world trade organization ( wto ), as well as informal country groupings such as the g7 first and the g20 later on, have been at the center of this global economic governance framework. although this model has been fundamental to prevent a reemergence of hazards observed in some years – like those that erupted in the interwar period – and to foster economic development worldwide, the need for a major overhaul of the global economic governance framework has become increasingly evident. three fundamental changes to the world economic landscape are worth highlighting in this respect. • the role of emerging market economies ( emes ) in the global economic and financial system has become far more important. the share of these economies in world gdp has increased substantially over the course of the last decades, as it rose from slightly over 36 per cent in 1980 to an estimated figure of almost 60 per cent in 2015. 1 emerging asia and, in particular, china are prominent examples in this regard, not only because of the sheer size that their growth dynamics have allowed their economies to reach, but also because of the impact this has had on the economic well ‐ being of their population. for instance, the ratio of gdp per capita ( ppp ‐ adjusted ) in the united states to that in emerging asia and china, increased from around 22 and 41 in 1980, respectively, to levels around 5

rates, while total investment has been falling, particularly that related to public works. investment expenditure cuts have been the main avenue for fiscal adjustment in the face of lower international oil prices. confidence indicators imply that economic activity may continue to wane. in particular, declining producer confidence may signal further potential weakening in investment in the short term. analysts ’ consensus forecasts are for moderate economic improvement in 2017 for the world and u. s. economies, and to a lesser extent for mexico, where growth is foreseen rising from an estimated 2. 1 percent this year to 2. 2 percent in the next. it is worth noting that the outlook for mexico ’ s growth next year is for a return of growth to approximately the aforementioned long ‐ term average, obviously insufficient to meet the requirement of significantly improving general living standards. 3 this necessity and the recognition that the main long ‐ term growth problem in mexico is stagnant productivity led the country to undertake an ample set of structural reforms, now being put into place. their benefits depend crucially on the quality of implementation, and will fully be felt only in the medium term. in addition, mexico ’ s growth scenario faces downside risks. in the short term, there is the potential for a greater slowdown in the global and u. s. economies, particularly manufacturing, as well as a larger ‐ than ‐ expected fall in crude oil output, and further deterioration in consumer and producer confidence. in the medium term, global ‐ wide protectionist tendencies are on the rise. finally, again on the domestic front, obstacles to adequate implementation of structural reforms could arise. heightened risk aversion since 2014, rising risk aversion has hit emerging markets especially hard in terms of lower capital flows and asset prices. sources of concern have included economic analysts ’ estimates for global and u. s. gdp are, respectively, 2. 5 and 1. 5 percent in 2016, and 2. 8 and 2. 2 percent in 2017. see consensus forecasts and latin american consensus forecasts, october 2016. and political issues, such as chinese economic health and policy actions there, and brexit. however, a persistent factor during the last few years has been uncertainty over the degree of monetary accommodation in advanced countries, particularly the united states. central banks have become more proactive, and their communication and actions have sometimes generated undue volatility. more importantly, increasingly loose, sustained, and far ‐ reaching monetary stances in developed countries confront at least two