How China’s global ambitions nearly toppled an IMF chief
Fury over whether IMF Managing Director Kristalina Georgieva manipulated the data to favor China in her previous role at the World Bank nearly cost the Bulgarian economist his job.
No matter how true the claims are, no one doubts China’s determination to leave its mark on the multilateral institutions that underpin the global financial system.
âChina wants a bigger voice and more chairs at the table,â said Yu Jie, senior researcher on China at Chatham House. “He wants to present himself as the leader of the world South.”
China’s geopolitical ambitions have intensified in recent months, ranging from banning cryptocurrency trading while simultaneously promoting the digital renminbi, to trade measures that target countries it disagrees with. These include shutting down to Lithuanian exports this month after the Baltic state allowed the opening of a Taiwanese representative office in Vilnius.
Equally important are China’s financial and diplomatic ambitions at the UN and in Washington-based institutions such as the IMF and the World Bank, which are at the heart of the global system designed by Western countries after World War II.
China pursues its ambitions by using its unusual dual status as a developing economy and a superpower.
âThere’s really no precedent for what we’re seeing with China,â said Scott Morris of the Center for Global Development, a Washington-based think tank. âChina is particularly important in these institutions, especially at the World Bank. . . as a shareholder, as a donor and as a client.
For the world’s poorest countries, China is now the world’s largest bilateral lender, larger in fact than all other bilateral lenders combined.
His ambitious “Belt and Road” initiative of overseas infrastructure investment has also been scaled back and replaced by the softer-sounding Global Development Initiative launched by President Xi Jinping at the General Assembly of United Nations in September.
This is an example of China âplaying with two hands,â Yu said. With one, he seeks approval from global institutions such as the UN to drive his agenda and gain support, by especially among developing countries. The GDI “doesn’t even look like a Chinese initiative,” Yu said.
Yet at the same time, when its global ambitions at the World Bank or elsewhere are thwarted, it quickly sets up alternatives such as the Shanghai-based New Development Bank and the Asian Infrastructure Investment Bank.
China’s frustrations are understandable. The leading role of the G20 during the financial crisis of 2009 was a belated recognition by the West that China and other major emerging economies deserved to have more of a say in global governance. Yet not much has changed at the IMF or the World Bank since.
Although it represents nearly a fifth of the global economy, China’s participation in the two institutions is only around 6%, less than that of Japan and barely a third of that of the states. -United. Efforts to reform the IMF’s quota system have been thwarted by those, including European countries, who would lose out.
As for the World Bank, a formula it devised after the financial crisis would have doubled China’s stake to 12%. But by the time this proposal was considered, under Donald Trump’s administration, China-U.S. Relations had deteriorated and China’s ambitions were put on hold after the plan was scrapped for further consideration.
“If you are the United States, do you want to deeply upset [allies] to please China? Morris asked. “It’s hard to read the landscape and conclude that the United States is going to do it.”
These tensions came to a head during the World Bank’s capital increase in 2018. It was at this point that Georgieva, as then managing director, allegedly oversaw the manipulation of data in the report. flagship of the Doing Business bank to flatter China’s ranking.
When the allegations emerged in September this year, Georgieva, who had since joined the IMF to become its managing director, was accused of doing so to help persuade China to accumulate more money. But like her noted in his defense, China had “unequivocally supported a capital increase of the Bank for many years.”
On the contrary, say its critics, it did it to appease Beijing after others refused any increase in its participation.
Georgieva has denied any wrongdoing and the IMF’s board, after reviewing the allegations, concluded that there was not enough evidence to show that she had played an inappropriate role.
China has had more success at the UN. Over the past 20 years, its contributions have increased from 1% to 12% as Beijing seeks to increase its influence, placing the country in second place. Meanwhile, US contributions have fallen from 25 percent to 22 percent.
Chinese nationals now head four United Nations agencies, including the Food and Agriculture Organization and the International Telecommunication Union, along with the United States.
Such influence comes at a relatively low cost. âYou have to give them the credit for having understood that with relatively little money you can become an important player in the international context,â said Augusto Lopez-Claros, executive director of the Global Governance Forum. âThey understood it better than the Americans.
A review by the CGD of China’s growing role in multilateral institutions and other development banks has shown that Beijing is asserting itself to the extent possible in these forums. Yet, as China is still officially classified as a “developing country”, it has also appealed to these institutions for financial and technical assistance.
âThey haven’t backed down from developing country status at all,â said Morris of CGD. âIt’s really unique. If you think of India or the other big emerging economies, they borrow a lot but they don’t have the status of a world leader.