Do Asians See a Role in Solving the Eurozone Crisis?

The Eurozone’s debt crisis has spurred talk about a possible role for BRIC countries to lend a helping hand through increased financing of the International Monetary Fund (IMF). While discussions are still under way over whether the IMF will even step into the euro crisis, rising powers such as China and Brazil continue to express interest. G20 finance ministers and central bankers met in Paris over the weekend and said they expected the October 23 European Union summit to “decisively address the current challenges through a comprehensive plan“. Today’s blog post highlights the views in China, India, and Russia on this issue:

CHINA

The mixed views in China indicate an interest to help the Eurozone in such a way that is both economically practical and politically beneficial to China-EU relations.

• Several op-eds in the People’s Daily highlight China’s shouldering of responsibility in global finance. They point to China’s purchase of European debt securities, expressed confidence in the Eurozone, and continuing trade and investment relations with the EU.

• Nevertheless, some voices emphasized that “China has to be cautious while expanding in Europe,” and consider “many factors including investment return, security, risk and national interests.”

• Ding Gang, a senior reporter with the People’s Daily, was more blunt about what China should expect in return: It is only “the most basic fair treatment” to ask that the EU recognize China’s market economy status and end the arms sale ban on China.

• Specific policy recommendations came from a recently organized academic forum at Tongji University. It was reported that Qiao Yide, secretary-general of the Shanghai Development Research Foundation, recommended the following: 1) purchase bonds from multilateral institutions (the European Financial Stability Facility) instead of national bonds; 2) encourage Chinese businesses to expand in Europe; and 3) increase the euro’s weight in the currency basket of the Chinese yuan.

• A Global Times op-ed commented on the geopolitical opportunity of the crisis.

Asian Views on the Next IMF Chief

Following the resignation of Dominique Strauss-Kahn, the IMF’s June 30 deadline for choosing a new managing director is rapidly approaching. The only two candidates are France’s Finance Minister, Christine Lagarde, and Mexico’s Central Bank governor, Agustín Carsten. In this post, we examine the domestic viewpoints of China, India, Japan and Russia on the upcoming selection.

CHINA

In China, commentators vigorously called for an open and competitive process for the new IMF head’s selection, with greater representation amongst emerging markets and developing members.

• Foreign Ministry spokeswoman Jiang Yu stated that the chief of the IMF should be chosen through “democratic consultation with a merit-based and transparent selection process.” Jiang said China has noticed that some countries have named their candidates, but she did not talk about China’s preference toward the candidates.

• Editorials discredited the age-old convention of a European IMF managing director and an American World Bank president:

•  The notion that a European IMF chief would be best suited to deal with the European crisis because he/she would understand the region better is a double-standard, argues Xinhua. “When East Asian countries suffered a debt crisis from 1997 to 1999 and the IMF’s main clients became Thailand, Indonesia and South Korea, no one argued that the IMF should be led by an Asian because he/she could understand the region’s problems more deeply.”
• “Europe should pass the IMF baton to Asia,” runs a China Daily headline. The IMF “should no longer function in a way that gives one continent such potent power over its functioning,” since such tactics are “zero-sum” and harmful to the entire world. “The rest of the world needs to tell the EU that its members will have to swallow the same bitter pills that people in Asia, Africa and South America have been subjected to for so long, rather than be accommodated and mollycoddled while the rest of the world is denied of its rights.”

• The China Daily noted that the recent joint statement made by the BRICS countries’ IMF executive directors is a much-needed example of coordination among emerging markets. “To properly reflect the growing role of developing countries, which are still under-represented in this [the IMF] and many other major international institutions, the BRICS countries should be more confident in asserting their common position, even if that may annoy others.”

• The Global Times argued that an increased Chinese presence at the senior management level will “reinforce the attention of the IMF to the emerging economies as well as improve the economic and trading relationship between developing and developed countries.”

INDIA

India appears resigned to the idea of Europe continuing its hold on the managing-director position, but has joined other emerging countries in criticizing the selection process.

• The Economic Times noted that as a rising superpower, “India is in a far better position to understand the compulsions of borrowers and ground realities of countries under fiscal stress.”

• The Hindu reports that French candidate Christine Lagarde received no assurance from the Indian leadership during a June 7 visit seeking support for her candidacy. Finance Minister Pranab Mukherjee confirmed this, adding that “the selection of the managing director…should be on the basis of merit, competence, and (be made) in a transparent manner.” Following Mexican candidate Agustín Carsten’s visit a few days later, Mukherjee stated that he is in touch with his counterparts and that they will announce their decision at “an appropriate time.”