June 19th, 2012 | China Daily IMF to receive financial injection
Beijing pledges to join global efforts targeting crisis in the eurozone
China has committed itself to boosting the resources of the International Monetary Fund as G20 leaders gathered on Monday to tackle the eurozone crisis and the sluggish global economy.
Leaders from major industrialized and developing economies, representing more than 80 percent of the global economy, have gathered for a two-day meeting in the Mexican resort of Los Cabos.
Despite obvious relief among world leaders that a pro-bailout party narrowly won the Greek election, Europe’s debt crisis has underscored the need for a bigger IMF war chest.
Leaders are set to confirm they will increase the IMF’s firepower with an extra $430 billion in loans even though some emerging nations are frustrated with the slow pace of winning a greater say at the global lender.
Beijing will pitch in, Vice-Minister of Finance Zhu Guangyao told reporters on Sunday, without giving any specific figure of how much China will contribute.
In a communique released in April during a G20 meeting of finance ministers and central bank governors in Washington, G20 countries said that in addition to the quota increase under the 2010 reforms, there were firm commitments to increase resources available to the IMF by more than $430 billion.
“This additional $430 billion is to help all members under the risk of a (financial) crisis and it is not earmarked for any special region,” Zhu explained, adding the amount will be raised through lending and bonds, considered as an investment because countries who contribute will later receive interest.
The G20 leaders confirmed the 6-percent shift of quota shares to emerging markets and developing countries, in the IMF, agreed at the G20 summit in Seoul in 2010.
China’s quota and its voting share in the IMF has increased to 6.394 percent, Zhu said.
Chinese leaders have consistently reiterated that China will boost IMF resources.
Chen Daofu, policy research chief of the Financial Research Institute at the State Council’s Development Research Center, said aiding Europe through injecting money into the IMF is a “relatively” good way for emerging economies, especially China.
“By adding funds to the IMF, China can support it to play a bigger role in tackling the eurozone crisis,” he said.
However, the best way for China to help Europe is by investing into the economy directly, not that easy given the regulations that must be adhered to, Chen said.
Chen Xingdong, managing director and chief economist at BNP Paribas Securities (Asia), said although China has a limited voting share, it will have a greater say if it injects money into the fund.
But given that the countries that make up the BRICS made a joint commitment, China is unlikely to pour an extraordinary sum of money into the fund, he said.
China, Russia and other emerging economies are putting up $72 billion for the IMF crisis intervention, the fund said earlier in April. Russian media reported earlier that Russia would put in $10 billion, indicating China will inject less than $62 billion.
“Currently it is the only feasible way for China. Unless China can reach some prerequisites with the EU, it has to turn to the IMF to protect its own interests,” said Chen Xingdong.
Mexico has said it will use this summit to push the world’s largest economies to increase the resources of the IMF and build the fund’s capacity to help European countries out of the financial crisis.
President Felipe Calderon of Mexico said last week in Mexico City that he wanted this summit “to strengthen and establish concrete commitments to strengthen international institutions, particularly the IMF, so that it is a strong and flexible tool for confronting the economic crisis.”
“The BRICS, including China, made commitments in the April meeting (on the IMF resources increase). So during this summit a specific amount will be announced,” said Zhu Guangyao, referring to Calderon’s remarks earlier about the $430 billion increase to be achieved in Los Cabos.
By Zhang Yuwei in Los Cabos, Mexico, and Wang Xiaotian in Beijing