China's IMF ambitions revealed in new archive report
Beijing has eyed bigger role in global system since helping create world agency in 1944
China's bid to play a bigger role in the management of the global financial system has been in train since it helped draw up the rules that created the International Monetary Fund in 1944, according to a report published today by OMFIF, the network linking central banks and sovereign wealth funds around the world.
The report throws new light on the original discussions that set voting power quotas at the IMF and China's key role in them, striking many parallels with Beijing's current efforts to gain a bigger say at the Washington-based multilateral lender, the rules it sets to manage global finance and in the world's system of reserve currencies.
"The Bretton Woods conference agreements, with inter-governmental cooperation as their framework and exchange rate intervention as their base, embody a mixture of the thoughts of both the socialist and capitalist economies," says the report by Jin Zhongxia, a former director general of the People's Bank of China's Research Institute and now China's executive director at the IMF in Washington.
"The topics currently discussed among the leading countries are not significantly different from those debated at the Bretton Woods conference.
"Those who open up and learn from the dusty archives of Bretton Woods may perhaps gain insights into many other issues relevant today."
Jin's report draws on previously undisclosed documents from China's central bank archives and shows that concerns discussed 71 years ago at the Bretton Woods conference that created the IMF remain at the heart of current lobbying efforts by Beijing to have voting power commensurate with its economic status in the global system.
It also helps explain some of the motivation behind Beijing's efforts to back its own multilateral lenders, the Asian Infrastructure Investment Bank and the New Development Bank - the so-called BRICS Bank - that many commentators see as challengers to the IMF and its sister organisation, the World Bank.
Beijing is, in parallel, making strenuous efforts to have the yuan included in the IMF's special drawing rights currency basket, which many analysts believe will happen in a review at the end of this year and help establish the yuan as one of the world's reserve currency pillars.
The yuan is now the world's fifth-most-active currency for global payments in value and accounted for 2.2 per cent of payments worldwide in May, just behind Japan's 2.6 per cent share, according to the latest data from international payments network Swift.
But the currency remains largely excluded from the official reserves of the world's major central banks because of strict capital controls maintained by Beijing that many international economists and US lawmakers say amount to currency manipulation.
Beijing disagrees and says that it already meets most of the IMF's 40 measures that define the free movement of capital and that those controls which remain are relatively minor and necessary to deliver financial stability.
"The contents may be of relevance in the light of discussions in 2015 over issues such as the quota reform at the IMF, possible inclusion of the [yuan] in the special drawing rights, and the establishment of the Asian Infrastructure Investment Bank and the New Development Bank," the report says.
The report is the latest in a series of papers published by OMFIF on China's economic transition and the challenges it faces from a slowdown in economic growth, yuan internationalisation, managed liberalisation of savings, investment and capital flows, and the disruptive trends on stock markets that could threaten economic stability.
"China sent the second-biggest delegation to the 1944 conference, did its best to gain an adequate quota as the fourth-biggest country in the IMF and was plainly seeking a greater voice, next to the US, in a fast-changing monetary and financial world where it was fighting to find its feet - just as is the case today," OMFIF managing director David Marsh wrote in a foreword to the report.
The Bretton Woods conference was convened to set the framework for the post-second world war economic and financial order. China's 32-strong delegation was the second-biggest at Bretton Woods after the US.
China's share of quotas in the IMF was set at US$550 million, with 5,750 votes or 5.8 per cent of total voting power, ranking it fourth among participant countries at its foundation. Its share is now 3.81 per cent, ranking it sixth.
"From the recently discovered archives, which had been gathering dust for 70 years, we are able to reconstruct the Chinese delegation's passage to the conference in a relatively complete and clear manner," Jin wrote. "Some content requires further research and verification. Yet the archives do offer a rather clear and complete outline of the Chinese delegation's participation."
