U.S. Leads Effort to Increase Influence of China in the IMF
By Steven R. Weisman
THE NEW YORK TIMES
In an effort to gain Chinese cooperation on international economic issues, the Bush administration is pushing for China and other developing nations to get more power in the global institution that has played a central role in easing myriad financial crises since the end of World War II.
But the U.S.-led effort to increase influence at the International Monetary Fund for China — and for South Korea, Turkey and Mexico, as well — is being resisted by several countries in Europe, which would lose power to those who would be gaining it.
Administration officials argue that the IMF has to be restructured to reflect the strength of fast-growing countries in Asia, Latin America and parts of Europe so these countries have more of a stake in a 60-year-old international system that oversees potential problems from the huge global currency and capital flows.
“The IMF has been asleep at the wheel in an era when private capital flows have been growing at an unprecedented pace,” said Timothy D. Adams, under secretary of the Treasury for international affairs. “The fund needs to get back to basics to deal with the problems of the 21st century.”
Adams said that China, like many other fast-developing countries, is “woefully underrepresented” at the IMF, with a smaller share of the total voting rights than other countries with smaller economies that are growing more slowly. The United States wants economic growth and the size of the economy to determine the scale of a nation’s voice at the fund.
The proposals are to be taken up at a meeting of the IMF and the World Bank late in September in Singapore, to be attended by Treasury Secretary Henry M. Paulson Jr.
At the same time, the administration is urging China to take on a greater role in promoting an open global trading system by helping restart the aborted trade talks sponsored by the World Trade Organization.
The IMF, along with the World Bank and the General Agreement on Tariffs and Trade, the precursor to the WTO, grew out of meetings near the end of World War II at Bretton Woods, N.H. They were set up as part of a postwar financial system aimed at avoiding a repetition of the economic crises of the late 1920s and 1930s that helped lead to the war.
China is a particular focus of U.S. interests because of the Bush administration’s uneasy relationship with the Beijing government and its desire for China to become a “stakeholder” in the international system, as U.S. officials put it.
The United States argues that China has been using its vast foreign exchange reserves, earned from trade surpluses with the United States, to intervene in the markets and keep its currency artificially low to increase its exports, contributing to the loss of U.S. manufacturing jobs.
Critics of the Bush administration in Congress are calling on it to rebuff China’s demand for more power at the IMF until Beijing revalues its currency in relation to the dollar.
But Adams and other U.S. officials say that rather than limit China’s influence at the IMF, they want to increase its role there and make the lending institution a more aggressive monitor of currency manipulation by member nations.