China may offer US$100 billion in additional financing to the International Monetary Fund during the upcoming G20 summit in London, giving the agency more ammunition to fight the unfolding global financial and economic crisis, a senior economist said on Monday.
The prediction by Yuan Gangming with the Chinese Academy of Social Sciences (CASS), one of the country's top think tank institutes, coincided with an official pledge of willingness to provide more cash to the IMF.
"If the IMF issues bonds to finance itself, China will actively consider buying" those bonds, Hu Xiaolian, vice governor of the People's Bank of China (PBOC) told a press conference in Beijing on the same day.
Hu's remarks showed that China, as a major power, is willing to share the responsibility in tackling the world financial turmoil, Professor Shi Jinchuan, dean of Zhejiang University's College of Economics told chinadaily.com.cn in a telephone interview.
China's gesture came one week before the heads of states of the 20 industrialized and developing nations meet early April in London to find ways to tackle the global financial and economic crisises which may drag the global economy into recession for the first time in sixty years.
Reform in the IMF, established after the World War II, is expected to be a focal point, as critics say the agency, failed to act effectively to deal with the current crisises and does not reflect the realities of the 21st century, namely, the growing importance of the developing countries.
Currently, the EU member states have 32 percent of the IMF voting rights and the United States have 17 percent, compared with China's 3.7 percent and India's 1.9 percent.
China surpassed Germany to become the world's third largest economy in 2007 and is expected to grow 6.5 percent in 2009, according to the latest estimates by the World Bank, when the developed countries are in a synchronized recession. India is also expected to maintain a positive growth.
At the meeting of G20 finance ministers two weeks ago,China, India, Brazil and Russia demanded more voting rights be given to developing nations at the London summit, which won the support of Australian Prime Minister Kevin Rudd.
China should have a more central role in the IMF, with its voting stake increased, Australian media cited him as saying. He pledged to work toward that end during the London summit.
The IMF is having a US$550 billion financing shortfall in the developing world which was hit hard by the crisises via plunging exports and capital outflow, while China is one of the few countries in the world sitting on huge piles of cash.
"It shouldn't be a big problem for China to invest US$100 billion in IMF," Professor Yuan Gangming of the CASS said in a telephone interview, as the country has a foreign exchange reserve of about US$2 trillion, albeit the growth slowed down dramatically due to falls in exports.
However, countries are divided over whether any new financing to the IMF should be offered in the form of increased quota for capital providers, or pure loans, as the former will dilute other countries' voting rights.
China would like to see more voting rights after contributing more, while the US, Japan, and EU want to keep their say in the IMF.
However, Yuan did not regard that as a big issue. "The voting rights issue can be put aside for a while," he said. "The imperative is that China should first take the initiative to actively present itself at the platform of IMF."
Zhejiang University's Professor Shi Jinchuan agreed, saying increased capital contribution will lay a foundation for China to demand greater say for developing countries within the organization.
(China Daily March 25, 2009)
