China holds 6.09 per cent voting power in the Washington-based fund, far lower than the 16.5 per cent share held by the United States, which effectively gives it veto power, with major decisions at the IMF requiring 85 per cent to be in favour for a motion to be approved.
The quota reform is critical to the IMF’s governance representation and legitimacy
The quota is far lower than China’s share in the global economic output, which stands at about 18 per cent.
“The quota reform is critical to the IMF’s governance representation and legitimacy,” Pan told a panel on Asian financial stability.
The fund concluded its latest round of quota reviews in December, but no decision has been made about any adjusted distribution.
Beijing is challenging US dominance, but it also has to ensure fairness as China’s growing say won’t become another unfair dominance
“Finance has become one of the hotly-contested realms in superpower rivalry,” Xi said in Excerpts of Xi Jinping’s Speeches on Finance Work, a newly published book summarising his financial instructions.
In another session at Central Party School – the higher education institution which trains Chinese Communist Party officials – in January, Xi said “having a strong voice and ability to deploy its influence in the formulation of global financial rules is one of the core attributes of a financial superpower”.
Rui Meng, a professor with the China Europe International Business School, said China stands to be the biggest beneficiary of the upcoming quota adjustment and capital injection for a more proportionate mix of voting powers at the IMF.
“Beijing is challenging US dominance, but it also has to ensure fairness as China’s growing say won’t become another unfair dominance,” Rui said.
“That’s why Pan has stressed a collective Asian voice and approach that has wider support and is more sustainable.”
In Boao, Pan appealed to panellists, including central bank officials from Indonesia, Singapore and Mongolia, to dovetail efforts to expedite quota realignment, including a new formula, to reflect the weight of Asian countries and emerging markets.
Beijing has also pinned more hope on strengthening regional deals, including the Chiang Mai Initiative (CMI).
The initiative is a currency swap arrangement pooling China, the 10 Southeast Asian nations, Japan and South Korea.
Specific ways to introduce a freely usable currency are being discussed
“The CMI is in line with new changes in the international monetary system and the characteristics of the region as a stabiliser,” Pan added.
“Specific ways to introduce a freely usable currency are being discussed. This will further serve the region with freely usable currencies and improve the flexibility and accessibility of investment.”
The Chinese central bank governor also hailed the “common will” in the region to explore the possibility of establishing international financial mechanisms and institutions dedicated to Asia, as he commented on the calls for the establishment of new legal entities to strengthen Asia’s financial safety net.
The PBOC has already signed local currency swap agreements worth 4 trillion yuan (US$554 billion) with 29 countries and regions, with the deals forming a key part of the international bailout efforts led by the IMF to help member countries fight economic or financial crises.