Chinese news: maybe china has bigger say in the restructured IMF

China may surpass Japan to have the most say after the United States in the International Monetary Fund (IMF) after a structural reform of the fund's governance, a senior IMF official said this Wednesday.

"There is a possibility that China's quota will rise to second, when the reform concludes by 2011," Daisuke Kotegawa, IMF's executive director for Japan, said to China Daily about it.

Each member country is assigned a quota, based on its relative size in the global economy; and the quota determines its maximum financial commitment to the IMF as well as its voting power.

China's current IMF quota is 3.72 percent, the sixth largest in the world. And at the same time The US and Japan hold 17.09 and 6.13 percent as comparison.

The IMF decided to reform its governance structure in April to reflect the growing economic clout of emerging economies. The review of quotas is expected to be completed by January 2011.

Sun Lijian, dean of Fudan University's Economics School, said: "A meaningful reform should not only increase the voting power of developing nations, but also remove America's de facto veto power in the IMF.

"If the US continues to dominate IMF decisions, there will be little change in the international financial system."

Up to now, some major decisions at the IMF need 85 percent of the vote but the US' 17 percent vote gives it effective veto power.

IMF Managing Director Dominique Strauss-Kahn said last month that he would support reducing the majority needed to make major decisions at the fund from 85 percent, noting that the US veto power makes some decisions difficult to make.

The Group of 20 leaders agreed to triple the IMF's funds to $750 billion from $250 billion in the April summit held in London so it can play a more effective role in tackling the global financial crisis.

Hu Xiaolian, a vice-governor of the People's Bank of China, told an April 10 media briefing in London that China is in discussions with the IMF and will contribute to the fund by buying its bonds denominated in special drawing rights (SDRs).

The IMF created the SDRs in 1969 to support the Bretton Woods' fixed exchange rate system. Their value is based on a basket of international currencies made up of the dollar, the euro, the Japanese yen and the British sterling.

But Liu Jing, associate dean of Cheung Kong Graduate School of Business, is not convinced that China needs a substantially bigger role in the IMF.
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Source: China Daily