China increases financial support to IMF

China announced Monday that it will contribute $43 billion to the latest round of the $430 billion resources increase to the IMF.

Analysts said the increase, together with commitments made by other G20 members, will enhance IMF's crisis-tackling ability, and increase the voice of the emerging economies in this global financial institution.

Chinese President Hu Jintao addressed the first session of the G20 leadership summit, which convened Monday in the Mexico resort of Los Cabos. A press release by the Chinese Foreign Ministry after the session said that China will increase $43 billion to IMF, the multilateral lender based in Washington.

"China supports and decides to join the resources increase to IMF," said the press release.

The announcement came against the backdrop of the world mulling new efforts to tackle major challenges in world economic and financial sectors, and equip IMF with abundant resources.

G20 finance chiefs agreed in April to have the group of advanced and emerging economies cooperate on increasing the financial firepower of IMF, by over $430 billion, to meet future financing demand from members affected by the eurozone crisis, which is having a negative impact on global trade and financial channels.

IMF said it will only tap the $430 billion financial firewall agreed to in April to shield the world from the European debt crisis after using up its existing lending power.

Zhu Guangyao, vice-finance minister, told reporters on Sunday that China will invest through the general resources account, which is the safest method of investment, since it enjoys the credit of IMF.

Zhu repeated China's position that the final IMF fund would not be "earmarked for any special region" but added that Beijing "supports a strong and prosperous euro and a unified eurozone."

One of the IMF's principles is that "the more you contribute, the more rights and interests you share," and China's increase in its investment to IMF will beef up its say in the financial organization, said Xiong Hou, a researcher at the Institute of European Studies of Chinese Academy of Social Sciences.

Yet compared to the group of developed countries, China's share of its say in the IMF is still small, and an effective use of IMF's money is still facing challenges, Xiong added.

"The Europe debt crisis is still brewing for a final solution, it is not developing out of control, and we should not view the issue in a short-sighted manner," said Xiong.

It is obvious that economic recovery in Europe will not only benefit itself, but also China, EU's largest trading partner, said Wang Yizhou, an expert on world economy and politics at the Chinese Academy of Social Sciences.

China’s financial support of the IMF will also make EU rethink its policies toward China, Wang added.

China's decision to boost resources for the IMF offers China a good way to use its rich foreign exchange and China will face fewer risks when supporting IMF rather than directly providing a loan to EU countries, Wang said.