In a hypothetical scenario where Europe’s financial woes become systemic and the U.S. refuses to boost the International Monetary Fund’s reserves to quell the crisis, would China be up to the task of replenishing the coffers of the fund?
Foreign Policy’s David Bosco raised such a question following an opinion piece by Simon Johnson of Bloomberg, where he suggested that Europe could tap China for help “to keep European creditors whole” in the wake of Ireland’s debt crisis.
“This would be an enormous opportunity for China to vault to a leading global role. Perhaps it was a good idea to place Min Zhu, a top Bank of China official, in a senior position at the IMF,” Johnson wrote.
According to Bosco, IMF and the World Bank, given their quota-based structures, are potentially susceptible to “hostile takeovers” by countries that are ready to inject it with new capital.
“All quota changes have to be negotiated, of course, but in extremis you could imagine the United States and other key shareholders acquiescing in exchange for fresh capital,” Bosco writes.
He concludes: “It wouldn’t be absurd for China to try to capture, or at least get a much greater say in the management of other international organizations, even non-quota based ones, by agreeing to put up more money. China currently pays just over 2 percent of the UN’s regular budget. A measly $100 million would vault it into third place, behind only the United States and Japan. At the very least this kind of bidding war for influence in international organizations would give us a sense of how countries value them.”
