China should have better representation in IMF

China has adopted an active and responsible attitude and substantial measures to confront the global financial crisis in cooperation with the international community.

It has decisively implemented an active fiscal policy and moderately loose monetary policy in a timely fashion in order to stimulate the economy.

China's measures centre on boosting domestic demand, especially consumption, for the purpose of maintaining economic growth. Since the second half of 2008, the government has significantly increased domestic investment and put in place a two-year investment plan of RMB 4 trillion yuan (€440bn). It has also cut benchmark deposit and loan rates five times and deposit reserve requirement ratio four times, and raised the social security standard remarkably.

The stimulus package has started to produce results.

There are signs that the economy is picking up growth momentum and that the dropping growth rate has been curtailed. It is expected that by reducing the over-reliance on external demand and boosting domestic demand, China will be able to maintain stable economic growth and contribute to a steady growth in the world's economy.

Likewise, China has taken an active role in the international rescue and cooperation effort proportional to its capability. First, China supplied liquidity to neighbouring economies through bilateral currency swaps. Since the start of the crisis, the People's Bank of China has signed currency swap agreements worth RMB 580 billion yuan (€64 bn) with a number of central banks, including those of South Korea, Hongkong, Malaysia, Indonesia and Belarus.

It has helped restore the confidence of the emerging and developing economies.

Secondly, China actively promotes the multilaterialisation of the Chian Mai initiative, in order to provide financial support for regional economic and financial stability. Within the 10+3 framework, the parties involved have signed 17 bilateral currency swap agreements worth USD 118 billion (€13 bn), including the agreements between the central banks of China and 6 member economies such as Japan, South Korea and Indonesia, by which China committed USD 16.5 billion (€12.5) funding.

Thirdly, China has actively participated in the rescue effort of the IMF and other multilateral development agencies. China has supported the IMF by quota funding, purchasing bonds from the World Bank and other international development agencies and reached preliminary agreement with World Bank / International Finance Corporation on purchasing its private bonds for trade financing.

Five goals for the G20 summit

China expects the following five goals to be achieved at the upcoming G20 London

Summit:

1) The international community should act together to enhance the confidence of the market and the public as well as seek consensus so as to create a win-win situation.

2) While encouraging the individual countries to put in place economic stimulus plans according to its own situation, the international community should strengthen co-ordination on macroeconomic policies.

3) Substantial progress with the reform of the international financial institution should be made, with the focus on increasing the representation and voice of the emerging markets and developing countries.

4) All forms of trade and investment protectionism should be opposed and credible steps should be taken to strive for all-round and balanced results in the Doha Round of trade talks. More support should be given for developing nations' trade growth.

5) Development issues should be addressed and aid to developing countries should not be decreased due to the financial crisis. As such, developed countries should meet the promised target of 0.7 percent of GNP for Official Development Assistance (ODA) as early as possible as well as to promote the international poverty reduction process to ensure the achievement of the Millennium Development Goals (MDGs).

Reform of the financial institutions

In terms of the reform of the international financial institutions, we are of the following views:

1) It is most important to increase the representation and voice of developing countries in IMF.

2) The surveillance role of the IMF should be further strengthened and make sure that the decision-making process is fair and just among all member countries. In light of the current crisis, the IMF should particularly step up supervision on the financial and economic policies of countries that issue main reserve currencies and supervision on countries where major international financial markets are located.

3) The IMF should improve its own capacity building and establish a timely and highly effective crisis early-warning system to effectively deal with the crisis.

4) The internal governance structure of IMF should be reformed and further perfected to enhance efficiency and improve decision-making process.

5) The selection of management personnel of international financial organisations, especially the presidents, should be merit-based and transparent so as to ensure that they have the ability to be recognised by all.

On increasing financial resources for the IMF, China supports the IMF's effort to resolve its insufficient funding issues by exploring various funding measures using a creative and practical approach and on the basis of balanced rights and obligations. But the primary measure should be to mobilise resources through the quota-based system.

Under current circumstances, in order to meet the urgent funding demand, China supports the IMF issuance of bonds, which is regarded as the most efficient and least time-consuming measure. China at the same time is studying and considering alternative funding methods.

The writer is Head of Mission of the Peoples' Republic of China to the European Union