China’s integration into the international monetary system (IMS) has been a complex, evolving story with many angles and aspects. Some are specific to steps that China has taken, or has planned, involving reforms both domestically and internationally. Others are specific to the overall functioning of the IMS, where the policies of all major economies have a bearing on the manner and efficiency of adjustment in the international flow of goods, services and portfolio investments. Much has been written on all of this. The approach taken in this report is of a different slant — one that looks at these issues from the perspective of the IMS as a payments system. A payments approach has two distinguishing features, which provide a new perspective on how to think about the practical and policy issues facing China, and are central to the functioning of today’s IMS.

The core of this report, co-published by CIGI and the Institute for New Economic Thinking, is to lay out in practical terms the critical issues China must consider in managing its engagement with the evolving IMS. There are both opportunities and pitfalls, and the hope is that the payments approach used will highlight why, and how, China and the IMS should “talk to one another.” This must be a two-way dialogue. While the pace, direction and ultimate goals of reform are for the Chinese to decide, what they decide will have implications going both ways — for them and for the functioning of the IMS. Avenues must be found to discuss and assess these implications from a system-wide, cooperative perspective.