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BRIC Power
By CHRISTOPHER SWANN and EDWARD HADAS
Published: November 28, 2011
Rescuing the wealthy euro zone is a tough sell for relatively poor China. But the Middle Kingdom could parlay some of its $3.2 trillion of reserves into greater international clout through the International Monetary Fund, currently headed by Christine Lagarde. It would be saving a big export market and preserving its ability to diversify the currency it holds.
After the 2008 financial crisis, I.M.F. member states roughly trebled the institution’s lending capacity. But now that seems not nearly enough. Its remaining firepower of about $400 billion is only about a third of the gross financing needs of Italy and Spain over the coming three years, Barclays Capital reckons. Should it be called upon to play a major role in stabilizing the euro zone, the I.M.F. needs more money, quickly.
The fund’s most obvious potential benefactor outside Europe is China. Beijing can perhaps look for inspiration to Saudi Arabia starting in the mid-1970s. Blessed with surging oil revenue, the Arab nation ratcheted up its contributions to the I.M.F. That earned it a much bigger role at the fund. Saudis still have a 2.8 percent I.M.F. voting share, far larger than the country’s 0.8 percent share of global G.D.P. China, which is today underrepresented at the fund compared with its economic heft, could pull something similar. It might even secure pole position to name the next fund chief.
Self-interest could figure heavily, too. With almost a fifth of its exports going to Europe, China can ill afford an economic crisis in the euro zone. Helping to bankroll the continued existence of the euro would also ensure China has access to a reserve currency other than the dollar. Financing the I.M.F. is also pretty safe — its loans to debtor nations tend to get repaid ahead of anyone else’s.
Full Hundred
http://www.nytimes.com/2011/11/29/bu...0europe&st=cse
By CHRISTOPHER SWANN and EDWARD HADAS
Published: November 28, 2011
Rescuing the wealthy euro zone is a tough sell for relatively poor China. But the Middle Kingdom could parlay some of its $3.2 trillion of reserves into greater international clout through the International Monetary Fund, currently headed by Christine Lagarde. It would be saving a big export market and preserving its ability to diversify the currency it holds.
After the 2008 financial crisis, I.M.F. member states roughly trebled the institution’s lending capacity. But now that seems not nearly enough. Its remaining firepower of about $400 billion is only about a third of the gross financing needs of Italy and Spain over the coming three years, Barclays Capital reckons. Should it be called upon to play a major role in stabilizing the euro zone, the I.M.F. needs more money, quickly.
The fund’s most obvious potential benefactor outside Europe is China. Beijing can perhaps look for inspiration to Saudi Arabia starting in the mid-1970s. Blessed with surging oil revenue, the Arab nation ratcheted up its contributions to the I.M.F. That earned it a much bigger role at the fund. Saudis still have a 2.8 percent I.M.F. voting share, far larger than the country’s 0.8 percent share of global G.D.P. China, which is today underrepresented at the fund compared with its economic heft, could pull something similar. It might even secure pole position to name the next fund chief.
Self-interest could figure heavily, too. With almost a fifth of its exports going to Europe, China can ill afford an economic crisis in the euro zone. Helping to bankroll the continued existence of the euro would also ensure China has access to a reserve currency other than the dollar. Financing the I.M.F. is also pretty safe — its loans to debtor nations tend to get repaid ahead of anyone else’s.
Full Hundred
http://www.nytimes.com/2011/11/29/bu...0europe&st=cse
