China's Minister of Finance Jin Renqing has called for a radical rethink of developing countries' role in global financial fora, including the World Bank and IMF.
In an exclusive interview with Emerging Markets, Jin, who arrived in Washington last night, threw his country's weight behind proposals to reform the Bank and the Fund.
Jin's call comes as the International Monetary and Finance Committee gets to grips with the thorny problem of IMF quota redistribution. One executive director told Emerging Markets yesterday the issue could cause developing countries to 'erupt in frustration' unless it is solved soon.
Developing country 'voice' within the World Bank, including shareholding and votings right, will also be discussed by the Fund and Bank joint Development Committee on Sunday.
IMF Managing Director Rodrigo de Rato acknowledged yesterday that the IMF's 'legitimacy' is at stake over the quota issue. And a senior Japanese official suggested to Emerging Markets that greater representation for Asian and other developing country members could open the door to them making significant funding contributions to both the IMF and the World Bank. Under-representation is 'another form of global imbalance', he added.
In his interview, Jin said: 'The Bretton Woods system needs reform, including the issue of the share of the World Bank as well as the quota of the IMF, which we hope can reflect the reality of the world economy.
The key issue is that developing countries have developed so quickly and play a more important role in the cause of global development. In this regard developing countries strongly hope to increase their voice. China certainly supports that very much.
China is very actively participating in G20, G7 plus China, APEC, Asean + 3, and also Asia/Europe finance ministers' meetings. The point is to take part in such events with this point in mind: global policy coordination.'
'Developing countries strongly hope to enhance their voice', Jin said. 'China certainly supports that very much. We work with other developing countries and we strongly hope the World Bank can emphasize that request from developing countries and really enhance their power and their ability in the World Bank.'
The US is this week showing signs of adopting a more accommodating stance on representation. US Treasury Undersecretary for International Affairs Timothy Adams suggested this week that steps be taken to give emerging market economies, including China, greater representation in the G7 and in other fora.
And in a letter to G7 finance ministers, Charles Dallara, Managing Director of the Institute of International Finance, has urged expanding the G7 into the 'G11' by including Brazil, Russia, India and China.
De Rato declared himself optimistic yesterday that a consensus could be reached on Fund quotas. Some of those that have traditionally held the balance of power in the IMF, including smaller European countries whose quota representation greatly exceeds their weight in the global economy, have long held out against change, But de Rato said that 'no country has told me that it is against' reform. 'But that does not mean that it will be easy', he added.
Technically, the IMF is not due to reach a conclusion on the current review of quotas until 2008. But Asian countries that are pushing for reform are not prepared to wait that long, and some of them could walk away from the IMF unless they see the prospect of earlier reform, one executive director said.
'It is important for emerging market countries to take more responsibility' in the IMF and World Bank, including providing funds, he said. But they will not do that until they get better representation, he added.