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Selection of IMF Head Reflects Changes to World Pattern

Jul 22 , 2011

The International Monetary Fund recently appointed French Minister of Finance Christine Lagarde as its new head. Lagarde's success continues the tradition of Europeans being in charge of the IMF. French president Nicolas Sarkozy called it a "French victory," and European countries such as Germany also support this decision.

Christine Largarde and Karl Carstens solicited votes worldwide before the election. They particularly visited China to win support, which pushed the international community's discussion on China's role in the IMF in the future.

Some experts on international affairs keenly proposed that a question has come to the forefront of public debate: When will the Chinese people enter the executive level of important international economic organizations? What does China see in this intense game of the selection of IMF head?

The author believes the main point is to deepen the understanding of the three things China must further strive to achieve.

First, China should further strive for the right to speak in the international economic and financial realm and strive for the right of reasonably institutionalizing its rapidly growing comprehensive national strength.

Currently, the global economic structure is experiencing an in-depth transformation. The economic aggregate of emerging economies keeps growing and the economic gap between the emerging economies and developed countries of America and Europe continues to narrow. The voices from emerging economies for reforming the international economic order and breaking up developed countries' monopoly on international organizations are getting louder. The competition for the position of IMF President and the reform of the IMF are the most obvious reflections of these voices.

The IMF, as the "Small United Nations" in the economic and financial realm, together with the World Bank and World Trade Organization, are called the "three economic pillars" of the world and has an irreplaceable position. A country's share in the IMF could not only decide the county's voting power within the IMF but also reflect the country's ability to participate in and manage international affairs as well as its international influence.

It is an action with multilateral benefits that China strives for rights to speak and vote in the IMF because it could make the world hear more voices from China and China, as a great power, could actively push forward the reform of the international monetary system, promote IMF's supervision of development countries' financial realms, apply more preferential credits for developing countries and do some other things like these. It could be said that the competition for the position of IMF President is not a turning point for emerging countries to take over the IMF but will be a new starting line for urging the IMF to further promote the speaking rights of emerging countries.

Second, China should further strive for the power of international rulemaking to better maintain the healthy and stable development of world economy and finance. The importance of developing game rules is self-evident because success and benefit are always inclined to accrue to rule-makers.

It is worth paying attention to the special significance of the recent election. The G20 summit made a decision to select the IMF leader based on the open, transparent and merit-based principle. This clear rule means that candidates' nationality will have nothing to do with the election.

In addition, one of Lagarde's campaign promises is that she will continue to promote the institutional reform to further improve the position of developing countries in the IMF and will also allow more representatives from developing countries to participate in the decision-making of the IMF. These are changes and breakthroughs in the rulemaking. Actively participating in international organizations is an inevitable path and actively participating in the rule making is an important benchmark for China to play a more important role in the international community.

Third, China should further its efforts to add the yuan into the basket of currencies that makes up the IMF's Special Drawing Rights. SDRs are international reserve assets the IMF allocates to member states, which the organization also uses as a unit of account. Currently, the SDR basket currencies include the U.S. dollar, euro, Japanese yen and British pound sterling.

The internationalization of the yuan can increase China's influence in the international economic system. If the yuan is included in the SDR basket, one of the many benefits for China is that the yuan will become the world's reserve currency and a means of payment in international trade. Furthermore, the inclusion of a stable yuan will make the value of SDRs more stable, and thus serve the interests of the IMF. Overall, the inclusion of the yuan in the SDR basket will be a win-win situation for both China and the IMF.

Lagarde will serve a five-year term as the IMF's new managing director. Overall, the IMF leadership selection has not only reflected the ebb and flow of different nations as well as new changes in the international economic situation and structure, but also brought China and other emerging and developing countries the opportunity to expand participation in the reform of the global financial system. It is hoped that the IMF can make satisfying progress by the time the 12th managing director of the organization is elected five years later.

Zheng Xiwen is an observer on international issues.

Source: People's Daily

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