China, India boost IMF crisis fund; US stays away
After years of pressure to take a greater role in global affairs, China and India have stepped up by contributing to a new IMF emergency fund -- from which the United States is absent.world Updated: Jun 20, 2012 15:48 IST
After years of pressure to take a greater role in global affairs, China and India have stepped up by contributing to a new IMF emergency fund -- from which the United States is absent.
China, India and other emerging economies made commitments to a fund during a summit in Mexico of the Group of 20, a club formed during the 2008 global economic crisis that aims to give a bigger say to developing powers.
China lent $43 billion to a new firewall being set up by the International Monetary Fund to help nations escape contagion from woes still afflicting the global economy.
The pledges made China the third largest contributor after Japan and Germany. The IMF said that commitments to the firewall now totaled $456 billion (360 billion euros), more than it initially anticipated.
The United States and other Western nations have long pushed China to be, in the words of World Bank president Robert Zoellick, a "responsible stakeholder."
US officials have often charged that Beijing sought to enjoy the prestige of a top power but assume the responsibilities of a poorer nation when convenient.
"It's a breakthrough in terms of countries committing resources," Australian Prime Minister Julia Gillard told reporters. "This is an important outcome which Australia has been advocating strongly for."
Indian Prime Minister Manmohan Singh pledged $10 billion but called for swift progress on promised reforms at the Washington-based lender, which along with the World Bank is dominated by the West.
"India's contribution reflects our recognition that as a responsible player in the global community, we must play our part," Singh told reporters after the summit on the beach resort of Los Cabos.
But the United States, the world's largest economy, has not committed any money to the firewall. The only other Group of 20 nations that have not made specific pledges are Argentina, Canada and Indonesia, according to the IMF.
President Barack Obama's administration has argued that Europe has the capacity to fund its own recovery.
But contributors have made clear that the firewall is not just for Europe. Foreign officials say Obama does not believe he could win approval for more funding from Congress, where skepticism of foreign commitments runs deep.
Few nations have publicly called on the United States to do more.
The United States remains the largest overall contributor to the IMF and in 2009 approved a $100 billion credit line for another IMF crisis fund, a move criticized by some of Obama's conservative adversaries.
In turn, China has hardly trumpeted its contribution. Chinese officials in Los Cabos did not speak about it and China's state-controled media took pains to stress that it was a loan that builds interest, not a gift.
While the firewall may appear to be an arcane issue, Chinese officials are often careful to walk a fine-line on issues that nationalist Chinese could perceive as a developing country benefiting wealthier nations such as Greece.
Nina Hachigian, a senior fellow at the Center for American Progress, a left-of-center Washington think tank, said China's contribution goes "in the 'plus' column when we consider whether China is a 'responsible stakeholder'."
But she said that China was not taking a major risk, as it has plentiful foreign reserves and is offering a loan rather than a gift.
"Despite the tricky domestic politics of using foreign reserves to help richer nations, Beijing knows that China's economic health is dependent on those nations being able to afford to buy its goods," she said.
"We can never expect nations to act against their own self-interest -- that is not the test of responsibility," she said.
"What we hope for is that they consider whether their actions strengthen the international system and are consistent with other countries' interests as well. China passed this test of responsibility in this case."
India has also faced calls to play a more active global role but, with a vastly different political economic and political system than China's, it has much better relations with the West.
First Published: Jun 20, 2012 14:41 IST