Tag Archives: Zhu Min

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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Opening More Top IMF Jobs To China And Other Brics

Though the emerging economies represented on the IMF board don’t appear to have been able to get behind a common candidate of their own to succeed the lately resigned Dominique Strauss-Kahn as the Fund’s managing director, the five that constitute the Brics have put out a common statement reiterating that the selection should be based on merit not nationality and repeating that the institution should better reflect the growing role of developing countries in the world economy. As the executive director from China, Jianxiong He is one of the quintet that signed it.

All pretty pro-forma stuff. Yet even though the Fund has been gradually reforming its governance to be more encompassing of emerging economies, this Bystander’s eye was still caught by a couple of sentences in points five and six of the statement:

…adequate representation of emerging market and developing members in the Fund’s management is critical to its legitimacy and effectiveness.

The next Managing Director…[should be] a person that is committed to continuing the process of change and reform of the institution so as to adapt it to the new realities of the world economy.

That is likely to mean a promotion for among others, Zhu Min, who, as special assistant to the managing director, is currently the most senior Chinese official at the Fund. He is likely to be bumped up to be a deputy managing director. The three the Fund now has are Naoyuki Shinohara, a Japanese, Nemat Shafik, an Egyptian, and John Lipsky, the American who is acting managing director but who has said he will be leaving the Fund later this year. We also expect the ranks of the senior counsellors and departmental directors to look a little more diverse after the inevitable rejigging once a new managing director is in place.

It also means that any Brics’s backing for the candidacy of France’s finance minister Christine Lagarde, now the front runner since Turkish economist Kermal Derviş has declined to throw his hat in the ring, will be dependent on an explicit promise that “the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe” will be abandoned for next time round.

A how-it-works footnote:  The IMF has 187 member countries, but five exert the most influence over how it is run–the U.S. and the other big, developed economies — Japan, Germany, France and the U.K. That quintet has permanent seats on the executive board. The remaining 182 member countries are assigned to 19 groups, each represented by an executive director. The votes they cast are weighted by their group’s member countries’ subscription to the IMF, its quota. (List of executive directors and their voting power here.) It is a model that leaves the Brics (Brazil, Russia, India, China and South Africa) in particular underrepresented now the center of economic and financial power is tilting eastwards and southwards. The big five command 37.5% of the votes against the Brics 11%. During Strauss-Kahn’s tenure, a start was made on reforming the quota system, with China, for example, seeing its voting share being increased over time to 6% from 2.9%; it has reached 3.82% to date. Longer term, the Fund’s staff of 2,400 also needs to reflect the changes taking place in the world economy and not only in senior management positions.

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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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Zhu Min: A Banker On The Rise

Our man who was in Davos for the World Economic Forum brings to our attention an announcement from the International Monetary Fund that Zhu Min, a deputy governor of the People’s Bank of China, has been appointed a special advisor to the IMF’s managing director, Dominque Strauss-Kahn. The appointment reflects China’s growing influence in the global economy. We wonder if Zhu, who also worked for the World Bank for six years in the 1990s and did postgraduate work at two prestigious U.S. universities, John Hopkins and Princeton, isn’t being prepped for a top role at one of the multilateral agencies.

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