International Financial Institutions

Abstract

This chapter explores the areas in which China and the European Union (EU) meet to cooperate or compete with each other in managing global financial affairs. It adopts an approach that combines the core elements found in realist, liberalist, constructivist, and evolutionary approaches. The chapter focuses on the International Monetary Fund (IMF) at the global level as the primary institution for analysis. At the regional level, it focuses on such major regional institutions as the European Bank for Reconstruction and Development, the Asian Development Bank, and the Chiang Mai Initiative Multilateralization (CMIM). The CMIM is viewed by some observers as a mini-IMF in Asia. The chapter examines three policy areas in which China and the EU compete or cooperate with each other in the IMF: their monetary contributions, their personnel contributions, and their policy contributions. It argues that despite the rise of China, the country’s ability to contribute to global financial governance has been relatively limited and uneven up to this day. This is due mainly to the structure of the global financial system, which favors the dominance of the EU and the United States in it. Such embedded dominance has led China and likeminded countries, individually or collectively, to look for alternative structures, resulting in a financial world that is increasingly more pluralistic and polarized. China’s accumulation of huge amounts of sovereign reserves and its plan and ability to use them effectively to enhance its economic growth have helped facilitate the emergence of a new global financial order.