Lagarde hopes to get China backing

Lagarde was in Beijing as part of her whirlwind tour to the emerging nations to drum up support for her candidacy. Prominent among the officials that Lagarde met included Vice-Premier Wang Qishan, central bank governor Zhou Xiaochuan, Finance Minister Xie Xuren and Foreign Affairs Minister Yang Jiechi.

According to Lagarde, during her discussions with the Chinese officials broad consensus was reached on two major aspects after discussing several issues like the G20 summit in Cannes, the reform of international financial institutions and the global economic environment.

"We agreed that the selection process for the managing director of the IMF should be open, transparent, and merit-based, irrespective of his nationality," Lagarde told reporters at a news briefing in Beijing.

The two sides also agreed that the trend of reforms that has taken place at the IMF must be continued and developed, both in relation to the governance of the fund, and with appropriate representation of its members.

To win support from emerging countries, particularly the backing of China, Lagarde has promised to support demands from emerging countries to have a greater say in the running of the IMF.

Lagarde admits that for the governance, management and doctrine of the fund, reforms must be centered on two critical principles - inclusiveness and diversity. Lagarde also indicated that it was appropriate for Zhu Min, the former central bank deputy governor and the current economic adviser to the IMF managing director, to play a more significant role in the fund.

"Getting support from China may not tilt the IMF scales in her favor, but it is still important as it will help her to work more smoothly and improve the efficiency of IMF," says Dong Yuping, an economist with the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

After visiting Brazil, India and now China, Lagarde will move to Lisbon to canvass support from African nations and then to Jeddah and Cairo to get Arab backing.

"The voting shares of the five nations together account for 11 percent, and is still a big portion that cannot be ignored," says Dong Xiaojun, a professor at the Chinese Academy of Governance, adding that Lagarde needs at least 85 percent of the votes to get the IMF position.

The jostle for the IMF top slot rose after Dominique Strauss-Kahn stepped down as managing director of the IMF following an indictment on sexual assault charges in May. His departure triggered intense discussions on whether the new candidate should come from Europe or the emerging nations.

But it will be very difficult for the BRIC nations to break the unspoken rule at the IMF, Dong Yuping says. "The joint voting shares of European countries and US could very well determine who would be the next managing director of the fund. Developing countries are not very united on the issue."

He said it would be better for China to support Lagarde and utilize the chance to get a Chinese candidate appointed deputy managing director.

Sun Lijian, deputy dean of the School of Economics at Fudan University, feels that China should support Lagarde because Europe's proposal to strengthen supervision of the United States, change dominance of the US dollar, and reforming the governance structure of the fund is in line with China's interests.

"Supporting Mexican candidate Agustin Carstens will not be a good choice because Mexico will be influenced by the US due to the North American Free Trade Agreement and geopolitical considerations," says Sun.

Carstens is the central bank governor of Mexico and has started his trip to Asia for winning support. He will meet with Chinese officials in Beijing next week.

John Lipsky, acting managing director of the IMF, said at a press briefing in Beijing on June 9 that the fund is highly confident that the member countries will choose a leader who is "effective, energetic and experienced".

Dong Xiaojun says that the first priority for Lagarde if she wins is to solve the sovereign debt crisis in Europe, and in the longer term promote reform of the international monetary system, to help reduce the dollar's dominance and benefit the yuan.

"The fund is also engaged in the other places of the world, but clearly it (the sovereign debt problem in euro area) is the immediate focus of the fund's operation at the moment," Largarde told China Daily.

As for the yuan's float globally, the French finance minister said it is a process that deserve further encouragement and IMF will indeed facilitate the process, but the changes will take time.

However, the best choice for China is still to support a candidate from emerging economies, although disagreement among the BRIC nations is a big barrier, Dong says.

Largarde's reign at the IMF will be consistent with what Kahn did without any substantial changes, says Lu Zhengwei, chief economist at the Industrial Bank. "Compared with Largarde, Agustin Carstens is a better choice as Mexico is an emerging economy and US is likely to support him due to the close ties between the two countries. What's more, he has sound experience of dealing with sovereign debt problems," he says.

The nomination process for the IMF post will close on Friday and there will be another process of short-listing up to three candidates. The fund's executive board, comprising of members from 187 nations, will interview the candidates and make a formal decision by June 30.