China backs IMF help for Ukraine, and hopes US approves reforms to expand fund
China said yesterday it backed IMF financial support for Ukraine, but expressed concern about the global lender's funding capacity given the failure of the US Congress to ratify a programme of reforms for the institution.
China's deputy finance minister, Zhu Guangyao, said on the sidelines of the IMF-World Bank spring meetings in Washington it was a "worry" that more than 85 per cent of IMF lending was currently focused on Europe.
Zhu highlighted the importance of reacting quickly to any problems that arise in regions outside Europe, adding: "That is why IMF financial capacity has become so important."
Zhu said China was worried about the potential impact of the Ukraine crisis, especially on Europe, which was already facing risk from deflation.
"This is a geopolitical issue too. We hope that event of geopolitical risk won't cause a big shock for the global economy, particularly for ... Europe's economy.
"That's why we support any action necessary to calm down the tension and to stabilise the economy, including Ukraine's economy," Zhu said.
Zhu gave no details of how much China would contribute to the programme for Ukraine, but said: "Voting support for the programme means financial support because China is a key member of the IMF."
The IMF has pledged to cover Ukraine's financing needs of US$27 billion over the next two years and the head of the IMF's European department, Reza Moghadam, said on Friday that the fund was able to lend to Ukraine because the country's debt was sustainable.
Zhu said the crisis showed the need to strengthen the financial capacity of the IMF and that China hoped the US Congress could move quickly to break an impasse on the issue.
IMF members agreed reforms in 2010 that would double the fund's resources and give more say to emerging markets, but the US Congress has failed to ratify the changes.
Some US Republicans have complained the changes would cost too much at a time Washington is running big budget deficits. The reforms also ran afoul of a growing isolationist trend among the party's influential "tea party" wing.
Zhu said there was "deep disappointment and frustration" expressed at the impasse by all participants in Friday's G20 meeting, which set a year-end deadline for US ratification.
"During the period before the end of the year, we are certainly continuing very full co-operation with the IMF and we hope at this difficult time - particularly Ukraine - the IMF plays quick and strong action," Zhu said. "We support that."
Some G20 officials suggest moving ahead on reforms without the United States, though its approval would be necessary for any major decision to go forward because of Washington's controlling share of IMF votes.