IMF governing system should be changed to reflect China's status: expert
China has officially become the International Monetary Fund's (IMF) third-largest member-country, a historic move experts say will diversify the global economic governance and give the country a bigger say to better safeguard its interests.
Although new challenges may lie ahead after China's new status in the IMF, the move indicates China's greater role on the world stage as its influence grows despite the world economic downturn, experts said.
In a statement released on Wednesday, the IMF announced that its quota and governance reforms took effect on Tuesday, and that it will "strengthen the voice and representation of emerging and developing economies in the institution."
"I commend our members for ratifying these truly historic reforms," IMF Managing Director Christine Lagarde said. She noted that a more representative, modern IMF will ensure that the institution is able to better meet the needs of its members.
Lagarde also showed her' appreciation for China's economic progress during a phone call with Chinese Premier Li Keqiang on Thursday, the Xinhua News Agency reported.
Lagarde expressed confidence in the steady growth of the Chinese economy through the implementation of economic reform measures.
China's quota share in the IMF will increase from 3.996 percent to 6.394 percent after the 2010 IMF reforms take effect, making the country the third-largest member after the US and Japan, according to the IMF website.
"It's a remarkable acknowledgement of China's influence and contribution to the global economy," Chen Fengying, an expert at the China Institutes of Contemporary International Relations, told the Global Times.
China will have a bigger say in global economic governance as the third-largest member of the IMF, together with a greater global responsibility, said experts. The reforms are also a beginning to changing the global economic order traditionally dominated by Western powers, said Chen.
Decision-making role
"Before the reform, China had to follow the fund's policies whether they were fair or not. However, the country can now better safeguard its interests and benefit its people as one of the major decision makers," said Chen.
She added that the IMF will see more senior officials from China and other emerging economies as the reforms take effect, and they will participate more in the decision-making process of influential economic policies, and that matters.
However, whether China's increasing investment in the fund will be fully and fairly utilized remains uncertain, as the country's hands may still be tied on many issues because the IMF's governing system remains unchanged, said Huang Wei, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
The IMF's governing system also needs to be reformed to make sure the voice of China and other emerging economies is not only heard but also handled properly, and the reforms are expected to start with an IMF chief elected from emerging countries instead of from another European country, said Huang.
Diverse fund
For the first time, four emerging market economies (Brazil, China, India, and Russia) will be among the 10 largest IMF members after the reforms, and this is only a beginning, said the fund.
The increasing share of emerging economies shows the IMF's determination to improve its democracy, diversity and fairness, Huang said.
The reform would also change the fund's economic governance philosophy which was traditionally based on Western values, a significant and necessary move in the changing context of the global economy, said Huang.
The current quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent).
The reforms were not ratified until the U.S. Congress approved of them - the country that owns 16.7 percent of the voting power - in December 2015.
