Last year, the IMF published a report with the apparently innocuous title"International Reserves: IMF Concerns and Country Perspectives"which contained a bombshell. It admitted the IMF had attacked a number of countries, including China, in a way which the report stated with diplomatic nicety was"not helpful."It conceded these attacks were based on research that was"pro forma."Again with delightful diplomatic understatement, the report noted:"The analytical underpinnings of IMF's Management… were not persuasive."

Stripped of the necessity for diplomacy, The Washington Post ran the headline"Auditor finds IMF was pressured by U.S. to fault China."The article noted:"The International Monetary Fund, at the urging of the United States, shaped recent research to pressure China over its economic policy, according to a study… by the funds in-house watchdog."

Bias was not only against China but against developing countries in general. Amar Bhattacharya, head of the Group of 24, a consortium of developing nations that monitors the IMF, noted the IMF"seemed to strike a particularly political note and was seen as a ‘stalking horse' for the United States to press China."

The specific issue examined by the IMF's Report was attacks on China and other countries for accumulating large foreign exchange reserves allegedly posing a threat to the stability of the international monetary system, which now have been admittedly declared unjustified. The report concluded bluntly:"The IMF has not provided a compelling argument why ‘excessive' reserves constitute a problem for the international monetary system."

The reason the IMF had taken this biased approach, conjuring up a non-existent danger, was bluntly stated:"Interviewees – from among senior IMF staff and former Management, as well as country officials – considered that the views of influential shareholders regarding the IMF's inability to influence China's exchange rate policy in the last decade were an important factor explaining why concerns about the stability of the international monetary system were expressed in terms of excessive reserve accumulation."In this context"Influential shareholders,"as The Washington Post stated, is a euphemism for the U.S.

That numerous factually baseless anti-China reports appear in the international press is obvious to anyone who seriously studies China's economy. There is an"industry"of writers who produce inaccurate anti-China economic stories which are repeatedly reprinted, while it would be difficult to find a media outlet willing to print such inaccuracies about the U.S.

To take a few examples, Gordon Chang predicted in his 2002 book The Coming Collapse of China that"A half-decade ago the leaders of the People's Republic of China had real choices. Today they do not. They have no exit. They have run out of time."But instead of"collapse"in the next decade, China experienced the most rapid economic growth ever experienced by a major country in human history – which did not prevent Chang being employed as an"expert"columnist by Forbes.

Even some serious economists do not appear to feel the need to explain their errors when writing on China. For example, New York Times columnist Paul Krugman took the exceptionally serious step of calling for tariffs against China. In his argument, he provided"evidence"that"the International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion."In fact China did not run a balance of payments surplus even remotely approaching Krugman's claim – the actual figure was $237 billion.

But while inaccurate journalistic writing on China's economy is routine, the IMF is meant to be different. It is supposed to be run objectively in the interest of its shareholders, which include almost every country. However the reality is regrettably different. Bias against developing countries has not been confined to issues admitted by the IMF's report. For example, during the 1998 Southeast Asian debt crisis, the IMF's approach was so arrogant and incorrect that a series of countries in the region decided that never again would they be placed in a situation where they had to rely on the IMF – this being one of the reasons those countries decided to build up large foreign exchange reserves.

Similarly, in the 1980s, the IMF pushed Latin America with every means at its disposal to concentrate on debt repayment and budget consolidation – policies which resulted in the continent's GDP shrinking in per capita terms over the decade. However when in 2008 the international financial crisis broke out in developed countries, no such ringing denunciations of budget deficits and expansionary monetary policies in the U.S., Europe and Japan followed. The Washington Post said the IMF's policies in Europe were"criticized by some emerging-market officials as more generous than programs established in response to financial crises in Asia and Latin America."In short, the recent IMF report simply revealed part of a systematic bias against developing countries.

This situation revealed in the report is inevitable as long as the IMF's structure no longer reflects the real weights of different parts of the world economy. The matters dealt with in the report are therefore not purely a question of the past. Developing countries, including China, do not have an equivalent weight within the IMF to the weight they possess in the global economy.

This situation was supposed to be resolved by measures taken to cope with the international financial crisis. In December 2010, the IMF Board of Governors approved increases in both quotas and representation for developing countries, stating"Members will make best efforts to complete this by the Annual Meeting of the Board of Governors in October 2012."However, by December 2012, only 70 percent of the necessary 85 percent of votes to reform the IMF's voting structure had been secured – even though China had ratified both measures. Meanwhile, changes agreed to more than two years ago had not been implemented, because the U.S. had not ratified them. Thus, systematic underrepresentation of developing countries, including China, in the structure of the IMF continued. As long as this situation exists, abuse in the IMF of the type revealed in the audit report on foreign exchange reserves is inevitable.

The unjustified bias revealed by the IMF report therefore highlighted the urgency of carrying out the IMF reforms agreed to in 2010. China was the specific target of the manipulations revealed in the IMF report, but every developing country, and the health of the world economy as a whole, has a strong interest in this issue.

The author is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/johnross.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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