China's increasing engagement in global financial governance since the 2008 crisis has potentially significant ramifications for global financial rule‐making and standard‐setting. This article presents a novel analysis of China's growing influence on the international stage and its consequences for the financial rules and standards that constrain policy makers in developing countries. We draw upon literature from international political economy and development studies to develop a framework for assessing whether China's rise has catalyzed a shift in global financial governance towards a tailored approach that responds to country‐specific developmental circumstances and needs. We argue that China's status as a rising power that still has idiosyncratic developmental priorities is leading it to push for rules and standards that are more flexible and sensitive to specific national development conditions. We illustrate this argument in three case studies, deploying the framework to explain variation in the post‐crisis evolution of rules in prudential banking regulation, capital flow management, and debt sustainability surveillance.
While insisting on cross‐border harmonization in financial rules and standards is a convenient choice for the international financial institutions (IFIs), they should consider moving further away from a one‐size‐fits‐all approach that unduly constrains the policy choices of developing countries.
China's growing influence in global financial governance enables developing country governments to exert more discretion in tailoring financial policies to their development needs and idiosyncratic circumstances.
As financial policy discretion is a mixed blessing, policy makers need to devise guidelines that harness the benefit of greater autonomy while safeguarding against the risk of a ‘race‐to‐the‐bottom’.
Decision‐makers in IFIs can take lessons from China's domestic development challenges to formulate a unique set of principles for sound financial management that is agnostic regarding the institutional setup to achieve it.