Chinese Economi

st Steps into World Financial Spotlight

BEFORE Zhu Min took the podium at the Beijing Symposium on World Economy and China: Post-crisis Global Economic and Financial Situation, in mid November 2009, the chair made an intriguing introduction to the newly appointed deputy governor of the People’s Bank of China: “Though we haven’t as yet got official confirmation on Mr. Zhu’s next post, one thing we’re certain of is that he will be assuming a bigger role in international affairs.”

Rumors were circulating that Zhu, who had been transferred just 20 days earlier from his post as deputy governor of the Bank of China, was a likely candidate to enter the caucus of the International Monetary Fund (IMF). The silence of Mr. Zhu and his current employer only help stoke the gossip mills.

China Needs Its Voice in the IMF

As a prominent economist, Zhu Min is known for his insight and foresight in both Chinese and international financial situations. During the Second Chinese Economic Forum sponsored by the Chinese Academy of Social Sciences in 2006, he was already warning against the perils of a burst derivative bubble and calling for more regulation. Both of his earlier predictions – that China’s recovery from the recession would follow a V-shaped trajectory and the global economy might remain flat for a long period after a steep fall – have since meshed with reality.

With these analytical attributes and his expertise within the international monetary system, Zhu is believed to be the top candidate to establish China’s presence in the IMF. “The IMF needs a strong Chinese figure during its course of reforms,” said Zeng Gang, director of the Banking Section at the Institute of Finance and Banking under the Chinese Academy of Social Sciences. “After the global financial crisis broke, calls for reform at the IMF grew louder. Mr. Zhu seems the man to meet the demand for a Chinese face at the top stratum of the organization.”

At present the U.S. still holds the balance of voting power in the IMF – 17.4 percent, and is the only one of the agency’s 186 member states with veto rights. Japan comes in second at 6.02 percent. China’s voting power rises slightly to 3.72 percent after a US $40 billion contribution to the IMF in April 2009. The agency is undergoing reforms – streamlining its staff, cutting its budget and giving developing countries more say in its decision making process. In a time of change, any shift of weight, however slight, toward an emerging power like China is not taken lightly, especially if China is made a part of the agency’s leadership.

In this context, when Zhu Min spoke, more people heeded. “For the financial sector, 2008 was the year the crisis unfolded, 2009 was a period of recovery, and 2010 will be the time for overhaul and upgrade,” he stated during the World Economy and China seminar. “A whole new financial theory and model will take shape in 2010. During that process the world’s financial markets will be re-demarcated and repositioned, and China’s financial industry faces the same situation.”

Right Person at the Right Time

China is a strong advocate for developing a new international financial order that gives the developing world a bigger voice. Following its injection of US $40 billion into the IMF as promised at the G20 London summit in April 2009, China purchased US $10.4 billion worth of Special Drawing Right (SDR) in August, and went on to top that off with US $50 billion for IMF bonds the month after. People close to the deals were saying in private that in exchange for its generosity, China was promised a high-level seat in the organization.

It would not be the first time a senior member from China has appeared in the IMF after the nation regained its legal status in the agency in 1980. Li Ruogu, now chair and president of the Export-Import Bank of China, was named the economist for the IMF’s Asia and Pacific Department in 1990.

If the time is right for another Chinese member to enter the IMF’s management core, Zhu Min is widely viewed as the prime candidate given his experience working in top financial institutions around the world.

A native of Shanghai, Zhu was born in 1953, graduated from Fudan University in 1982, and headed for the U.S. to further his studies three years later. After receiving a doctorate in economics from Johns Hopkins University, he began teaching there, and later at Fudan. His international finance career was diverse; he worked as a World Bank economist from 1991 to 1996, and a consultant to the UN Development Program from 1995 to 1996.

In 1995 Zhu met Lou Jiwei and Cao Yuanzheng who were visiting the United States. The former was director of the Macro-Economy Department of the State Commission for Restructuring the Economic System, and the latter was deputy director of the commission’s International Department. In their talk Zhu expressed his desire to return to the homeland. In 1996 Zhu joined the Bank of China.

Zhu’s prestige in China’s economic circles rose steadily over his 13 years with the BOC. In his position as chief of the Restructuring and Public Offering Office of the Bank of China HK, he won praise for his ability to successfully steer the institution through a gloomy market in 2002 and take it public. He then was actively involved in the listing of the parent company on the Hong Kong stock exchange. In August 2006 Zhu Min was promoted to deputy governor of the BOC in charge of finance, internal control, legal affairs, development strategy and research.

Years abroad have encrusted Zhu Min with a Western sense of humor and a candid nature. At the 2009 Summer Davos, the World Economic Forum meeting, he won the audiences laughter by saying: “I have to thank Mr. Martin (Martin Wolf, associate editor and chief economic commentator of Financial Times) for calling me an economist instead of an official. The former obviously has a better reputation nowadays.” He prefers to be referred to as an economist rather than an official, and is loved by his staff for his affability. Many in China’s banking sector believe that Zhu, who is conversant in both international finance and Western culture, has an edge over many of his Chinese peers in interpreting and handling financial problems within a global framework. The media is also keen on him, citing his approachable and pragmatic style. “Mr. Zhu enjoys high esteem in the international financial sector. He is down-to-earth, and never shy about touching sensitive issues,” said a foreign journalist based in Beijing.

As early as 2004 Zhu Min, then advisor to the BOC governor, told participants at the annual Davos meeting: “All Asian countries hold their reserves in U.S. dollars for security reasons, but at some point, this has to change.” He likened the relationship to a love affair that had to come to an end. “The United States is benefiting from China and other Asian nations using their trade surplus to buy U.S. treasury bonds as a reserve currency. But in the long run, this is not sustainable.... China will focus more and more on its domestic demand, which is growing fast. We cannot keep our exports at a growth rate of 30 percent.”

If speculation about his ascent to the IMF leadership turns out to be true, Zhu Min will become the second Chinese figure to hold a senior position within a top international financial organization, following Justin Yifu Lin, chief economist and senior vice president of the World Bank. Many believe the expected appointment will mark a substantial step up for China’s prominence in world finance.