China And The Next Head Of The IMF

Late last year the International Monetary Fund shook up its membership quotas to better reflect the growing tilt of global economic power to developing economies. China became the third largest member behind the U.S. and Japan, and ahead of Germany, France and the U.K. Its fellow Brics–Brazil, India and Russia–moved into the top ten. With that greater stake in the ownership of the IMF has come growing demands from the Brics for a commensurately bigger stake in the running the place. In particular, they want an end to the convention that the IMF’s top job, that of managing director, goes to a European, just as the top job at the World Bank goes to an American.

With the incumbent, Dominque Strauss-Kahn, now facing charges of sexual assault in New York, (and this Bystander assumes innocence until otherwise shown; DSK, as he is known, denies the charges and any wrongdoing) attention is turning to his successor. Could that be for the first time not just not a European, but someone from China, in keeping with the country’s new status within the institution?

Not to spoil the ending, but this Bystander doesn’t think it will happen this time. It is a generation of IMF leadership too soon. The name most mentioned as a possible Chinese candidate, People’s Bank of China governor Zhou Xiaochuan, now in his early 60s, may be a tad too old (IMF retirement age is 65, though that could be easily circumvented if necessary). Zhu Min, a deputy central bank governor now in his late 50s and who is a special assistant to Strauss-Kahn, the first Chinese to hold a senior position at the IMF, though U.S.-educated and a highly polished individual, may be seen as too much of a technocrat for what is also a highly political job, especially now bailing out Europe’s indebted nations is the IMFs first order of business.

There are other forces at work against a Chinese being the first non-European head of the IMF: Japan and India. Both neighbors would like the honor to be theirs, or at least not one of the other’s. India has the most credible candidate in Montek Singh Ahluwlia, one of the architects of the country’s economic reform, but at 67, age weighs even more heavily against him than Zhou. Japan has enough internationally seasoned economic diplomats to field a candidate but no name has emerged as a strong contender.

Even if China, Japan and India all agree that the job should go to someone from an emerging economy, getting the three to line up behind a single candidate will be tough. So there will be horse trading in support of a compromise candidate–and the geopolitical arm wrestling with the U.S. will get an additional dimension because the job won’t go to an American so Washington will have to play through a proxy. (There is a fuller discussion of possible candidates here.) That could swing the choice back towards a European–and Brussels will claim the eurozone crisis demands a European. While several Asian finance ministers have already come out in support of France’s finance minister, Christine Lagarde, none of Beijing, Delhi and Tokyo has endorsed her (and she has been quietly canvassing support in the region, having been expecting Strauss-Kahn to step down next year when it was thought he would have been running for the French presidency, an event that now seems unlikely and the top IMF job to open up sooner than expected).

Kemal Dervis, Turkey’s former economy minister now at the Brookings Institution in Washington, Trevor Manuel, a former South Africa finance minister and Agustin Carstens, governor of Mexico’s central bank, along with Lagarde, would probably comprise the bookmakers’ favorites. Stanley Fischer, the African-born American economist who is now a governor of Israel’s central bank, and a favorite in Washington, as an outside bet, though he, too, at 67, has an age handicap. So is former U.K. prime minister Gordon Brown as his successor, David Cameron, won’t back him saying the job should go to China or India.

What is certain is that none of the candidates can get the job with Beijing’s tacit agreement, and that will surely come at an as yet unspecified price in terms of even greater influence over the institution.

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