China calls for “critical” IMF reforms to reflect economic strength

The head of the People’s Bank of China, Pan Gongsheng, said Boao Forum for Asia last week that established international institutions need reform. He also appealed to central bank officials from Indonesia, Singapore and Mongolia to coordinate efforts to reflect the weight of Asian countries and emerging markets.

China’s central bank governor has reaffirmed Beijing’s desire to have more say in the international financial system to match its economic prowess, while calling for a regional monetary mechanism and improved bilateral cooperation.

A day earlier, IMF Managing Director Kristalina Georgieva had visited China’s central bank in Beijing, where she discussed the IMF’s quota reforms with Pan.

China has 6.09 percent of voting rights in the Washington-based fund, far lower than the US’s 16.5 percent, which effectively gives it veto power over major decisions at the IMF, which requires 85 percent of a proposal to be approved.

China’s quota is far lower than China’s share of global economic output, which is around 18 percent.

“Quota reform is critical to the IMF’s governance representation and legitimacy,” Pan told a panel on Asian financial stability.

The fund completed its last round of quota reviews in December, but no decision has been taken on any adjusted distribution.

According to President Xi Jinping’s vision of China as a financial superpower, which was rolled out at the central financial working conference in October, part of it would be to increase the weight of the world’s second largest economy in international finance.

China pursues a policy along two axes vis-à-vis the IMF. On the one hand, China, together with Russia and the other partners in the BRICS-10, are building parallel international financial institutions that can replace both the World Bank and the IMF, and on the other hand, China is demanding reforms in the IMF and doing so in such a way that the other strong the economies of Asia can join the team.

The US, for its part, will cling convulsively to its de facto right of veto, knowing that the entire Bretton Woods system that established US economic hegemony after the Second World War is about to collapse.