China Could Become Second Most Powerful IMF Member

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China’s clout within the International Monetary Fund could increase following proposed changes to member funding quotas.

As G20 finance ministers and central bank head meet in Washington for several days of discussion, the IMF is also conducting its 15th general review of members quotas, with the goal of expanding its financial backing and improving its ability to deal with financial crises.

The international financial institution hopes to reach a decision on funding increases, including specific quotas for member states, by autumn 2019.

Should the IMF decide to increase funding quotas it would almost certainly result in China overtaking Japan to become the second most influential member in terms of voting rights, given that voting power is apportioned on the basis of funding contributions, which are in term determined by national GDP.

Japan has ranked second in terms of voting rights since 1992, originally on account of a 6.56% funding share.

Changes to funding quotas since the start of the decade have since seen its share of funding recede to 6.46%, while China’s has increased to 6.39% from 4%, raising its rank in terms of voting power from sixth to third place.

Japan’s hopes to prevent a further rise in China’s influence within the IMF by arguing that leadership qualities should also be taken in consideration when allocating voting rights, as opposed to just sheer economic size.

The Nikkei Review reports that financial diplomat Masatsugu Asakawa said that other factors should be taken into consideration, such as Japan’s willingness to pony up $100 billion for the IMF after Lehman Brothers collapsed in 2008.

Japan may have little to be concerned about for the time being, however, given that the “America first” stance of the Trump administration has made it unlikely to support any increases to IMF contributions in the near future.

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