Why Would China Want to Expand Its IMF Quota?

To have more influence within the IMF, of course. A brief at China Economic Review says that China may have remained mum at the G-20 Summit on increasing its contribution to the IMF, its quota, until developing countries in general, and China particular, are afforded more influence within the IMF. China has tried to increase its quota before, in 2001, but China was blocked from increasing its quota beyond the size of the smallest G7 member, Canada. That restriction has since been exceeded, but China's quota is still only at 3.72%.

Who might be doing this blocking? Well, the second highest quota is held by Japan at 6.13%, and the third highest is Germany with 5.99%. Number one? The US at 17.09%. It just so happens that having a veto on institutional issues within the IMF requires a a 15+% quota in order to overcome the 85% weighted majority voting requirements. Which means that there is only one nation in the world with the final say on the structure of the IMF.

The US appears undecided on what sort of IMF it wants. Brad Setser reports that last week George Bush did not want to substantially increase the size of the IMF, but at G-20 the US suggested reviewing "the adequacy of the resources of the IMF." Whatever the case truly is, it is hard to imagine the US actually giving up its veto power. And, it is hard to imagine Congress approving additional allocations to the IMF at this point in time in order to maintain our veto. Without true necessity, it is easy to see the US use its veto to maintain the IMF's status quo.

Alternatively, why should China seek to expand its influence in the IMF? China's use of soft power is not necessarily backfiring, but in the face of recent troubles in Sudan, China might be more aware that the authority of an international body would be more acceptable to the rest of the world in bringing stability to troubled regions. But, why the IMF? The political tone of my undergrad college was extremely liberal, but how many people don't think of corrupt dictators who were 'friends' of the US and 'enemies' of communism when they think of the regimes that the IMF was used to to prop up?

Maybe, just maybe, if the IMF allowed China and other nations to increase their quotas under the IMF, it could improve its own image. Perhaps Argentina wouldn't take loans that amount to usury from Hugo Chavez. Perhaps the IMF could actually start doing what it was formed to do, help install sound macroeconomic policies in developing nations in need of loans. After being a piggy bank for bad guys, this would be a huge step up. That just might be worth a veto...