Business

Experts: More IMF reforms expected

By Ariel Tung (China Daily)
Updated: 2010-11-11 11:05

NEW YORK - A major overhaul of the International Monetary Fund (IMF) is shifting voting power to emerging nations, which economists said is merely the beginning of wide-ranging reform for the institution.

They also said that it is a clear sign that China's increasing global prominence is being recognized because it has the financial strength and diplomatic skills to play a more important role.

On Nov 5, the IMF agreed to shift more than 6 percent of its voting rights to leading developing countries, said IMF managing director Dominique Strauss-Kahn. China will have the third strongest voice, with a fund share of 6.5 percent that follows the 17.4 percent for the United State and Japan's 6.5 percent.

Strauss-Kahn said China in turn recognized that with its new voting power comes greater responsibility in the global economy. The IMF's board approval comes in advance of the G20 summit in South Korea.

Uri Dadush, senior associate and director in the Carnegie International Economic Program, thinks it is important that China encourages domestic development and consumption. It also must become less reliant on its export market, Dadush added.

"It's not just the Chinese's priority but the world's priority if China develops its domestic economy. It is a large part of Asia and a large part of the world," said Pieter Bottelier, senior adjunct professor of China studies at John Hopkins University and a nonresident scholar in the Carnegie International Economics Program.

"I am very much impressed by the central committee's draft outline in its next five-year plan. If the leadership succeeds in pursuing its objective, that will be a global benefit," he said.

Yukon Huang, senior associate in the Carnegie Asia Program, said China needs to take on more aggressive policies and measures to stimulate its domestic consumption.

"The government is not very precise in demonstrating that these plans will be born out of reality. China should be more dramatic in its demonstration that it will make a difference in this."

Some experts, however, are unconvinced that China is ready for its greater global responsibilities. Nonresident Brookings expert Geng Xiao thinks that China is too deep into its "complex domestic development challenges" to be ready for a major role in the global economy.

He suggested that China contribute to the global economy by investing some of its large foreign exchange reserves in policy research. This would be in line with the existing policy for communities like the IMF, the World Bank and the many think tanks in countries who are members of the Organisation for Economic Cooperation and Development.

The real issue, according to Derek Scissors from the Heritage Foundation's Asian Studies Center, is that the world's second largest economy is still not rich.

China Daily