Congress should move quickly to approve reforms giving China and other emerging economies a greater say in the International Monetary Fund to show that the U.S. is intent on preserving its leading role in governing the world’s economy, Chinese Vice Finance Minister H. E. Guangyao Zhu said Wednesday.
In a speech before the Peterson Institute for International Economics, Mr. Zhu said China is committed to working within the framework of global governance set up by the U.S. and its allies after World War II, but the system must be reformed or it will falter in the face of changing realities such as the growing economic clout of China and other emerging countries.
“The administration has made a lot of effort to try to convince Congress, but unfortunately until today, it’s still not approved,” he said.
The Obama administration played an instrumental role in drafting the reforms in 2010 and persuading most other IMF members to approve them, but disagreements with Republicans on Capitol Hill have held up the legislation because of opposition from some conservatives to expanding the IMF’s lending authorities.
Mr. Zhu, in his remarks, made it clear China sees itself as equal to the U.S. but does not seek to displace the U.S. on economic and security matters.
Congress, therefore, must do what’s in the best interest of both the U.S. and the rest of the world by approving the reforms, he said. Washington would continue to have the dominant voice in IMF affairs under the reform legislation.
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U.S. GDP “is more than $16 trillion and it has the largest economy in the world. I don’t think anybody can replace that,” Mr. Zhu said.
While China’s economy has vaulted to $9 trillion and continues to grow strongly at around 7.5 percent a year, it is still smaller than the U.S. economy, he said, downplaying estimates by the World Bank and some private think tanks that by some measures China is close to overtaking the U.S. as the world’s largest economy.
“My judgment is people [outside China] are more serious than domestic people about saying China has grown beyond the U.S.,” he said, adding, “We still see a big gap.”China “is still a developing country,” Mr. Zhu said.
“One big gap is the environment. We really paid the cost for 10 percent growth, particularly on the environment side,” as China’s massive export-oriented industries fouled the air, water and land in their headlong rush to market, he said.
China is now focusing on “quality growth,” and will tolerate lower growth rates in the 7 percent range in the interest of improving both the economy, the environment and living standards so they are closer to those in the U.S. and the developed world, he said.
“We want growth with real quality, so the Chinese people can enjoy a much better life. That’s the wish of the Chinese people,” he said.
But he stressed that China still has a long way to go before it can catch up with the U.S., including building up the rule of law; increasing the role of consumers in its economy; cleaning up the environment; establishing a resilient, open and sophisticated financial sector; and integrating China’s currency into the world economy.
World’s growth engine
Despite looking to the U.S. for leadership, China recognizes the important role it now plays as a major engine of growth for the world economy, he said.
That is as important now as it was during the Great Recession, when China helped pull the world economy back on its feet, Mr. Zhu said. He voiced worries that the European Union is tipping back toward recession and even possibly entering a deflationary spiral like the one that engulfed Japan. Europe is China’s biggest trading partner.
“We hope both of our two great countries will work together to contribute to world growth,” he said. “We are very happy to see the U.S. economy back to the right track” and resuming its role as a top engine of growth for the world economy this year.
Mr. Zhu said he was open to proposals to expand trade and investment between the U.S. and China, including one by the Peterson Institute to eventually include China in the Trans-Pacific Partnership (TPP) trade agreement the U.S. is currently negotiating with other Pacific Rim nations.
“We need momentum building up in U.S.-China relations. That will contribute to global peace,” he said.
But he said that China would continue to closely guard its interests. China has held up final agreement on an information technology agreement being negotiated through the World Trade Organization because it wants to protect fledgling Chinese industries that are trying to compete with established Western tech giants.
Mr. Zhu did not indicate China was willing to offer anything more to move that agreement towards a conclusion, as sought by the Obama administration. He held out hope, however, that Washington and Beijing might be able to conclude a bilateral investment treaty before President Obama leaves office.
He also held to the Chinese government’s insistence that it is not using anti-monopoly enforcement to selectively punish U.S. firms operating in China — a frequent complaint of American businesses these days. He insisted that the vast majority of antitrust actions taken by the government have been against domestic firms.
• Patrice Hill can be reached at phill@washingtontimes.com.
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