Providing a financial lifeline to a string of crisis-hit countries such as Iceland and Ukraine, the International Monetary Fund (IMF) has played a positive role in cushioning the growth-retarding shock emanating from the United States. Moreover, the finance ministers of the G20 countries recently agreed to increase their funding for and push for the restructuring of the organization at their meeting in Horsham in Britain on March 14. Yi Xianrong, a researcher at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, discussed this topic in an article published in the Oriental Morning Post. Edited excerpts follow:
Set up in 1945, the IMF used to be a pillar of the Bretton Woods system that helped rebuild the war-torn global financial landscape and contributed to world prosperity. For decades, it has been a key element of global trade and finance. But now Britain and U.S.-dominated organization is facing a looming restructuring as emerging economies seek a greater say in global policymaking to match their rising economic strength.
Meanwhile, the crippling financial crisis has exposed loopholes in the current global financial system and added urgency to the need to reorganize the IMF and the whole global financial system.
But the reorganization means more than just examining and strengthening its operations and management. More importantly, it entails a complete reform to redress an imbalance in its decision-making powers. For example, the developed countries have maintained an advantage of voting rights on the IMF board relative to the developing ones. And traditionally, the United States names the president of the World Bank while a European heads the IMF, which is, obviously, unreasonable.
As emerging markets gain more clout in the world economy, it is imperative now to improve their representation in the IMF so that the organization can be more representative and influential.
At the G20 meeting in Horsham, the finance ministers of the BRIC countries-Brazil, Russia, India and China-publicly called for a greater say in the IMF and appealed for a revaluation of the IMF's role in global finance.
For China's part, it is also necessary to make efforts to push forward the IMF's restructuring efforts. China can take a closer look at the current global financial situation and then put forward a restructuring program that is acceptable to all IMF member countries. The program should reflect changes in global finance and at the same time serve the interests of all sides. China also can seek a firm foothold in the IMF through its efforts in combating the ongoing financial crisis.
After all, the restructuring of the IMF and the World Bank is imperative under the current situation. China is supposed to actively involve itself in the upcoming restructuring of these international financial organizations. But we should first ensure an economic recovery at home.