In These New Times

At the Group 20 Finance Ministers and Central Bank Governors Meeting held in Gyeongju, the Republic of Korea on Oct. 22-23, countries reached consensuses on the International Monetary Fund (IMF)’s quota reform, Europe agreed to give up two of the eight or nine seats it controls and shift 6 percent of voting rights at the Fund to dynamic developing economies.

Meanwhile, the “BRIC” countries (Brazil, Russia, India and China) will be promoted to the ranks of the Fund’s top 10 share holders, while China’s share will rise to the third place from its previous sixth position.

This is a historic accord reached at the G20 Finance Ministers and Central Bank Governors meeting. As a founding member of the IMF upon its establishment, China’s voting rights share was the third largest after the United States and Britain. However, China’s share has dropped to the sixth place today, which is obviously incompatible with the nation’s current status as the world’s second largest economy.

The Fund’s quota reform poses another far-reaching international economic and financial reform after the reform of the World Bank’s governance, reflecting from a side aspect change of the global political and economic map as well as a reform to adapt to the reality. Although it is an initial, “small step” in the process of the global monetary and financial setup reform, the Fund’s quota reform is at a critical juncture and of vital historical significance.

First, the IMF share re-apportion shows that the economic power of the Fund is shifting eastward, particularly to the emerging and developing nations represented by the “BRIC” countries; it also means that their economic growth and contributions to the global economy have won recognition of the world community.

Second, the Fund’s quota reform will help make the international economic order more rational. It has taken a big step to doing away with the longtime monopoly of voices by Europe and the U.S., so as to enable developing nations to have a bigger voice at IMF and facilitate them giving scope to a better role in global economic and financial affairs; this is conducive to building a fair, just, inclusive and orderly international monetary and financial system, and laying a sound basis for the ultimate realization for developed and developing nations to acquire equal access to the Fund’s share reform objectives.

Thirdly, in this round of reform, China’s share in IMF has somewhat risen; this is meant not only to increase its capital contribution with a bigger say in its voice at the Fund, but to assume its greater international obligations. So, it is conducive for China to further strengthen cooperation with the Fund to play a better constructive role in seeking the rights of other emerging market economies and developing nations, so as to enhance China’s position and influences; China in the meanwhile will use IMF as a platform to create favorable external environment for its economic development.

Of course, the IMF shares re-apportion will not change the basic framework of the Fund and the contrast strength among nations; the IMF quota remains unchanged for the United States that still has a veto power, and it will continues to lead and extend the IMF order. So, the irrational situation should alter as soon as possible, and a clear timetable and roadmap for the reform are urgently needed.

To date, the world is moving toward a new, rapidly evolving multi-polar direction, developing nations are playing an increasingly vital role in world economic recovery and economic growth, and IMF must pace up its own reform to adapt to this new reality. Moreover, for the Fund’s reform in years ahead, a fair, reasonable qualification and selection process for the IMF President should be laid down along with a scientific quota calculation method and a dynamic adjustment mechanism reform, so as to stem any country from accessing to a veto power. Only by so doing, can the Fund governance and decision-making mechanism conform more to the requirements for the rapid growth of multi-polar world economy.

By People’s Daily Online and contributed by Professor Shi Jianxun, an especially PD-invited guest commentator and an ace finance expert with Shanghai-based Tongji University