The International Monetary and Financial Committee (IMFC) of the IMF held its 20th ministerial meeting on October 3-4, 2009 in Istanbul. Twenty-four governors representing 186 member countries and representatives from international and regional institutions and forums including the IMF, World Bank, WTO and Financial Stability Board attended the meeting and discussed the Fund surveillance, global economic outlook and the Fund s governance. PBC Deputy Governor Yi Gang attended and spoke at the meeting.
Deputy Governor Yi pointed out that global economic and financial outlook had improved, but the recovery was yet to be soundly established. The global economy was confronted with the risks of rising trade and investment protectionism and uncoordinated macroeconomic policies. It was imperative for major financial markets to accelerate financial reforms, remove toxic assets, enhance capital adequacy, strengthen financial regulation and make more coordinated and forward-looking macroeconomic and financial policies.
The Fund should play its due role in policy coordination. It should monitor more closely risks (especially in the restructuring progress of financial sectors and the implementation of expansionary fiscal and monetary policies in major markets) and conduct in-depth analysis. International capital flow should be more closely watched to keep relative stability of the exchange rates of major reserve currencies.
Deputy Governor Yi called for better international cooperation and coordination to secure a more open trade system, accelerate comprehensive structural reforms and improve allocation of resources. It was particularly important to remove impediments to productivity growth, especially in the labor, product and service markets. The IMF and World Bank should explore ways to reallocate more resources to developing countries via multilateral mechanisms, tap their potential and thus lay the foundation for a more balanced development of the world economy.
Deputy Governor Yi briefed the audience on China s economic developments and policies. Showing signs of stabilization and recovery, China s macroeconomy outperformed expectations in the first half of 2009. While maintaining economic growth and expanding domestic demand, the Chinese government made efforts to contain fiscal and financial risks.
Banks enhanced their asset quality and resilience to shocks. China would keep the stability and consistency of its macroeconomic policies, accelerate economic restructuring, expand domestic demand, especially consumer demand, vitalize key industries, enhance independent innovation and improve people s welfare.
Meanwhile, China would guard against all potential risks including inflation to promote the stable and relatively rapid economic development.
As for the reform and future mandate of the IMF, Deputy Governor Yi pointed out that, the failure of major international financial institutions to issue timely early warnings highlighted the consequences of its misfocused surveillance. The persistently misaligned quota shares and underrepresentation of emerging markets and developing countries hamper Fund governance, even-handed surveillance and timely early warning.
Deputy Governor Yi supported increasing Fund resources through a variety of means but also stated that quotas should be its primary resource. The Fund should introduce a reasonable automatic quota adjustment process to reflect the changes in the relative economic positions of its members. He also expressed the support for the broader reform of Fund governance, which would result in a strengthened role of the Executive Board, better oversight over the management, a more reasonable process for the selection of Managing Director and greater participation of emerging markets and developing countries in the Fund s management and staff.
Deputy Governor Yi highlighted the importance of strengthened monitoring over major financial markets by the Fund and stated that it should give full regard to the circumstances of member countries during assessments rather than oversimplifying the process by looking at a single policy. Deputy Governor Yi welcomed the Fund s progress in Early Warning Exercise, its package to reform the lending facilities and financing mechanisms of low-income countries and its increased flexibility in non-concessional financing to low-income countries.
