CHINA AND THE IMF IN TOKYO

CHINA’S IMF BOYCOTT UNDERMINES QUEST FOR CLOUT

John Foley

Reuters, October 10, 2012

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If China wants a bigger say at the IMF, boycotting the fund’s meeting in Japan is the wrong way to get it. The head of the central bank, Zhou Xiaochuan, withdrew on Oct. 10, amid a territorial dispute between the two countries. Yet the IMF is supposed to be about finance, not border politics. If China doesn’t agree, maybe it isn’t ready for a bigger role.

At best, the boycott is a missed opportunity for a country keen to increase its 3.8 percent voting stake in the fund. Zhou is a highly respected ideas man – he has pushed hard for a non-dollar denominated financial system – and the keynote lecture he was due to deliver is a potent platform for shaping the agenda. Though China’s central bank has challenges, it also has much to teach the world about macroprudential management.

True, China is not alone in mixing finance and politics: the United States remains the dominant force at the IMF, and a study in 1999 showed that countries which vote with the United States at the United Nations were more likely to get help from the fund*. But China will get more support from other members by promoting less foreign policy intervention and setting a better example, rather than simply inserting its own agenda.

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