China has earned a new degree of recognition for its growing influence on the global economy, after members of the World Bank decided Sunday to increase Beijing’s voting power behind only the United States and Japan in the international lending body.
The boost underscored a broader decision at the bank’s meeting to raise the share of votes held by developing countries to just over 47 percent, as part of ongoing reforms to give poorer countries a greater say in setting World Bank lending policy.
“It will enhance the role that developing countries can play in World Bank affairs and also help the bank play a greater role in helping developing countries improve economic development and reduce poverty,” Chinese Finance Minister Xie Xuren said in a statement.
The World Bank, started after World War II, lends money to low- to middle-income nations at low interest rates to spur development and fight poverty.
A bigger role
China’s voice has resonated with growing volume in international economic bodies as its economy is now the second largest (by gross domestic output) in the world, behind the US. The international financial and economic crisis amplified that voice, especially since the G20, where China is a leading member, has become more influential in setting global policy than the G8 of developed capitalist countries.
At the personal level too, China has become more visible. Since 2008 the World Bank’s chief economist, a key figure, has been Justin Yifu Lin, a distinguished Chinese economist.
Sunday’s move “is symbolic recognition of what is happening anyway” says Michael Pettis, who teaches finance at Peking University in Beijing. “China is getting a bigger voice … if for no other reason than its investments abroad are growing much more significant. It has reserves and it is prepared to fund development.”
More voting power to come?
The World Bank’s 186 members decided Sunday to increase China’s voting power from 2.77 percent to 4.42 percent. This is still well behind Washington, whose 15.85 percent share gives it effective veto power, and also short of Japan’s 6.84 percent. The bank requires an 85 percent vote to pass decisions.
The 3.1 percent increase in “developing and transition countries” share of World Bank votes gives them 47.2 percent; since the bank includes some high-income countries in its definition. But countries more normally classified as “developing” in fact hold just over 42 percent, according to the Bretton Woods Project, an international network of monitoring the World Bank and International Monetary Fund.
Mr. Xie said he saw Sunday’s reform as “an important step towards equitable voting power between developing and developed members,” but he clearly expects more, both for his country and other developing nations.
“The future shareholding principles should continue to be based on economic weight,” he added “and aim to achieve the ultimate goal of equitable voting power.”