Congress Ends Impasse Blocking China’s IMF Role; USTR Assesses China’s WTO Record

Stephanie Henry

January 5, 2015

Congress’ approval of the 2016 Omnibus spending bill on December 18 contained one significant, positive measure for the US-China relationship: an increase in China’s stake in the International Monetary Fund (IMF). Congress had delayed voting on an IMF reform package for several years, leading some critics in China to view the inaction as part of a containment strategy to limit China’s influence in international institutions.
IMF reform had been a long-standing goal for the Obama administration and IMF member countries, including China and other emerging economies, which will gain greater influence in the Fund as a result of the restructuring. The US-China Business Council’s board of directors has also strongly supported US approval of these reforms, including it in its 2015 statement of priorities for the bilateral relationship. Progress on reform had stalled in Congress primarily over key House Republicans’ concerns that reforms could threaten the United States’ influence in the Fund.
The IMF’s Board of Governors proposed changes to the IMF’s financing and governance structure in 2010. The reforms propose giving China and other emerging markets—including Brazil, Russia, and South Africa—more influence in the Fund by increasing their voting power. The changes would also boost the IMF’s resources, and restructure the Fund’s board to allow for more representation from emerging markets. Under the reforms, China will become the third-largest shareholder in the IMF, but the United States’ shares will remain large enough for it to retain veto power.
As the largest shareholder in the IMF, the United States’ approval was necessary to move forward with the reforms (via Congressional authorization). A majority of IMF member countries had already approved reforms, and had consistently urged the United States’ approval of reforms.

USTR releases annual China WTO compliance report 

The Office of the US Trade Representative (USTR) on December 23 issued itsannual report to Congress evaluating China’s compliance with its World Trade Organization commitments. The report raises key policies and practices of concern to US government and industry, including intellectual property rights protection and enforcement, policies favoring domestic interests, market access barriers to US goods and services, and poor transparency, among other issues.
The report attributes top problems faced by US companies in China to the government’s “interventionist policies and practices,” as well as “the large role of state-owned enterprises [SOEs] and other national champions in China’s economy.” However, the report notes that economic reforms could address these problems in the future, and describes reforms as a “win-win” for the United States and China. In the report, USTR calls on China to allow the market to play a greater role in China’s economy, reform SOEs, remove preferences for domestic companies, and eliminate market access barriers to US goods and services.