US urged to back larger role for China in global economy

The United States should support a larger role for China in the current global economic governance architecture as the two nations have much to gain from cooperation on global issues, US experts said Tuesday.

KINDLEBERGER CONUNDRUM

After World War II, the United States played an instrumental role in establishing the global economic governance architecture, including the International Monetary Fund (IMF) and the World Bank, giving itself unprecedented influence.

After more than half a century, the paramount economic challenge for the two countries' policymakers is to overcome what might be called the "Kindleberger Conundrum," named after US economic historian Charles Kindleberger, said Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, at a luncheon seminar hosted by the Washington-based think tank.

According to the theory, he said, the preservation of an open, rule-based multilateral economic system goes against the backdrop of the historic shift, in which rising powers might be unwilling to sustain it at a time when a declining power is increasingly unable to single-handedly shoulder the burdens of leadership.

The two countries must overcome their mutual wariness, not simply on specific issues, but on how they view their systems and their roles in the world, Subramanian said, adding that there is reason to be optimistic about an open global economic system through the bilateral cooperation.

EMPOWERMENT, NOT CONTAINMENT

As the largest shareholder in both the IMF and the World Bank, the United States should support the idea of increasing China's quotas in these U.S.-dominated agencies, offering China the veto power in the IMF, and placing the RMB in the basket of currencies making up the special drawing right, the IMF's special currency, Subramanian said.

Kurt Campbell, former U.S. assistant secretary of state, said that welcoming China into multinational institutions has actually already taken place.

"We have in fact wanted China to play a larger role in many of these institutions for over a decade," he said.

"Every country in Asia wants better relationship with China," and the very usage of the term "containment" resembles the residue of a period in history that is long gone, said Campbell, who is widely regarded as a key architect of the U.S. "Pivot to Asia" strategy.

Echoing Subramanian's view, Joseph Nye, a Harvard University professor, said the United States should not contain China, but work with the world's second largest economy.

Containment is simply not a relevant policy tool for dealing with a rising China, Nye said in a recent article.