China's IMF Quota Set to Surpass Japan's

飞雪寒冰

China’s contribution to the International Monetary Fund will exceed Japan’s when new quotas are implemented, making it second only to the U.S., under a new formula agreed by the IMF last year, a People’s Bank of China official said.



The central bank official, who declined to be identified, told Caijing that the IMF passed a resolution in 2008 to adopt the new formula this year. But the implementation was postponed after G20 finance ministers agreed in London last month conduct the next IMF quota review in 2011, bringing it forward from the original schedule of 2013.



Under the new formula and based on China’s 2008 data, the country’s IMF contribution will be 6.3 percent this year, with the U.S. contribution at 17.09 percent and Japan’s at 6.13 percent, the official said. China’s current IMF quota is 3.72 percent.



Each IMF member is assigned a quota that is broadly based on its relative size in the global economy. A member’s quota determines its maximum financial commitment to the IMF and its voting power.

飞雪寒冰

The central bank official said the new IMF quota formula takes into account each nation’s GDP, foreign exchange reserves and current account data.



With more countries showing interest in tapping the IMF credit line as the global recession worsens, there are concerns the IMF will not have enough resources to go around.



The IMF said it needs an extra US$250 billion to double its available funding. The United States has suggested a US$500 billion increase. China has said it could contribute in ways that don’t require an immediate overhaul of the organization, such as buying bonds issued by the IMF.



The central bank official said separately that the U.S. Treasury is considering voting for an increased allocation of special drawing rights, or SDRs, by the IMF, while the UK has also agreed to a significant increase in SDR issues.



An SDR is an international reserve asset, essentially an artificial currency made up of a specific proportion of U.S. dollars, Japanese yen, British pounds and euros. The IMF invented SDRs in the late 1960s to supplement the existing official reserves of member countries. SDRs are allocated to member countries in proportion to their IMF quotas. They are now used mainly as the unit of measure for IMF assets.

飞雪寒冰

According to the central bank official, member countries which joined the IMF after 1981 have never received SDRs, though a 1997 amendment to IMF rules allowed SDRs to be allocated to new members.



The new SDR allocation rule won approval from 131 member states representing 77.7 percent of the IMF voting rights. But the U.S. Congress has not approved the proposal.



In an article published last month, central bank governor, Zhou Xiaochuan, called for an overhaul of the current global monetary system, and proposed using SDRs as a new “super-sovereign reserve currency” in place of the U.S. dollar, as the ongoing global financial crisis “again calls for creative reform of the existing international monetary system toward an international reserve currency with a stable value, rule-based issuance and manageable supply.”