Use of the renminbi will be broadened internationally after ratification of the 2010 quota and governance reforms of the International Monetary Fund by the US Congress, according to experts.
The reform plan, ratified on Dec 18, will double the IMF’s quota resources, or special drawing rights, while shifting 6 percent of the quotas to dynamic emerging markets and developing countries.
China’s quota will increase from 3.996 percent to 6.394 percent, making the country the third-largest shareholder in the IMF — up from sixth — and enabling it to play a bigger role in decision-making in global financial governance.
IMF Managing Director Christine Lagarde, in a statement released on Dec 18, welcomed the decision by the US Congress to authorize the reforms.
“The reforms significantly increase the IMF’s core resources, enabling us to respond to crises more effectively,” she said. They also improve the IMF’s governance “by better reflecting the increasing role of dynamic emerging and developing countries in the global economy”.
The People’s Bank of China, the central bank, also welcomed the US ratification. In a statement issued on its website on Dec 19, it said the reform “will enhance the representativeness and voice of emerging markets and developing countries at the IMF”.
“Going forward, China will work closely with other member countries to support the IMF to continuously improve its quota and governance structure, to ensure that the IMF remains a quota-based and adequately resourced institution,” it said.
Zhang Ming, a researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said the reform requires China to take on more responsibility to maintain global financial stability, based on its position in the world economy and in cross-border trade.
“The renminbi will be widely used in the member countries’ foreign exchange reserves, as China will continue to support further reforms to diversify reserves shifting from those denominated in the US dollar,” Zhang said.
After the reform, the quotas of all 188 members will increase to about SDR 477 billion, or $659.67 billion.
Created by the IMF in 1969, the SDR can be exchanged among governments for freely usable currencies in times of need. A member can access up to 200 percent of its quota annually and 300 percent cumulatively, and the access can be higher in exceptional circumstances.