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China 'plays constructive role' in G20

Publication Date : 20-06-2012

 

The latest Chinese capital contribution to the International Monetary Fund (IMF) will enhance the organisation's ability to tackle the European debt crisis and increase the say of emerging economies, analysts said.

China announced on Monday that it will contribute US$43 billion to the $430 billion boost to the IMF.

The contribution can be used by all IMF members, the People's Bank of China, the central bank, said in a statement on yesterday.

Chinese president Hu Jintao, addressing the G20 Summit on Monday in the Mexican resort of Los Cabos, said that China supports increasing the resources of the IMF and enhancing its ability to tackle, the crisis and provide emergency assistance.

Hu also called on the group to continue supporting Europe "in a constructive and cooperative way".

The financial contribution is "a positive thing", and EU countries will welcome the decision, the EU ambassador to China, Markus Ederer, said yesterday at a speech at the University of International Business and Economics in Beijing.

China has been playing "a constructive role" in supporting the EU to tackle the crisis, Ederer said.

"If China expresses confidence in the eurozone, it is a very important signal to the market."

But Ederer emphasised the support from the IMF is "the second line of defence", as he stressed the EU's own responsibilities.

G20 finance chiefs agreed in April to increase the financial firepower of the IMF by more than $430 billion.

The IMF said that it will tap the new resources to shield the global economy from the European debt crisis only if it uses up its existing resources.

One of the IMF's principles is that "the more you contribute, the more rights and interests you share", and China's increased investment in the IMF will give it extra clout, said Xiong Hou, a researcher in the institute of European studies at the Chinese Academy of Social Sciences.

But in comparison to developed countries, China's IMF share is still relatively small, Xiong added.

The approach by the US and other developed countries in not boosting IMF resources does not match their economic strength, according to Jia Xiuguo, an expert on international affairs with the China Institute of International Studies.

"It is inconsistent with Washington's responsibility to the IMF," Jia said.

China's decision to boost IMF resources, rather than give direct loans to European countries, is a good way to use its large foreign exchange reserves, said Wang Yizhou, an expert on the global economy and politics at the Chinese Academy of Social Sciences.

The G20 Summit in London in 2009 agreed on a $500 billion increase in IMF resources and China invested $50 billion.

During the summit in 2010, the G20 leaders confirmed the 6 per cent shift of quota shares to emerging and developing countries in the IMF, and were committed to achieving this by the annual meeting in 2012.

If the reform is carried out, China's quota in the IMF will be increased to 6.39 per cent.

The EU's total quota in the fund is about 30 per cent, followed by the US with about 17 per cent.

In the Monday address, Hu said implementing the IMF quota reform is an urgent task.

During a meeting with German Chancellor Angela Merkel ahead of the G20 Summit on Monday, Hu said that China will continue to support Europe's efforts in promoting integration and maintaining the stability of the euro.

A united, stable and prosperous Europe serves the interests of the world, including China, Hu said. The EU is China's largest export destination.

Merkel said Europe appreciates China's confidence in the continent and its support for European integration.

She also noted that a steady, robust Chinese economy is an important factor in any global economic recovery.

China will continue to pursue a proactive fiscal, and prudent monetary policy, Hu said in his address at the G20 meeting.

The economy as a whole has maintained growth stability as it adjusts its economic structure and improves the standard of living, he said.

"We will keep the right balance between maintaining steady and fairly fast growth, adjusting the economic structure and managing inflation," Hu said.

 

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