China should be actively involved in working toward the
International Monetary Fund's (IMF) quota and voice reform, which
could shape its members' positions in the global economy, experts
said.
However, experts also said the country should act cautiously and
avoid appearing "too aggressive" in demanding its own quota
increase.
The IMF declared during last month's annual meeting that all the
elements for an internal reform package, including increased
quotas, should be in place by its next annual meeting in April
2008.
The Washington-based multilateral financial institution said it
plans to increase its total quota by about 10 percent next year and
at least double basic votes to protect low-income countries.
Under the current regime, the distribution of quotas is
determined according to complex mathematical formulas. A member's
quota determines its voting power and access to IMF financing.
Every IMF member is automatically granted 250 basic votes, and
additional votes are meted out according to the country's quota in
the Fund.
Initiatives to change the system have been the subject of
sometimes bitter debate, with some industrialized member countries
reluctant to give ground to emerging market economies.
Old order
"The current makeup of IMF still reflects the global economic
order following World War II, with quotas greatly skewed in favor
of many European countries, while emerging economies are seriously
underrepresented and marginalized," said Zhang Ming, a researcher
at the Institute of World Politics and Economy with the Chinese
Academy of Social Sciences (CASS).
For example, China's gross domestic product (GDP) was more than
six times that of Belgium in 2006, while Belgium had a 2.16 percent
quota and China's quota was only 2.98 percent.
IMF took an initial, yet major, step toward overhauling its
quota share structure last September by increasing the quotas for
four developing economies: China, South Korea, Mexico and
Turkey.
China's quota was then raised from 2.98 percent to 3.72
percent.
"Last year's quota increase (for China) is more a symbolic move
than a substantial one, as the developed economies, especially the
United States and Europe, are still the dominant powers in the
Fund," said Tan Yaling, a senior researcher with the global
financial market department of the Bank of China.
"Nevertheless, it is a positive move, as it increased China's
say in the Fund and raised its international status," Tan
added.
Under the reform package announced last month, which IMF said
"should enhance the representation of dynamic economies whose
weight and role in the global economy have increased", China is
likely to book some quotas out of the 10 percent overall increase,
experts said.
"But even if China gets the expected quota boost next year, it
would still be more symbolic than substantial," Zhang said.
Despite the proposed quota increase for emerging and developing
countries, experts agree that the situation in which IMF is still
dominated by the United States and European countries will remain
unchanged in the "foreseeable future".
"It will be a long, incremental process before developing and
emerging countries as a whole gain sufficient voice in running the
institution," Zhang said.
But China can use its increased voice in the Fund to "try its
best" to push for policies that "take into account the interests of
both developed and developing countries", Tan said.
Greater say
For example, China can make use of its greater say to work with
other countries to cut the strings usually attached to development
assistance provided by the United States and European
countries.
"The quota and voice reform provides a good opportunity for
China to further expand its voting rights in the Fund," Tan
said.
World Bank, World Trade Organization and IMF are three pillars
international financial and trade organizations that serve as links
and hubs among the market economies with which China must engage,
CASS's Zhang said.
"If you cannot go it alone and must live side by side with them,
it's better to take an active role and try to have your opinions
heard according to their game rules rather than passively following
them.
"But China should move cautiously and not be too aggressive in
demanding the quota increase to avoid backlash from some
countries."
China's position on the reform is clear.
At last month's annual IMF meeting in Washington, Vice-Minister
of Finance Li Yong said: "The reform should be aimed at
significantly raising the overall quota shares of developing
countries - particularly for emerging market economies - and
strengthening the voice of the low-income countries in the
Fund."
Experts say China should be actively involved in the reform and
seek a quota size befitting its economic weight.
As the Chinese economy becomes increasingly integrated with the
world economy, maintaining global economic stability through
international institutions, such as IMF, is in China's self
interest, said Tsinghua University economics professor Li Daokui,
who once worked for IMF.
Stronger voice
"Therefore, China should have a voice in the Fund that is
commensurate with its weight in the global economy to safeguard its
own interests," Li said.
In recent years, developing and emerging market countries have
been increasingly active in pressing for quota reforms to give them
stronger voices in IMF policymaking.
"Today, emerging markets contribute to a better equilibrium in
global finance, while developed countries have contributed to
disequilibrium," Brazilian Finance Minister Guido Mantega said at
the IMF annual meeting in Washington last month.
Emerging markets, he explained, are also greater contributors to
world growth than developed countries.
"The conclusion of this is that we have a much larger economic
responsibility, and therefore, we need a larger representation in
the Fund," Mantega said.
(China Daily November 20, 2007)
