Global finance leaders to discuss IMF voting power reforms

Visitors are silhouetted against the logo of the International Monetary Fund at the main venue for the IMF and World Bank annual meeting in Tokyo October 10, 2012.

Credit: Reuters/Kim Kyung-Hoon

By Lesley Wroughton

WASHINGTON | Wed Apr 17, 2013 11:16pm EDT

WASHINGTON (Reuters) – Global finance leaders will do a stocktaking of IMF voting power changes when they meet in Washington this week amid concerns that a key IMF reform package is being held up in the U.S. Congress, a tough sell in a tight budget year.

Without mentioning the United States, IMF Managing Director Christine Lagarde on Wednesday repeated a call to member countries to approve the 2010 package, which would boost the voting power of emerging countries like China and India that have long called for more say in the IMF to reflect their growing economic might.

The voting power issue will be discussed by the Group of 20 developed and emerging countries and by the IMF’s steering panel, the International Monetary and Finance Committee, starting on Friday.

“There isn’t really much new in terms of issues on the table,” a senior International Monetary Fund official, speaking on condition of anonymity, told reporters.

“As soon as the U.S. approves it, it will come into effect. Certainly the view of the membership is that it should happen as soon as possible, and that is certainly our view, and the U.S. is also committed to getting it done,” the official said.

While approval of the package is being delayed by the United States, there has been little progress since January among countries on agreeing a new formula for calculating members’ voting shares.

The official acknowledged that further discussions hinged on updated economic data due in June.

The 2010 deal was meant to have been fully authorized by countries in October last year. But the Obama administration put off asking Congress to fund it last year to avoid controversy before the November presidential elections.

Some countries believe that delays in the voting reform package and in compiling a new formula will set back the next phase of major vote changes due in January 2014.

The United States has repeatedly said it is committed to the 2010 agreement, a thorny issue for some lawmakers who argue that the U.S. money for the IMF should go toward safeguarding domestic programs that are being cut.

Last week President Barack Obama asked Congress to shift $ 63 billion of U.S. money from an IMF crisis fund to permanently boost U.S. funding to the IMF.

The request, which would further enhance America’s clout within the IMF, will be considered as the appropriations committees start their work in deciding fiscal 2014 funding levels for government agencies and discretionary programs.

Some congressional aides have said U.S. approval of IMF money is unlikely before October.

New Treasury Secretary Jack Lew, testifying recently at a hearing on the president’s 2014 budget proposal, argued it was in the interest of the United States to maintain its leadership in the IMF and a veto power over policy decision.

“We have a veto in the IMF, we have a controlling voice when we need to, we have leverage so that the United States can influence the economic decisions around the world, and it is something that our international leadership depends on,” Lew told the hearing.

(Reporting by Lesley Wroughton; editing by Xavier Briand)

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Reuters: Economic News

Global finance leaders to discuss IMF voting power reforms

China Vice Premier says economy faces headwinds, urges broad reforms

China’s Politburo Standing Committee member Liu Yunshan (R) talks to newly-elected Vice-Premier Zhang Gaoli during the sixth plenary meeting of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, March 16, 2013.

Credit: Reuters/Jason Lee

BEIJING | Sun Mar 24, 2013 12:48am EDT

BEIJING (Reuters) – China’s economy faces more headwinds as it struggles with surplus production capacity and risks to the financial system, a member of the country’s top decision-making body said on Sunday, calling for sweeping reforms, including lessening state control.

Vice Premier Zhang Gaoli, a member of the highest-ranking Politburo Standing Committee, warned that failure to extend reforms would consign the economy to years of low-quality growth.

“There are increasing downward economic pressures and the problem of excess capacity is worsening,” Zhang said. “Objectively speaking, there are potential risks in the financial area.”

China’s $ 8.4-trillion economy fought its worst slowdown in 13 years last year when weak exports and interest rate hikes from the year before dragged annual growth to 7.8 percent — impressive by world standards but the grimmest for China since 1999.

The downturn, which surprised many with its length and depth, led analysts to warn that China’s days of heady, double-digit economic growth are over and that broad reforms across sectors are needed.

History has shown that the only way to surmount growth obstacles is to undertake sweeping changes, Zhang said.

“This is a very important job for us,” he told a business forum, saying areas that needed change include government institutions, the household registration system and environment protection standards.

“If not, even if our absolute economic size gets bigger, our economy, our growth standards, will still be at the mid- to low-end.”

Areas often cited by analysts as requiring pressing change include freeing China’s interest rates market, allowing more private investment in the economy, encouraging consumption and “greener” growth, and enforcing the rule of law.

Zhang sought to assure foreign firms that China, which is often criticized for impeding competition by subsidizing its state firms, is open for business.

“Some of our friends from abroad are very concerned about China’s investment environment,” he said. “I can tell you fair competition is our common goal.”

The new Chinese government, led by President Xi Jinping and Premier Li Keqiang and which formally took office this month, has vowed to start reforms. But resistance to change by interest groups means any reform would likely be gradual, analysts say.

“Where control is required, the government must exert control and control it straight and well. Where control is not needed, then the government should not control and intervene,” Zhang said. ($ 1 = 6.2122 Chinese yuan)

(Reporting by Shao Xiaoyi and Koh Gui Qing; Editing by Sanjeev Miglani)

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Reuters: Business News

China Vice Premier says economy faces headwinds, urges broad reforms

China central bank head to spur reforms through tough waters

China’s central bank governor Zhou Xiaochuan answers a question at a news conference during China’s annual session of parliament, in Beijing March 13, 2013.

Credit: Reuters/Jason Lee

By Kevin Yao

BEIJING | Sat Mar 16, 2013 4:56am EDT

BEIJING (Reuters) – Zhou Xiaochuan’s grey hair identifies the Chinese central bank chief as someone willing to do things a bit differently to the ranks of bureaucrats with dyed-black hair in Beijing’s other top organs of state – and the struggle he faces getting things done.

Zhou, who took control of the People’s Bank of China in 2002, is the architect of broad financial reforms that have spawned fledgling capital markets, liberalized some interest rates and broken the peg between China’s yuan and the U.S. dollar – a step along the path to turning it into a global currency on a par with the greenback.

But formidable challenges lie ahead as the country has entered a stage where big changes face push-back risks from vested interests, especially from state giants in key sectors.

“The reform task for Zhou will be very arduous and it may not even be completed during his tenure,” said Xu Hongcai, senior economist at China Centre for International Economic Exchanges, a top government think-tank in Beijing.

His tenure was given an unorthodox extension on Saturday by China’s newly installed political chiefs – headed by President Xi Jinping and Premier Li Keqiang – in what is seen as a bid to burnish the pro-reform credentials of the new Communist leaders.

Zhou, 65, is at the mandatory retirement age for cabinet-ranked officials, such as central bank governor. But his election as a deputy chairman of parliament’s top advisory body on March 11 gave him “national leader” status and cleared the way for Zhou to stay on at the PBOC.

That makes Zhou not only the longest-serving central bank chief since the establishment of the People’s Republic of China in 1949, but among the longest-serving in the world.

On the other hand, it does nothing to reduce the scale of the battle he must fight – to make China’s interest rate and currency regimes more market-driven and to open up the restricted capital account – that is seen as full of pitfalls by political hardliners and vested interests alike.

Expanding capital markets would end subsidized access to funds for state firms while expanding investment options beyond the real estate market that local government officials have for years used to fund pet projects and boost promotion prospects.

Zhou’s Western-style hobbies – an avid tennis player, connoisseur of high-end whisky and an opera buff known to sneak out to performances while on official visits overseas – and the belief that China has much to learn about market reforms from the United States have made him vulnerable to ideological attacks.

Zhou has been the object of ire from conservatives within the Communist Party, as well as the occasional flare-up of nationalistic sentiments in Chinese cyberspace.

“He has been criticized by some for paying too much attention to what foreigners say (about China),” said a central bank official who requested anonymity due to the sensitivity of the matter.

But his re-appointment signals that the trained engineer is regarded by political chiefs as someone likely to succeed in delivering reforms to put China’s economy on a more stable long-term footing – and keep the party in power.

Zhou still needs to beef up the PBOC’s clout in internal policy wrangling, as the central bank lacks the independence of institutions like the U.S. Federal Reserve and needs cabinet approval to change interest rates or the value of yuan.

His advocacy of a greater role for the market in setting borrowing costs and currency rates was rooted in his early academic career in the late 1980s and, as a protégé of former Premier Zhu Rongji, he helped draw up the blueprint to wean the economy off central planning.

Zhou, a renowned economist, has promoted a number of influential overseas-educated Chinese scholars to key posts. Among them, Yi Gang, who holds an economics PhD from the University of Illinois, is tasked with managing the country’s $ 3.3 trillion foreign exchange reserves – the world’s largest.

“Governor Zhou’s faith in the free market is deep in his bones – he has been consistent in reforms,” said the central bank official.

(Reporting by Kevin Yao; Editing by Nick Edwards and Neil Fullick)

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Reuters: Business News

China central bank head to spur reforms through tough waters

US hopes to finalize IMF vote reforms soon - US official

MOSCOW | Sat Feb 16, 2013 11:28am EST

MOSCOW Feb 16 (Reuters) – The Obama administration is hoping to move ahead shortly with legislation to finalize IMF voting reforms agreed in 2010, which will make China the third-largest voting member in the global financial institution, a senior U.S. official said on Saturday.

The official, speaking at the end of a Group of 20 meeting of finance ministers in Moscow, said the administration was actively discussing legislation with relevant members of Congress.

The 2010 package cannot be finalized until it gets the go-ahead from the United States, which has effective veto power over the historic deal that was meant to have been approved by all IMF member countries in October last year, but was stalled by the U.S. presidential election.

It is part of a broader plan by the IMF to give emerging market powers greater voting clout in the organization.

China, Brazil and other large emerging market economies have long contended that the IMF’s voting set-up unfairly benefits Europe and the United States, which dominated the IMF since its founding after World War Two.

Reuters: Bonds News

US hopes to finalize IMF vote reforms soon - US official