Chatter at the IMF: In 10 years, headquarters could be in Beijing

Christine Lagarde, the managing director of the International Monetary Fund, may not have realized that the headlines after her talk Monday on global economic challenges were about her casual remarks that the IMF could be based in Beijing in 10 years.

She was speaking at the Center for Global Development in Washington with its president, Masood Ahmed, a former senior IMF official.

Talking about the growing weight and contribution in the global economy by emerging market economies, Lagarde pointed out that those economies are currently underrepresented at the IMF and should be better represented if current growth trends continue.

"Which might very well mean, that if we have this conversation in 10 years' time we might not be sitting in Washington DC," Lagarde said.

"We will do it in Beijing," Ahmed chipped in.

"We'll do it in our Beijing head office," Lagarde added, smiling and eliciting laughs from the audience, with Ahmed giving a thumbs-up.

"That's a possibility. And it's actually called for in the articles of the IMF that the head office has to be in the largest economy in the institution," Lagarde said.

The IMF chief quickly added that talking about Beijing in 10 years' time, it will be critically important, in order to secure staff eagerness to travel, that climate change commitments made by China be met.

The New York Times and Reuters have run stories highlighting Lagarde's comments about the IMF possibly moving its head office to Beijing a decade later. The news also has been picked up by media in China.

"My understanding from people at the meeting is that the comment was made in jest. But of course, there is a grain of truth in every joke," Caroline Freund, a senior fellow at the Peterson Institute for International Economics, told China Daily on Tuesday.

Freund, an economist who had previously worked at the IMF, the World Bank and the US Federal Reserve, said that even if the IMF is not located in China, China will likely be the main competitor.

"China is the world's largest exporter, poised to become the world's largest economy, and will become the world leader on international economic policies sooner or later," she said.

In an article posted on the Peterson website on Monday, Freund argued that China is not yet ready to lead the global economy before further advancing its economic reform agenda, especially of state-owned enterprises.

The IMF was launched in 1945 and headquartered in Washington, capital of the world's largest economy. The US wields an effective veto with a 16.5 percent share of the IMF's board votes.

The IMF revised the voting structure in 2010, but it was approved by the US Congress only at the end of 2015, after a long delay.

There is no telling if the US Congress will become more supportive toward future IMF reform. The IMF Board of Governors called on the executive board last December to work on a new round of quota review, aiming to complete the review by 2019.

China is now the third-largest shareholder in the IMF, after the US and Japan. China now has 6.49 percent of the IMF quota and 6.16 percent of the votes.

Economists estimate that China, with growth rates forecast above 6 percent, will likely surpass the US over the next 10 years to become the world's largest economy in nominal terms.

The Conference Board estimates that China's GDP will surpass that of the US by 2018, and PriceWaterhouse Coopers forecasts that China's economy will be bigger than the US' before 2030.

But the IMF, using purchasing power parity that adjusts for differences in prices, claimed in late 2014 that the Chinese economy already overtook the US that year to be the world's largest.

chenweihua@chinadailyusa.com