Option Millionaires

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The Group of 20 (G20) nations recently pledged more than 430 billion U.S. dollars in additional funding to the International Monetary Fund (IMF), making the global lender’s fundraising plan a great success. China has responded actively to the fundraising idea and said that it will not be absent from the fundraising. IMF Managing Director Christine Lagarde said that the new funds will expand the IMF’s lending capacity and help resolve the European sovereign debt crisis.

Shouldering international responsibility

Raising more than 430 billion U.S. dollars for the IMF, Lagarde said that the new resources have almost doubled the lender’s available capacity.

The euro zone and Japan pledged 200 billion U.S. dollars and 60 billion U.S. dollars, respectively, to the IMF, becoming the largest and second largest contributors to the organization’s fundraising plan. China has not publicly revealed the amount of its contribution.

“Developed countries have made their contribution, and developing countries will do something accordingly,” said Zeng Gang, head of the Banking Research Office at the Chinese Academy of Social Sciences’ Institute of Finance and Banking.

Zeng said that the international lender has no other choice but to raise funds from member countries to enhance its ability to cope with financial crises. As an IMF member and a responsible major power, China ought to shoulder its international responsibility and make due contributions to the expansion of the lender’s lending capacity.

Gaining a greater say in the IMF is considered as one of the main reasons for developing countries’ active response to the fundraising plan.

Under a 2010 IMF agreement, more than 6 percent of voting shares at the fund will shift to emerging market economies before the fall meetings of the IMF in October, and developed countries as a whole will hold nearly 58 percent of the IMF's voting shares by the time. The agreement will make China the third strongest voice in the organization, only after the United States and Japan. However, developed countries have kept delaying the implementation of the agreement.

Guo Tianyong, a professor at the Central University of Finance and Economics, said that BRICS countries such as China and Russia have all expressed reservations about pledging additional resources, which reflects their discontent with repeated delays to the reforms of the IMF and other international financial organizations as well as their demand for a greater say in these organizations. The final results of the IMF’s voting share reform and fundraising efforts are determined by all players, but China and other emerging economies will not easily give up their claims.

China likely to contribute 60 billion U.S. dollars

Concerted efforts of all nations are needed to revive the sluggish world economy. South Korea, Saudi Arabia, and the United Kingdom will each contribute 15 billion U.S. dollars. Australia, Singapore, Denmark, Sweden, Norway, Switzerland, and Poland have all pledged additional money to the IMF, while the United States has shown no willingness to contribute.

According to the IMF, of the 430 billion U.S. dollars, various countries have announced to contribute a total of 362.3 billion U.S. dollars, leaving 67.7 billion U.S. dollars for China, Russia, Brazil, India, Indonesia, Malaysia, and Thailand. It is estimated that China may contribute 60 billion U.S. dollars.

Saving Europe will benefit China

What the funds will be used for is a major concern among contributors. The IMF said in a statement that the resources would be channeled through temporary bilateral loans and note purchase agreements to the fund’s General Resources Account. It stressed that the new resources will be used for all its member states, instead of just for European countries. However, analysts noted that in the near and long term, Europe, whose debt problems pose the biggest risk for the global economy, needs the IMF bailouts the most.

Zeng believes that it is in China’s interests to save Europe by increasing financial support to the IMF. The European Union is China’s largest trading partner, and its collapse would have a big negative impact on the Chinese economy. In an increasingly interdependent world, helping others is a great way to help oneself. The human world is not a jungle, and requires balanced relations among different nations. While pursuing their own interests, major powers should also shoulder their international responsibilities.