IMF and World Bank meetings show China's rising influence (3)

15:15, April 27, 2010      

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International cooperation should be enhanced to deal with the uncertainty in economic recovery

Zhou Xiaochuan, governor of the People's Bank of China, said at the meeting that the global economy has maintained positive recovery momentum, but the speed and strength of the recovery vary significantly in different countries and regions. The recovery is strong in emerging markets and developing countries, while in developed countries the pace of recovery is relatively slow.

Zhou added that, at present, the primary risks to the global economy come from developed countries. Sovereign debt risk has become a major and real threat to global financial stability and economic recovery, and its potential adverse effects deserve special attention. The prolonged de-leveraging process in the banking industry could result in a lack of financing support for sustainable recovery thereby increasing the complexity and difficulty of exit strategies from the financial crisis.

The liquidity poured into financial markets by the central banks of major developed countries and the uncertainty of their exit policies have increased the instability of international capital flows. Consequently, this has added difficulty to short-term capital flow management for emerging market economies. In addition, the risk of a resurgence of trade and financial protectionism must also not be overlooked.

Some scholars pointed out before the meeting that the severe global financial crisis has fully exposed deficiencies in the current international financial system and also the necessity and urgency to reform the system. The meeting also stressed clearly the importance of greater international cooperation and effective multilateral institutions.

Xie said that developed countries should take into full account the possible impact of their exit strategies on the global economy, especially on the developing economies. In order to establish a solid foundation for the global economic recovery, all countries should maintain the continuity and stability of their macroeconomic policies and take greater care when implementing exit strategies. Furthermore, the strength, method and pace of policy adjustments should be in accordance with each country's national conditions.

It will still take some time for developing countries to share equal voice and representation with developed countries in reforming the international financial institutions. The IMF released a reform program for reallocating the IMF quota and voting shares as early as 2008, but the program has not yet been implemented. Moreover, the IMF promised that it will complete the new IMF quota and voting reforms by January 2011, but the recent BRIC Summit called for the reforms to be completed by the G20 Summit scheduled for November 2010.

By People's Daily Online

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