IMF chief Christine Lagarde says the International Monetary Fund may move its headquarters to Beijing in a decade if China and other big emerging markets continue to grow.
In 10 years’ time, “we might not be sitting in Washington, DC. We’ll do it in our Beijing head office,” Lagarde said at a Center for Global Development event in the US capital.
The IMF’s bylaws, she said, call for the institution’s head office to be located in the largest member economy.
China is estimated to overtake the US as the world’s biggest economy over the next decade if the country, with growth forecasts above 6 percent, keeps up the momentum. The IMF and some of its members have argued that China already contributes more to global growth on a purchasing power parity basis.
The Fund is about to launch another review of its voting structure next year. The United States, with a 16.5 percent share of its board votes, has used an effective veto over IMF decisions since the body was launched in 1945.
According to the professional services giant PWC, China could be the largest economy in the world, accounting for around 20% of world GDP in 2050.
By the time, the seven emerging economies (E7) could have increased their share of world GDP from around 35% to almost 50%, the report said.
The E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey are expected to grow at an annual average rate of 3.5% over the next 34 years, compared to an average of just 1.6% for the advanced G7 nations of the US, Canada, France, Germany, Italy, the UK and Japan, it added.
In December 2015, the International Monetary Fund admitted the yuan into its select basket of reserve currencies, giving a major boost to China’s position as a global economic power.
The yuan, also called the renminbi, joined the dollar, euro, British pound and Japanese yen in the Special Drawing Rights (SDR) basket used as standard in dealings with the financial reserves of world countries.
Lagarde then described the inclusion “an important milestone in the integration of the Chinese economy into the global financial system.”
China is the world’s second largest economy. The addition was a victory for the country’s push to make the yuan a freely usable currency.
Washington is wary of China’s growing financial clout and the serious challenge which the dollar faces as more emerging economies are switching to their local currencies in trade.
Meanwhile, the IMF is already on a collision course with US Congress and other influential institutions of the country.
US lawmakers have repeatedly refused to ratify a 2010 IMF reform to give greater weight to the BRICS group of emerging market powers, namely Brazil, Russia, India, China and South Africa.