Give the World Bank to China

Posted By Clyde Prestowitz Monday, February 27, 2012 - 3:18 PM Share

With the term of World Bank President Robert Zoellick soon coming to a close, there has been much talk of breaking the U.S./European monopoly on the top posts at the bank and the International Monetary Fund (IMF) by naming an emerging market leader as the bank's new chief. I herewith throw my vote to Zhou Xiaochuan, the head of the People's Bank of China.

The U.S.-European deal under which an American always heads the World Bank while a European heads the IMF is musty with old age and is arguably in violation of the technical rules of the bank and possibly of the IMF as well. In the bank's structure the percentage of share ownership and voting power is supposed to be allocated according to GDP size. This has always resulted in the dominance of the United States. But the truth is that the GDP of the EU is nearly a third larger than that of the United States. So technically, it should be a European heading the bank instead of an American.

But the real point is that size of GDP should not be the determining factor. At the moment, the United States has 15.85 percent voting power with Japan next at 6.82 percent and China next at 4,42 percent, but China's GDP has already surpassed that of Japan and is set, according to several forecasts, to overtake that of the United States within the next three to six years. That kind of economic momentum should be recognized. More importantly, China has by far the world's biggest financial reserve holdings and is increasingly being turned to for various kinds of financial assistance by other countries, especially the developing countries of Africa. Perhaps the bank's rules should be altered to allocate voting power on the basis of reserve holdings rather than simply sheer size of GDP. That would unequivocally put China in charge.

Such a move would be particularly appropriate at this moment in as much as Zoellick is the originator of the phrase: "China must become a responsible stakeholder" in the global system. This way, he could give his stake to China.

No country has ever been more successful than China in achieving rapid economic development. Such a move at the bank would give it a platform upon which to develop more fully and apply more broadly its ideas for development and balanced globalization. At the same time, U.S. backing for a Chinese at the head of the bank would allay fears of a new U.S. containment policy raised by the Obama administration announcement of its "Pivot to Asia." It would also be a signal to other developing countries that America welcomes a larger role for them. At the same time, it would signal Americans that there is a new emphasis in Washington on Pivoting to America and its much needed re-development.  

LIONEL BONAVENTURE/AFP/Getty Images

 

CHARLESFRITH

3:56 PM ET

February 27, 2012

Nice suggestion

I'm impressed.

 

SLIGHTLY_OPTIMISTIC

5:42 PM ET

February 27, 2012

G20

For additional information, Project Syndicate had a piece last year from Singapore asking Is China the New World Bank?.

It was said that a plan is needed for effective development programmes. This is arguable, however the need for financing seems a priority.

Anyway do the voting percentages matter? The status of the United Nations and its economic agencies - the World Bank, and the IMF - has changed with the advent of the G20. Surely the technical rules of these agencies have little real importance also.

 

MCGANNONMA

6:11 PM ET

February 27, 2012

Bad idea

Sure let them have it, because they have done so well with their economy through currency manipulation and devaluing the Yuan

 

THE_OBSERVER

12:53 AM ET

February 28, 2012

Double-edged sword

China's may want the newly industrializing countries and the south to have a larger say in how things are run at the World Bank and the IMF but that doesn't necessarily mean that China wants the reins of the World Bank at this stage. As the author points out, China is basically running another international development agency in parallel with the usual ones. China herself is trying to manage their economy but at the same time trying to help out some of those countries that are friendly to China. They have the reserves pursue those aims. To be head of the World Bank would to invite pressures from all sides for that organization's cash which may conflict with China's own international political outlook and development aid goals.

 

PATRICK MOLEN

5:11 AM ET

February 29, 2012

Bargin Hard

Don't do a Kissinger and 'give them' Taiwan in exchange for "eggrolls".

I don't believe we should give them this position without getting something EXTREMELY SUBSTANTIAL in return. I'd link it to all and every matter, irregardless of whether the matter falls into the monetary economics, political, military, or the diplomatic realms.

How badly do the Chinese want this World Bank position?
What are they prepared to give up for this?

Cold calculated hard nosed bargaining and nothing else.

 

PATRICK MOLEN

6:01 AM ET

February 29, 2012

One newspaper noted of the

One newspaper noted of the outcome of Nixon’s China trip, "They got Taiwan, we got egg rolls."

 

MARTY MARTEL

3:41 PM ET

March 4, 2012

Let China create its own World Bank and IMF

With its massive foreign exchange holdings that are increasing by the hour, let China create its own World Bank and IMF if they so desire.

Nobody has seen China come forward to help poor countries the way US and Europe have done. Mercantalist China goes to African countries to exploit resources and create more export markets.

As it stands, China with its massive forex reserves, has already become a lender of last resort to many a countries and many a companies in the world. China will have such a chokehold on the world economy before long that China will be able to dictate to many a countries including US on how to run their economies.

 

MAXIMB

3:20 PM ET

March 22, 2012

The best place to look is the

The best place to look is the Sunday Times, it will take you a week to get through, but you will have read up on what is going on around the world. It has said that if you have no education at all but Read the Times, you will be able to keep your own on any topic..

"Is rio orange war always forfait mobile internet inevitable ?"
MaximB

 

MAXIMB

3:23 PM ET

March 22, 2012

Thanks to NAFTA we no longer

Thanks to NAFTA we no longer make any thing, allot of good jobs have been out sourced - banks and companies operating in this country insists on hiring immigrants rather than the home grown, cheap wages, we are defiantly on the road to being a third world country..

"Is rio orange war always forfait blackberry inevitable ?"
MaximB

 

HANS KLOSS

6:15 PM ET

March 27, 2012

China wants the reins of the

China wants the reins of the World Bank at this stage. As the author points out, China is basically running another international development agency in parallel with the usual ones. China herself is trying to manage their economy but at the same time trying to vrásky help out some of those countries that are friendly to China. They have the reserves pursue those aims.Nobody has seen China come forward to help poor countries the way US and Europe have done. Mercantalist China goes to African countries to exploit resources and create more export markets.

 

Clyde Prestowitz is the president of the Economic Strategy Institute and writes on the global economy for FP.

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