PBOC Backs Tougher IMF Watch on Rich Nations' Fiscal Risks

People’s Bank of China (PBOC) Governor Pan Gongsheng has thrown Beijing’s support behind closer International Monetary Fund (IMF) scrutiny of fiscal risks in the world’s biggest developed economies, Reuters reported on Saturday, as a sell-off in government bonds dominated the IMF and World Bank annual meetings in Bangkok.

Addressing the International Monetary and Financial Committee, the IMF’s policy-steering body, Pan said China backs the Fund in strengthening its surveillance of fiscal risks in “major advanced economies” and the spillovers those risks create for other countries, according to a PBOC statement cited by the news agency.

He also pressed the IMF to broaden how it assesses global imbalances, giving greater weight to financial factors such as cross-border capital flows rather than focusing mainly on trade. Pan reaffirmed China’s support for the multilateral trading system and said Beijing opposes protectionist measures in all forms.

Bond market turmoil

The remarks come amid a global bond market rout driven by rising borrowing costs and persistently large fiscal deficits in major economies, with investor nerves further frayed by heavy capital spending on artificial intelligence, Reuters noted. Briefs Finance reported that the IMF’s latest financial stability assessment identified the surge in yields as the biggest near-term risk to the system.

Pan had struck a similar tone at a meeting of G20 finance ministers and central bank governors in Bangkok on Thursday. According to the South China Morning Post, he warned that sharp swings in some sovereign bond markets, together with a growing risk of a correction in AI-linked asset valuations, have increased financial vulnerabilities. He also argued that exchange-rate moves on their own cannot correct global imbalances, and that surplus and deficit economies should share responsibility for reaching what he called a “dynamic equilibrium”, Reuters reported via The Standard.

Pushback over China’s surplus

Beijing’s position puts the spotlight on fiscal policy in the West at a time when China’s own trade surplus is under growing international scrutiny. IMF Managing Director Kristalina Georgieva said earlier in the week that China needs to move away from export-led growth towards domestic consumption, according to Reuters.

Washington has also turned up the pressure. US Treasury Under Secretary Erin Browne said the IMF should be more assertive in calling out what she described as distortions from non-market practices, particularly those associated with China, according to reports from the meetings. Treasury Secretary Scott Bessent did not attend, and the G20 gathering ended without a joint statement, Briefs Finance reported.

European leaders have meanwhile urged a stronger yuan. The PBOC said earlier this month that it has neither the need nor the intention to gain a trade advantage through currency depreciation, and that China operates a managed floating exchange-rate regime.

What’s next

Chinese officials signalled further steps at home and abroad during the meetings. Finance Minister Lan Foan said China will pursue a more proactive fiscal policy, while PBOC Deputy Governor Tao Ling told a Shanghai forum that Beijing plans to expand offshore yuan liquidity through measures including cross-border yuan lending, panda and dim sum bonds, and additional currency swap lines, the SCMP reported.

With the US using its G20 presidency to focus on non-market practices and Beijing pointing to fiscal excess in advanced economies, the debate over who bears responsibility for global imbalances looks set to intensify. For markets, the more immediate question is whether the IMF’s warnings over sovereign debt translate into steadier bond yields in the weeks ahead.