Global IssuesChina Advances a Grip on IMF
The IMF’s new Chinese deputy chief Zhu Min is known by many in the financial capitals in the West for warning as early as 2007 about the dangers of the U.S. sub-prime mortgage market and its dire consequences for the global economy.
'There is money everywhere,' Zhu, at the time still a little-known internationally official at China’s Central Bank, said in a speech. 'You can get liquidity from the market every second, for anything. So people are investing in assets with no idea of the risks they are taking.'
Wall Street in New York and the City, the financial centre of London, ignored his warning, which contradicted the official position of the world’s premier financial watchdog at the time. The International Monetary Fund (IMF) has since reversed track on financial derivatives and has also embraced Zhu Min’s wisdom, making him first an adviser and now a deputy managing director.
Zhu Min is the first Chinese to occupy such a high-ranking position in the Washington-based global lending institution. His appointment, though, follows a trend of promoting Chinese economists to the highest echelons of the Bretton Woods institutions that have underpinned the global economic and financial order since the end of World War II.
In 2008 the World Bank appointed Chinese economist Lin Yufu its senior vice-president and chief economist. Both appointments have been received in China and around the world as recognition of the importance of China’s fast-growing economy and political ambitions in the global arena.
Beijing has been careful to portray both elevations as a victory for the emerging economies as a lot, and as part of the reform process of the institutions designed to give bigger say to the developing world.
'We are very pleased with the appointment of Zhu Min as deputy managing director at the IMF by managing director (Christine) Lagarde,' foreign ministry spokesman Hong Lei said when the nomination was announced. 'We believe that it signifies a great improvement in the role of emerging countries and developing countries within the IMF, which will be beneficial in improving the structure of the organisation.'
The China element has been underplayed in official pronouncements but some analysts point out that Zhu will play the China card by doing what Chinese international players are known for doing best — exerting influence behind the scenes.
'Contrary to some beliefs, the biggest role Zhu Min can play at the IMF will not be to have a say in how the money is distributed,' argues Mei Xinyu, a well-respected adviser to China’s commerce ministry. 'His task should be to surreptitiously and gradually push for a change in the way the IMF thinks and operates so that we can see new, more realistic economic decisions and pronouncements.'
Writing in the China Securities Journal, Mei reminded everyone that China has the largest foreign reserves in the world and is unlikely to be in need of financial bail any time soon. He said China had already absolved the IMF somewhat of its tasks in Asia by pushing for the creation of an Asian Monetary Fund.
Mei is one of many Chinese economic mandarins who believe that despite China’s increasingly important contributions to the global economic structure, the IMF is prejudiced against it.
Beijing has been greatly annoyed with IMF’s recent admonishments that the Chinese currency, the yuan, is underrated and in need of quick readjustment. The People’s Daily, the mouthpiece of the communist party, published a lengthy refute of the IMF’s Annual Appraisal Report last week.
In response to IMF’s nudge to Beijing to alleviate its risks of inflation and the real estate bubble by appreciating the yuan, the paper argued that the debt crisis plaguing western countries is to blame for pushing up inflation in China.
'The IMF's proposals cannot help China to effectively deal with imported inflation because as long as the United States and Europe continue to suffer debt crises, more hot money will flood into China, leading to high inflation and continued expansion of the money supply,' it said. It suggested that the IMF continues to close its eyes to the tribulations of the West while zooming on China.
It is this type of what the Chinese call 'West-centric' views at the IMF that Beijing hopes Zhu Min will be able to help change. Perceived as a soft-spoken negotiator among his Chinese counterparts, Zhu is credited with knowledge of the game in both Chinese and international financial circles.
Zhu, 59, has held various positions at the Bank of China and worked as an economist at the World Bank before being appointed as a special adviser to the IMF in 2010.
© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service