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China unlikely to challenge Japan's sway in Asian Development Bank

Beijing eager to play major role in new BRICS development bank, not its Asian counterpart

PUBLISHED : Friday, 05 April, 2013, 12:00am
UPDATED : Friday, 05 April, 2013, 5:11am

Contrary to expectations in some quarters, China may not push too hard to break Japan's domination of the Asian Development Bank this year.

In its 47-year history, all eight presidents of the multilateral lender have been the nominees of Japan, one of the largest shareholders of the bank. And it might be no different this time when the voting ends at the end of the month - to the disappointment of those hoping Beijing would enter the contest this time.

China's rise to become Asia's largest economy and its ambition to play a bigger role in the global economic and financial order has prompted speculation that Beijing may field a candidate for the top job in the regional organisation.

The Japanese government nominated its top currency official, Takehiko Nakao, to head the ADB after Haruhiko Kuroda stepped down to lead the Bank of Japan.

Japan hopes the election will be completed before the bank's annual meeting in India in May, before newly installed leaders in China can successfully lobby to challenge the Japanese nominee, sources said.

Analysts, however, say China will not pull out all the stops to secure a game that will not be easy to win. Despite calls from the mainland's financial sector to contest the role, the Ministry of Finance and Ministry of Foreign Affairs has not nominated one of their own, after taking into account the US$2 billion that would be required to bring China's voting rights in line with Japan's and the fact that bilateral relations are already strained by a territorial dispute, they said.

Last week, China pledged to co-found and contribute to a new BRICS development bank to bankroll growth in the emerging world with Brazil, Russia, India and South Africa.

The move is widely regarded as illustrating China's eagerness to create a new funding organisation. Beijing would prefer to do that rather than try to influence existing organisations that are dominated by developed countries.

"China's economic prowess and influence have made it a suitable leader in world and regional organisations," said Guo Tianyong, a professor at the Central University of Finance and Economics in Beijing.

"If China nominated someone for the position, I think they would come from the Ministry of Finance, which is the ministry that directly works with the ADB."

Senior ministry officials with experience in dealing with governments and acumen in finance have taken vice-presidential positions at the ADB over the past decade, including Jin Liqun, the current chairman on the board of supervisors at sovereign wealth fund China Investment Corp, and Zhao Xiaoyu, who took over from Jin in 2008.

Of the four ministry vice-ministers, Zhu Guangyao is the one with the most overseas experience. He worked for the World Bank from 1994 to 1996 and from 2001 until 2004.

But the presidency of the ADB is a totally different ball game. Unlike vice-presidents, the bank's chief is chosen from a list of nominees put forward by its 67 member states. A successful nominee must garner more than 50 per cent of the votes.

Huang Yiping, Barclays Capital chief economist for emerging Asia, said: "It is difficult to get a Chinese head for the ADB. Japan and the US have a combined 30 per cent stake in the organisation, let alone the other developed countries."

Japan and the US each have more than a 15 per cent stake in the bank, and they each have 12.8 per cent of the voting rights. China became a member country in 1986 with a 6 per cent stake and voting rights of 5 per cent.

While China is the third-largest shareholder in the bank, it is also one of its largest borrowers.

While winning a majority of votes could be difficult because "foreign relations are complicated and countries have various disagreements", China could support the nominee of a smaller country, said Shi Yinhong, a foreign relations professor at Renmin University.

"China wants to have more staff in international organisations to match its leading position in the world economy. But for the time being, I don't think China will try for every senior position available, because it is not well prepared in terms of reserves of talent, knowledge and experience."

In 2011, the International Monetary Fund nominated Chinese economist Zhu Min for a new deputy managing director's position, reflecting China's increased weight in the global economy. Zhu is a former deputy-governor of the People's Bank of China.

Unlike home-trained Zhu, many of the candidates Beijing has recently nominated for positions in international organisations either grew up or were trained abroad.

Last year, the World Bank named Cai Jinyong as chief executive of the International Finance Corporation, its private-sector lending arm. Cai, a mainlander, spent years working overseas and formerly worked for Goldman Sachs. Peking University economics professor Justin Lin Yifu, a Taiwan native, was appointed the World Bank's chief economist in 2008.

Liang Yunxiang, an international relations specialist at Peking University, said the tapping of overseas Chinese showed the lack of talent at home available to fill top positions in world organisations. While it desires to have a greater say in the world, China has to proceed step by step. It has to train people and increase capital contributions to multilateral organisations gradually.

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