BEIJING (Reuters) - The United States should reduce its dominant voting share in the International Monetary Fund, an adviser to the People’s Bank of China said on Tuesday, helping to give emerging economies more of a say in deciding who will take the helm of the IMF.
Xia Bin, who sits on the central bank’s monetary policy committee, told Reuters that reform of the IMF could not make significant progress unless the United States is willing to give up its dominant voting share in favor of developing countries.
“It’s not an issue of who will be the candidate for the IMF managing director. The problem is that the voting share of the United States is too big,” he said.
Within China, the PBOC is one of the dominant voices influencing the government’s stance on IMF-related matters.
French Finance Minister Christine Lagarde has emerged as a front-runner to succeed the fund’s jailed managing director, Dominique Strauss-Kahn, but developing economies, with growing global clout, are keeping pressure on Europe and the United States to preclude a backroom deal over the appointment.
“The voice of emerging-market economies should be heard, but emerging markets must realize that reform of the global monetary systems is a long process,” Xia said.
The voting shares reflect the relative size of member countries’ economies.
In November, the IMF agreed to boost the voting power of big emerging economies, enabling China to leapfrog Germany, France and Britain in the fund’s power rankings, with its quota share rising to 6.19 percent from 3.65 percent.
Under the latest adjustments, the United States remains the IMF’s most powerful member with 17.67 percent of the overall quota, effectively giving it veto power at the Fund.
Xia said he hopes a candidate from China could compete for the IMF job but added that it’s unrealistic to expect China to play a big role in IMF policy decisions any time soon.
Indeed, China is likely to exercise its growing clout within the IMF judiciously, said a source at the PBOC.
“China is the second-largest economy in the world and our influence is increasing. So we must not make choices randomly and any decision must be taken cautiously and responsibly,” said the source, who declined to be named because he was not authorized to speak about the subject.
“Of course, the IMF should better reflect the voices of emerging countries,” he added. “But it takes time and does not mean they will necessarily select a head from the emerging countries this time.”
In the interview, Xia again blamed the ultra-loose monetary policy in the United States for pushing up global commodity prices, which he said in turn fueled inflationary pressures in emerging countries.
Turning to the domestic issues, Xia said the government is less concerned about slower economic growth as it puts more emphasis on structural adjustments and is likely to maintain a tighter policy to fight inflation.
“We will continue to implement the prudent monetary policy. Prudent means policy will be relatively tight,” he said.
“It’s impossible for China to sustain double-digit economic growth like in the past,” Xia added.
China factories expanded in May at their slowest pace in 10 months while price pressures eased, a purchasing managers’ index showed on Monday, adding to evidence that the economy is moderating as a tighter policy starts to bite.[ID:nL3E7GN06N]
The central bank, keen to put a lid on inflation, has unveiled a series of tightening measures in recent months, including repeated increases in banks’ required reserves and interest rates.
Reporting by Kevin Yao; Editing by Ken Wills