A More Influential Chinese Voice At The IMF

This Bystander has been tardy in recognizing the elevation of Zhu Min from special adviser to the managing director of the International Monetary Fund to deputy director, and belatedly does so now. It is the first time a Chinese official–Zhu is a former deputy governor of the People’s Bank of China–has held such a high post at the Fund. It is also one of the first appointments of the new managing director, Christine Lagarde, along with that of David Lipton to replace his retiring fellow American John Lipsky as first deputy managing director.

We are, though, not surprised by Zhu’s promotion. To what extent it is a quid pro quo for Beijing going along with Lagarde’s own appointment, we can only speculate, and Zhu certainly is worthy of the job on his own (considerable) merits. But, equally, it certainly reflects a further increase in China’s growing influence on the governance of the global financial system via the IMF.

Zhu has been a staunch defender of Beijing’s foreign-exchange policy in the face of U.S. pressure to revalue the yuan against the dollar. While that is a position he espoused as special assistant, it will be interesting to see how he and the Fund square that circle as deputy managing director. His promotion may also prompt the IMF to start asking some harder–and necessary–questions about the U.S.’s fiscal and monetary policies, questions the Fund has in the past tended to fight shy of in all its talk of redressing global imbalances. For an institution traditionally headed by a European, it has long been under Washington’s sway.

Such discomforting questions would have been good to have had raised before the 2008 global financial crisis. As it happens, Zhu warned in January 2007 at the World Economic Forum in Davos that loose monetary policy in Washington was providing ample easy credit that was prompting risk-careless investment on Wall Street. That was the same Davos meeting at which Robert Kimmitt, deputy secretary at the U.S. Treasury, reflecting the consensus view of western economic policymakers, opened his remarks at a panel on the global economic outlook with “the economic outlook in the United States is positive”. With America again playing domestic politics with the global economy, another dose of realism from the outside wouldn’t go amiss.

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