Analysis Of The Reform To IMF

The International Monetary Fund (IMF) originated at the "Bretton Woods Conference" which was held in the United States in 1994 when the Second World War was drawing to an end and the global economy was in urgent need of a new international financial order and the monetary system. Against the backdrop, the agency seemed to be dominated by the U.S. and Europe as its establishment and development were accompanied by the economic infiltration under the U.S. hegemony. In other words, it has provided the economic basis for American hegemony.Until now, IMF is still witnessing the predominance of developed western countries over other states, which will inevitably undermine the interests of developing countries. In this sense, western scholars on the IMF reform are more likely to stand in the position of specific developed capitalist countries, which will definitely cause the lack of objective. As opposed to western countries, China is still among the latecomers to the IMF research, the same as other developing countries with the emphasis placed on the introduction of the IMF. Moreover, the approaches on the IMF reform to the Asian financial crisis in 1990s can hardly keep pace with the ever-changing global economy. On the other hand, economic and political issues are undoubtably intertwined in the context of the international economic affairs, which means that the IMF tends to be explored in the sense of political scinence or economics.The 21st century has witnessed a new round of global financial tsunami triggered by the U.S. subprime mortgage crisis, which has rendered the IMF reform urgent. Overall, a systematic and objective research on the IMF flaws and reform is still in need although a series of reform proposals have been outlined under the repeated appeals for the IMF reform. In this context, the dissertation is planned to explore the legitimacy and effectiveness of the IMF from a legal point of view, thereby analyzing its existing deficiencies and identifying the approaches to global financial crisis considering the IMF flaws revealed by the financial crisis, particularly discussing relative proposals in China's perspective. In this sense, it has been divided into four sections.More specifically, the dissertation firstly introduces the IMF background in terms of its establishment and evolution. Along with the shift in national power after the Second World War, the U.S. and British had entered a long-term competition for the international financial leadership, which eventually led to the Bretton Woods system emphasizing the convertibility of the dollar into gold. Although the system collapsed and was later replaced by a more flexible system of Jamaica, the IMF under this system is still sustained to fulfill its three fundamental missions including stabilizing international exchange rate, ensuring international credit and coordinating international monetary relations.After that, the second section indicates the urgency for the IMF reform. Monetary system is doomed to collapse as the IMF is sliding toward "Triffin dilemma" situation considering the contradiction brought by the international reserve currency, namely the dollar. Overall, the lack of adequate early warning ability and prevention mechamism has rendered its lagging measures ineffective in alleviating the deepening crisis. In that case, it is no wonder that the disorder of the international financial system and the turmoil of the world economy have emerged. Worse yet, the IMF has been marginalized in developing countries as it offers loan assistance combined with a series of mandatory conditions interfering with their internal affairs, which has not only weakened the efficiency of the IMF functions on dealing with financial crisis, but also affected the credibility of the IMF. Moreover, it is a tough issue for IMF to attract the investment because of the imbalance of the right to vote.The third section has revealed the problems of the IMF which can be summarized that the IMF cannot play its fundamental roles effectively, namely"crisis preventer, crisis lender and crisis manager". In the first place, the legitimacy of its internal decision-making mechnism is challenged. The distribution of voting rights varies according to different share subscription, which undeniably causes a serious imbalance between the developed and developing countries and is less likely to reflect the rapid changes in economic strength of different countries as the concentration of voting power is decided by the penetration of European and American power politics. Secondly, the crisis management mechanism including the lending policies and relative conditions is unreasonable. Its"money with prescription"mode along with additional conditions may fail to meet the recipients'specific demands and even interfere in their autonomies. Thirdly, the supervision mechanism and the capability to deal with the crisis may not be available as The IMF presents a lagging financial supervision mechanism coupled with a weak early warning ability. Furthermore, policy surveillance is inefficient in respect of the credibility and transparency of its supervision. Fourthly, the current international monetary system shows obvious flaws. It is difficult to integrate the domestic financial policies into the world economic development by taking sovereign currency as an international reserve currency. Worse yet, the diversity of reserve currency seems to exacerbate the instability of the exchange rate system and the operational complexity rather than avoilding the "Triffin dilemma" situation.The fourth section places emphasis on discussing the IMF reform. A consensus has been reached on the general issues including enhancing the IMF transparency, supervising international hot money and strengthening cooperation with other international organizations. However, when it comes to the fundamental interests of developed and developing countries, it is still difficult to tackle the relative issues such as the distribution of voting rights, the decision of loan conditions, and the scope of the financial functions.The advent of the current financial crisis has rendered the IMF reform urgent and essential, which brings about both challenges and opportunities for China to rellocate in the international economic system. In response, a series of strategies from the perspective of China have been outlined in this section covering improving decision-making mechanism, optimizing SDR, enhancing financial supervision and strengthening international financial cooperation. It is assumed that the proposals are more likely to be acceptable for all member states as the developing countries are pursuing more significant international status and the developed countries are trying to optimize the IMF functions and strengthen cooperations.