By Zheng Lifei (China Daily)
Updated: 2007-11-20 09:15

China should be actively involved in working toward the International Monetary Fund's (IMF) quota and voice reform, which could shape its members' positions in the global economy, experts said.

However, experts also said the country should act cautiously and avoid appearing "too aggressive" in demanding its own quota increase.

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The IMF declared during last month's annual meeting that all the elements for an internal reform package, including increased quotas, should be in place by its next annual meeting in April 2008.

The Washington-based multilateral financial institution said it plans to increase its total quota by about 10 percent next year and at least a double basic votes to protect low-income countries.

Under the current regime, the distribution of quotas is determined according to complex mathematical formulas. A member's quota determines its voting power and access to IMF financing.

Every IMF member is automatically granted 250 basic votes, and additional votes are meted out according to the country's quota in the Fund.

Initiatives to change the system have been the subject of sometimes bitter debate, with some industrialized member countries reluctant to give ground to emerging market economies.

Old order

"The current makeup of IMF still reflects the global economic order following World War II, with quotas greatly skewed in favor of many European countries, while emerging economies are seriously underrepresented and marginalized," said Zhang Ming, a researcher at the Institute of World Politics and Economy with the Chinese Academy of Social Sciences (CASS).

For example, China's gross domestic product (GDP) was more than six times that of Belgium in 2006, while Belgium had a 2.16 percent quota and China's quota was only 2.98 percent.

IMF took an initial, yet major, step toward overhauling its quota share structure last September by increasing the quotas for four developing economies: China, South Korea, Mexico and Turkey.

China's quota was then raised from 2.98 percent to 3.72 percent.

"Last year's quota increase (for China) is more a symbolic move than a substantial one, as the developed economies, especially the United States and Europe, are still the dominant powers in the Fund," said Tan Yaling, a senior researcher with the global financial market department of the Bank of China.

"Nevertheless, it is a positive move, as it increased China's say in the Fund and raised its international status," Tan added.

Under the reform package announced last month, which IMF said "should enhance the representation of dynamic economies whose weight and role in the global economy have increased", China is likely to book some quotas out of the 10 percent overall increase, experts said.

"But even if China gets the expected quota boost next year, it would still be more symbolic than substantial," Zhang said.

Despite the proposed quota increase for emerging and developing countries, experts agree that the situation in which IMF is still dominated by the United States and European countries will remain unchanged in the "foreseeable future".

"It will be a long, incremental process before developing and emerging countries as a whole gain sufficient voice in running the institution," Zhang said.

But China can use its increased voice in the Fund to "try its best" to push for policies that "take into account the interests of both developed and developing countries", Tan said.

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