China is now the World Bank’s third-largest shareholder, leap-frogging Germany and the UK to take 4.42% of the voting rights at the International Bank for Reconstruction and Development, the fund that lends money to governments. The US and Japan are the two largest shareholders.
Previously, China had 2.77% of the voting rights at the IBRD, so it is a major shift. Robert Zoellick, the president of the World Bank, said it was the first time that the World Bank has rejigged its voting rights in order to raise money, some $5.1 billion.
China’s decision to up its stake in the World Bank is a vote of confidence in the way the system works, and now piles the pressure on the International Monetary Fund to also rejig its structure in order to give China greater say in the running of the operation.
Already, Zhou Xiaochuan, the governor of the People’s Bank of China, has made China’s position clear. In a speech at the IMF/World Bank Spring meeting, Zhou said: "The severe underrepresentation of emerging market and developing countries in the IMF seriously affects the Fund’s legitimacy and effectiveness, and must be promptly corrected".
"We urge the Fund to accelerate its work, and complete quota reviews on schedule in accordance with the G-20 Pittsburgh Summit and IMFC objectives. Quota adjustment should be rules-based; the rules should be simple and transparent, and should treat all equally. We expect the review to leave no member’s quota share severely misaligned. We urge countries that have yet to approve the 2008 quota reform to complete the approval process as quickly as possible," he added.
In other words: If the IMF wants China’s financial support, and to lure China away from making its own, bilateral, loan deals with other countries, it better give China a say in how it is run, and fast.
The big question is: how long before China gets its way and the current US veto right on IMF loans is removed?