Headlines

FINANCE: With China Lending, IMF-WB Conditions Take a Toss

Antoaneta Bezlova

BEIJING, Sep 18 2006 (IPS) - As world financial leaders are casting ballots this week to increase the voting rights of China on the board of the International Monetary Fund (IMF), Chinese leaders have been reminded that with more power comes greater responsibility and that Beijing will be scrutinised on the ways it chooses to use its new credentials in the global economy.

As world financial leaders are casting ballots this week to increase the voting rights of China on the board of the International Monetary Fund (IMF), Chinese leaders have been reminded that with more power comes greater responsibility and that Beijing will be scrutinised on the ways it chooses to use its new credentials in the global economy.

“The international community recognises that China has increased its role in the world economy,” IMF chief Rodrigo de Rato told the media in Singapore where the IMF-World Bank (WB) annual meeting is taking place.

A bigger voice at IMF “would allow you to express your views but, of course, you will listen to the views of the others,” he was quoted as saying. “That happens to the first shareholder and the last shareholder.”

De Rato’s remarks come as two studies released almost simultaneously have highlighted the positive sides but also the risks in China’s growing economic involvement in the world’s poorest continent, Africa.

The latest study by the WB says China’s investment and trade are a boon for the African continent but the relationship remains precariously asymmetric. Meanwhile, a paper prepared by the U.S. Treasury and endorsed by economic officials from the Group of Seven (G7) countries criticised emerging lenders, such as China and India, for providing high-priced loans to poor African countries that have limited capacity to repay.


Both documents were released over the weekend as finance officials from the world’s most industrialised countries or G7 were meeting in Singapore ahead of the IMF-WB meetings, Sep. 19-20.

The IMF board of governors will vote to give rapidly expanding economies like China, South Korea, Mexico and Turkey a bigger say in the fund’s decision-making process on setting economic policies.

The idea is that for China to accept its responsibility to the international financial system, it must be given a voice commensurate with its growing clout. Under the proposals, China would see its share of total IMF voting rights raised to 3.65 percent from the current 2.94 percent.

“While this increase in voting power represents an opportunity for China, at the same time it is even a more serious challenge as to whether we can live up to our new responsibilities,” says Zhang Rui, a professor of economics at Guangdong Normal School of Economics.

True, the increase of China’s voting rights in the IMF represents only a small part in the overall plans for adjustment of the balance of power within the global body, which is skewed in favour of the developed countries.

Yet, the increasingly central role that China is playing in the global economy, and particularly in the poorer parts of the world, has come under scrutiny because of Beijing’s new rhetoric, which does not demand the sort of economic or political policy concessions that Western countries do.

China claims to be the champion of all third world countries, offering them a new relationship that will free them of the dependence on the Northern powers of the G7. When touring Africa, Chinese diplomats portray Beijing’s involvement in the continent as a classic win-win relationship.

Chinese demand for commodities such as iron, copper, gold, aluminium and oil has soared as the country’s economy booms. These exports support African jobs and companies while providing useful foreign exchange to their governments.

Meanwhile, Africa’s imports of Chinese manufactured goods, machines and textiles have also increased, as Chinese companies have sought new markets for their produce around the world.

The Bank recognises the potential of this new partnership. Africa is the new economic frontier for both China and India, says its latest study.

Asia now receives 27 percent of Africa’s exports, tripling the amount in 1990 and almost on par with Africa’s exports to the Untied States and the European Union, Africa’s traditional trading partners.

Meanwhile, Asians exports to Africa are growing 18 percent per year, faster than to any other regions in the world. Investment from China and India into poor African countries are also picking up, the study entitled ‘Africa’s Silk Road: China and India’s new economic frontier’ said.

Still, there is a major unevenness in the emerging commercial relationship, admits the Bank, which could prevent African economies from benefiting from the increasingly important roles China and India are playing in the global economy.

African exports to Asia make up only 1.6 percent of Asia’s total imports, while China and India’s purchases from Africa amount to only 13 percent of Africa’s total exports.

“It is imperative that both sides of this promising South-South economic relationship address asymmetries and obstacles to its continued expansion through reforms,” notes the author of the study Harry Broadman who serves as the Bank’s Africa region economic advisor.

China’s increasing economic prowess has enabled it also to extend fresh loans to African countries the majority of which, the G7 says, are ill equipped to repay. Loans from China come with few conditions and at a time when many highly indebted countries in Africa have had their existing debts written off by Western governments and donor agencies.

“While welcoming the increasing role of new donor countries, we believe it is imperative that all donors share information and take account of debt sustainability issues in their lending practices,” the G7 said in a statement on the weekend. The group comprises the U.S., Japan, Britain, Germany, France, Italy and Canada.

A paper supporting their statement was released by the U.S. Treasury Department, which highlighted China’s role in these new lending practices. Overall, China has committed to providing developing countries with 10 billion dollars in low-priced loans and commercial-rate credits over the next three years.

In the most high-profile infrastructure aid-programme of recent years billions of dollars were offered to Angola in an effort to consolidate ties and secure China’s access to the country’s oil reserves. The financing has allowed the Angolan government to avoid dealing with the IMF, which has long criticised its finances for lacking transparency.

 
Republish | | Print |

Related Tags

Africa, Asia-Pacific, Development & Aid, Economy & Trade, Global, Global Geopolitics, Global Governance, Globalisation, Headlines

FINANCE: With China Lending, IMF-WB Conditions Take a Toss

Antoaneta Bezlova

BEIJING, Sep 18 2006 (IPS) - As world financial leaders are casting ballots this week to increase the voting rights of China on the board of the International Monetary Fund (IMF), Chinese leaders have been reminded that with more power comes greater responsibility and that Beijing will be scrutinised on the ways it chooses to use its new credentials in the global economy.
(more…)

 
Republish | | Print |

Related Tags