The Future of the IMF – the Precipitous Turn Towards China

Earlier this year, Christine Lagarde made the prediction that in a decades time, the IMF could begin holding their meetings in a new headquarters: in China.

This is not a political move, and does not reflect Lagarde’s support of Chinese growth. It is rather reflective of the bylaws of the IMF. The rules of this organization call for the IMF, which was founded by the United States, to be headquartered in the country which has the world’s largest economy. As China continues to grow, following the current trajectory, and assuming that the IMF continues to accept and rely on China’s increasingly unreliable economic data, China may overtake the United States as the world’s largest national economy sometime in the next several decades. This would signal a massive power shift in the international economic order as a former pariah state and totalitarian regime becomes the center of a system of which it has been a determined opponent for its entire existence.

China has found a way to play its way into the international order, joining international organizations and financial institutions and following the letter of the law without any of the spirit, playing the part of disruptor and not of a responsible guarantor. Their behavior and rhetoric are two separate things, and this should be briefly examined.

On one hand, China has repeatedly criticized unipolar hegemony and opposed the formation of a monopolistic international order dominated by a small club of wealthier nations. They have expressed, prior to the formation of the AIIB, that the original intention was for China to create a China-dominated financial institution to attempt to dethrone the Western-dominated order. The existing order was seen as too focused on creating a rules based system with political cooperation and alignment, with Western political goals seen as an integral piece of the lending system.

What has instead happened, though, is that China, through its calls for increased participation in the WTO and IMF, and then its unilateral creation of the BRI and AIIB, has found that multilateralism and cooperation reduced the necessary responsibility of world leadership. China has become less focused on destruction of the world order and the chaos that would ensue, and has instead found that it would do better to try and replace the United States within the existing order as a new hegemon, albeit based on a completely different system of values focused on the supremacy of national sovereignty, rather than universal ideas of freedom. This need not be done by overpowering the United States, but instead could be done by creating parallel institutions that make Western-backed IFIs redundant, emasculating the political power of the West.

For this reason, when the IMF revises its voting quota system, it should consider the political implications of any reshuffle and should doubly doubt the veracity of China’s economic claims. If China supersedes the US as the global hegemon over international financial institutions, at this point in time, it will begin their collective descent from a rules and order promoting system to one whose leaders question the very purpose of the order, and whose ultimate aim resembles less a coalition of cooperative states who share the benefits of their interconnectedness than a zero-sum system of exploitation, backed by a political system whose ultimate aim is the export of a Chinese-backed view of sovereignty – one that excuses egregious human rights abuses, totalitarianism, and carries with it an aim of ideological subjugation.

Staff writer: Ari B.

https://www.reuters.com/article/us-imf-china-lagarde-idUSKBN1A922L