China Perspective

IMF's quota reform to increase global confidence

(Xinhua)
Updated: 2010-10-09 21:05

WASHINGTON - Giving emerging economies a bigger say at the International Monetary Fund (IMF) would broaden its representation and boost global confidence but it should not be linked to taking greater responsibility in the global economy, Governor of the People's Bank of China Zhou Xiaochuan said Friday.

"Just recently, there is a voice that connects IMF's quota reform with other issues. This is not a mainstream voice in the past two years," Zhou said in response to a question by Xinhua at a media briefing during the annual meetings of the IMF and the World Bank here.

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"The mainstream voice is to let the institution be more representative, and let it be more trustworthy to various countries, especially emerging market and developing countries," Zhou said, noting there was no necessary connection between quota adjustment and shares of responsibility.

Changing the quota of votes at the IMF is one of the key topics at the IMF annual meeting this year.

IMF Managing Director Dominique Strauss-Kahn said Friday the fund's balance of power was changing, reflected by changes in quota and chairs in the IMF.

The Intergovernment Group of Twenty-Four (G24), a grouping of 24 developing countries, on Thursday called for the IMF to accelerate its process to a bigger quota to developing countries.

Strauss-Kahn's remark echoed US Treasury Secretary Tim Geithner's speech earlier this week, when he called for emerging economies to take more responsibility in the global economy.

Zhou said China had already been taking responsibility for the global economy.

China had pledged $50 billion to the IMF after the Group of 20's (G20) London Summit in 2009, which means that "China thought not only of its own interest, but also of global economic cooperation to tackle the global financial crisis," he said, adding that China had tried its best to provide support and help to individual disadvantaged countries.

Regarding the world economic imbalance, Zhou said the Chinese philosophy held that balance was relative, while imbalance was absolute. According to the theory, the existence of economic imbalance in the world, which can be adjusted by market mechanisms, was no strange thing.

"For China, we have a package to bolster domestic demand, which includes boosting household consumption, deepening social security reform, expanding investment in poorer areas, as well as reforming the exchange rate regime," he said.

As for the uproar over China's currency, Zhou said there were some ulterior reasons behind those countries pushing for a stronger Chinese currency.

Some countries, whose economic recovery had not been smooth and whose unemployment remained high, and were consequently facing greater pressure at home, might find it convenient to divert attention by pointing at other countries' currency rate regimes, he said.

"But nobody knows whether it is that helpful," Zhou said, adding, "We think that this issue, along with that of connecting quota reform with shares of responsibility, may gradually fade out along with the recovery. When the economy gets better, job creation increases, such issues would no longer be the focus of attentention," he said.

China needed to carry on its exchange rate regime reform, but "will do it in a gradual way," Zhou said.

He also expressed confidence the IMF would meet its goal of completing the quota adjustment and structural reform before January, 2011, as set at the G20 Pittsburgh Summit in 2009.