China should play a great role in IMF’s reform
The meeting of the finance ministers and central bank chiefs of G20 countries in March drew great attention. That’s because of the great influence of the global financial crisis.
The most important thing discussed at the meeting was how to deal with the financial crisis, rebuild the present financial system and reform the international financial organs.
Although the leaders have different opinions on many important decisions, the financial and central bank chiefs decided to increase the funding of the IMF and speed its reform.
The financial ministers of the four countries, Brazil, Russia, India and China called that the IMF has to take unprecedented reforms to cope with the ever-increasing global financial situation and the IMF should take effective measures to meet their needs in the world monetary body, too.
At the beginning the IMF was founded to reconstruct the international monetary order and the financial market which was destroyed during the 2nd world war. It was also aimed to balance international exchange rates and provide workable solutions to problems of global income and payment.
While the serious defects of the IMF caused the US-and-Britain-manipulated Bretton Woods institutions (the World Bank also belongs to it) to collapse slowly in spite of that it still makes great contribution to global economic stability and development. However, even after the destruction of the world financial system, international financial trade and negotiations went ahead under the IMF framework.
The world economy has changed a lot since the collapse of the Bretton Woods institutions and the end of the Cold War, and the present global financial crisis has increased the defects of the IMF. All these along with some important emerging economies have made the reform of the IMF necessary.
Naturally, those who presented at the weekend G20 meeting all thought that only reconstructing financial system can cope with the ongoing crisis better and avoid similar problems. While reconstructing or reforming the IMF not only means changing its purposes, functions, and operation and management system thoroughly, but also changing its US-and Britain-led power structure. For example, the Americans have had the final decision on the World Bank president’s selection and Europeans have chosen the IMF chief for years. This unreasonable practice also should be changed.
That means the already delayed reforms should give emerging developing economies more and proper say in IMF’s legislation work. In return, the renovation can help increase the IMF’s legitimacy.
An approved reform plan at an IMF board meeting last April, developed countries’ share of votes will decrease while those of developing nations will increase. However, the overall status of the developed countries remains more or less the same in the world monetary body which is not the exact reform the IMF should undergo if no changes be applied in the future.
It is a must to give developing countries more rights at the moment and China is a case in point which should gain its due place in the monetary body as the world’s third largest economy and the largest foreign reserves holder. Before that, China ought to play a more active role to reform the IMF. It should be involved to formulate the new rules for the world body. At the same time, it should make some reform to its own schemes. All countries involved have to make sure of the appropriate solution of the complex IMF reforms, with all parties’ interests in mind.
To better safeguard its and developing countries’ interests, China has to talk with US-led developed countries, and work together with other rising economies to play its due role. This will protect China’s interest and help reconstruct a fresh global financial market order.
Despite the global financial crisis, China’s economy has been operating well due to the government’s series of timely and practical macroeconomic policies. This has won China a favorable environment promising to lead the rescue role in the struggling world economy.
Earnestly, China is indispensable in any reconstructed global financial order. With the impending reconstruction of the IMF and the World Bank, China is wished to obtain just rights in proportion to its economic strength and contributions.
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