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Wednesday 18 March 2009
China Should Be Cautious Lending to IMF
China should not lend a lot of money to the International Monetary Fund, because the cash would be used to bail out countries that are richer than China and are biased against Beijing, an influential economist said in remarks published on Tuesday.
China should not lend a lot of money to the International Monetary Fund, because the cash would be used to bail out countries that are richer than China and are biased against Beijing, an influential economist said in remarks published on Tuesday.
Yu Yongding, a former central bank adviser, acknowledged that China’s standing in the world would be enhanced if President Hu Jintao agreed at next month’s G20 summit in London to make a big loan to the Fund.
But Yu told the China Daily he favoured lending a symbolic amount, not a huge sum.
“If we do so, it will seem like the poor is rescuing the rich, wouldn’t it?” said Yu, who heads the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, a leading government think-tank.
The Chinese public would not stand for it, he said.
China is ranked 100 out of 192 U.N. members measured by per capita gross domestic product and many of the troubled countries that the IMF wants to bail out have much higher standards of living, he said.
Moreover, some of the countries on the rescue list, especially some from Europe, have an anti-China mentality, he added.
“Their pitches are even higher than some Western countries sometimes when they protest against China,” Yu said. “We have no reason to help them.”
Yu’s comments do not necessarily reflect official thinking. But they shed light on a heated debate as to how Beijing should respond to efforts to strengthen the finances of the IMF, which is looking to at least double its $250 billion in loanable funds in case the global economic crisis worsens.
China is a prime candidate to help in the eyes of some because it has nearly $2 trillion in foreign exchange reserves.
But Premier Wen Jiabao said last Friday that providing extra firepower for the IMF must be a collective effort.
He also demanded that the Washington-based fund be more alert to the needs of emerging economies.
“We must reform the internal governance of the IMF ... and implement the principle of a balance between powers and responsibilities and show more concern for the interests of developing countries,” Wen said.
Even an increase in China’s voting power in the IMF in return for a big loan would be pointless because the United States would still wield a veto over the Fund’s main decisions, Yu said.
“The most substantial step, if any, should be the removal of the U.S.’s right to veto,” he told the China Daily. “But it’s a difficult task.”
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China Should Be Cautious Lending to IMF
Reuters
17 March 2009
China should not lend a lot of money to the International Monetary Fund, because the cash would be used to bail out countries that are richer than China and are biased against Beijing, an influential economist said in remarks published on Tuesday.
Yu Yongding, a former central bank adviser, acknowledged that China’s standing in the world would be enhanced if President Hu Jintao agreed at next month’s G20 summit in London to make a big loan to the Fund.
But Yu told the China Daily he favoured lending a symbolic amount, not a huge sum.
“If we do so, it will seem like the poor is rescuing the rich, wouldn’t it?” said Yu, who heads the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, a leading government think-tank.
The Chinese public would not stand for it, he said.
China is ranked 100 out of 192 U.N. members measured by per capita gross domestic product and many of the troubled countries that the IMF wants to bail out have much higher standards of living, he said.
Moreover, some of the countries on the rescue list, especially some from Europe, have an anti-China mentality, he added.
“Their pitches are even higher than some Western countries sometimes when they protest against China,” Yu said. “We have no reason to help them.”
Yu’s comments do not necessarily reflect official thinking. But they shed light on a heated debate as to how Beijing should respond to efforts to strengthen the finances of the IMF, which is looking to at least double its $250 billion in loanable funds in case the global economic crisis worsens.
China is a prime candidate to help in the eyes of some because it has nearly $2 trillion in foreign exchange reserves.
But Premier Wen Jiabao said last Friday that providing extra firepower for the IMF must be a collective effort.
He also demanded that the Washington-based fund be more alert to the needs of emerging economies.
“We must reform the internal governance of the IMF ... and implement the principle of a balance between powers and responsibilities and show more concern for the interests of developing countries,” Wen said.
Even an increase in China’s voting power in the IMF in return for a big loan would be pointless because the United States would still wield a veto over the Fund’s main decisions, Yu said.
“The most substantial step, if any, should be the removal of the U.S.’s right to veto,” he told the China Daily. “But it’s a difficult task.”
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