| Chance to Reform IMF in EU-US Split?
| Wednesday, March 25, 2009
|By Antoaneta Bezlova
The split between U.S. and Europe and the deepening economic downturn have provided a distraction from the debate about China’s role in creating global economic imbalances that had dominated economic circles in late 2008.
But to China’s chagrin, the divergence of opinions has also pushed the summit agenda towards discussing an increase in financing to the IMF, instead of debating the much anticipated reform of the financing body.
"What should have been the core issue of the summit - how to reform the IMF- has now been left by developed nations to fall by the wayside," Xu Mingqi, economist with the Shanghai Academy of Social Sciences, told the financial conference.
Xu argued that instead of debating how to redistribute voting rights inside the body, world leaders should decide on the creation of a monetary mechanism to be applied to countries issuing hard currencies that would work to protect the interests of global investors.
A similar concern was voiced by Chinese Premier Wen Jiabao during his once-a-year meeting with the press last week. Wen said he was "worried" about the safety of China’s assets in the U.S., and asked Washington to provide guarantees that it would protect their value.
China is the largest holder of U.S. treasury bonds. As of Dec.31, the volume of the country’s investments had reached 696 billion dollars.
While China also grapples with the implications of slumping global demand for its export-driven economy, Beijing sees the crisis as an opportunity to advance its own priorities of raising the country’s global profile and acquiring more say in international financial institutions.
Over the last few months, Beijing has taken the first steps towards transforming its controlled, partially convertible currency into a regional currency by pushing loans and some trade settlements in yuan across Asia.
At the same time, China has said that it would use its huge foreign exchange reserves to contribute to the bailout fund of the IMF on the condition that its share of voting rights in the international body is increased.
Currently, the voting rights of the BRIC countries, namely Brazil, Russia, India and China, in the IMF are 9.62 percent of the total, together accounting for about half of the voting rights that the U.S. holds.
|posted by citizen jerk @ 7:52 AM