SINGAPORE (Kyodo) Japan is asking China to ensure openness and flexibility in its economic and financial management, given that the fast-growing nation has gained a bigger say in the International Monetary Fund.
Japan will continue working with other shareholders to tackle the issue of the underrepresentation of China and other emerging economies at the 184-member global financial watchdog, but wants Beijing to speed up structural reform so it will be a responsible player in the world economy commensurate with its rising clout, a senior Japanese official said.
“A key issue here is that China’s economy will not simply become bigger, but how much it can make its system similar to ours,” Vice Finance Minister for International Affairs Hiroshi Watanabe said after the IMF announced Monday the launch of a two-year voting-share reform package, paving the way for its biggest overhaul since it was established some 60 years ago.
Watanabe and other financial leaders believe China’s economy — the world’s fourth-largest and looking certain to overtake Germany in the near future — needs improvement in currency policy, market access and intellectual rights protection, areas in which it lags far behind the standards of major industrialized nations.
“We think that the pace of China’s reform is slow, including currency reform,” Watanabe told reporters in Singapore.
“I’ve asked my Chinese colleagues, ‘Will you keep behaving as the representative of developing countries, even though your economy will be the world’s third largest in the near future?’ or ‘Don’t you consider taking part in policy coordination with us, the G7 (Group of Seven)?’ ” he said.
IMF Managing Director Rodrigo de Rato has similar views.
“For the sake of its own economic stability, as well as the stability of the wider world, China should strengthen its financial sector, boost domestic demand, and use the exchange rate flexibility it gave itself a year ago,” de Rato said.
Monday’s decision by the IMF board of governors lifts China’s voting share, or quota, in the IMF to 3.72 percent of the total from 2.98 percent, raising its rank to sixth from eighth.
Along with China, three other symbolically underrepresented countries — South Korea, Mexico and Turkey — had their quotas increased to better reflect their growing weight and responsibility in the global economy.
Under the reform package, these special quota increases will be followed by compilation of a new formula to realign quotas for all IMF members based on parameters such as the size of a country’s economy and its openness, leading to a second round of quota hikes for emerging economies.
IMF members have broadly agreed to reach consensus on the new formula by next April. Japan believes gross domestic product and openness — or the degree of integration to the global economy — should have larger weight than in the current formula, which also involves parameters such as foreign reserves and capital flows.
“We would like China to advance reforms while taking into account such a view,” which other G7 members broadly share, Watanbe said.
He indicated there could be additional quota increases for China in the second round or beyond if its system is open and flexible enough to meet IMF requests.
Responding to Japan’s wish to see a more responsible China, People’s Bank of China Gov. Zhou Xiaochuan said, “We will accelerate economic restructuring and further liberalize the economy to achieve balanced and sustainable development.”
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