China has entreated member nations of the IMF to give more power to emerging markets. The request was brought about after US lawmakers blocked the IMF’s move to reorganise power structures in favour of emerging markets. The change would give countries such as China, Brazil and India more weight in relation to the emergency lender’s operations.
Such restructuring has been in the pipeline for over three years and the US remains the only country not to have authorised the necessary changes. The Obama administration has continually pressured Congress to sign off on these changes, but Republicans have refused to cooperate.
Hong Lei, spokesman for the Chinese Foreign Ministry, indirectly criticised the US for its lawmakers’ inability to agree upon funding measures need to move forward. “Quota realignment is a significant decision made by the IMF,” said Hong in a press conference held on Wednesday. “Members of the relevant organization should step up efforts to implement the plan for quotas and governance reform and give greater representation and bigger say to emerging markets and developing countries in international financial institutions.”
In challenging the long-standing power structure of the US and Europe, China could be looking to create new alliances with developing markets
“I think the whole issue with the reform is political rather than economical,” said Managing Director at Global Intelligence Alliance UK, Aleksi Grym. When asked what the short term effects of such quota reforms would be, he replied, “none probably. It’s effect rather than cause. It’s really just a power play between the US and China.”
Developing nations have historically been suspicious of the IMF. In the early 1990s, the fund promoted privatizations that made the transition from communism more difficult and a few years later it cut budgets, worsening the debt crises in Latin America and Asia.
Such structural reforms are being discussed now that would position China as the third largest IMF member, while loosening the US’ tight hold on the fund’s voting shares. China’s championship of emerging markets might reach beyond an immediate increase in power for itself. “If you think about the IMF and its role, it’s all to do with crisis management. This is about how much influence China will have on emerging markets in terms of crisis, development and aid,” said Grym. Although the quota reforms have not yet been ratified, China has already begun exercising influence in future markets.
“China has offered selfless assistance to Africa mainly in the fields of economic and social development,” said Hong. “[China has] helped Africa earn development fund and promoted Africa’s ability of self-development and ability of bargaining in the international market.”
Greater say over the IMF’s quotas could have much larger implications in the future. Though China’s objectives seem clear, there could be another driving force. In challenging the long-standing power structure of the US and Europe, China could be looking to create new alliances with developing markets.