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Chinese Bretton Woods archives show IMF continuity

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unnamed (63)A ground-breaking Chinese account of the 1944 Bretton Woods conference shows seven decades-old continuity over Beijing’s policies on the IMF. Official Chinese archives record strong parallels between war-time Nationalist government policies and those of the present Communist leadership.

research paper by Jin Zhongxia, former director general of the Research Institute of the People’s Bank of China (PBoC), now China’s executive director at the IMF in Washington, underlines how China’s actions in helping set up the IMF at the end of the second world war display broad similarities with policies today.

Drawing on hitherto undisclosed archive documents, Jin – who wrote the paper in his previous role at the PBoC Research Institute – retraces the footsteps of the Chinese delegation at the Bretton Woods conference in New Hampshire 71 years ago and explores its role and deliberations. ‘The contents may be of relevance in the light of discussions in 2015 over issues such as the quota reform at the IMF, possible inclusion of the renminbi in the Special Drawing Right, and the establishment of the Asian Infrastructure Investment Bank and the New Development Bank, ’ the paper says.

‘The US remains the leading world power; yet China has risen to second place, ’ Jin writes. ‘The topics currently discussed among the leading countries are not significantly different from those debated at the Bretton Woods conference, historians have tended to focus only on the western countries such as the US and the UK. Little attention has been given to the other participants, let alone China.’

The United Nations Monetary and Financial Conference (commonly known as the Bretton Woods conference) agreed to create the IMF and the International Bank for Reconstruction and Development (IBRD or World Bank), establishing the framework for the post-second world war economic and financial order. China’s 32-strong delegation, led by Kong Xiangxi, China’s then finance minister and central bank governor (also known as H.H. Kung and Kung Hsiang-hsi), was the second biggest at Bretton Woods after that of the US.

Jin’s account draws on archives from the old Central Bank of China under the Nationalist-led government. The documents were taken over by the Communist government at the end of China’s civil war upon creation of the People’s Republic of China in October 1949. The research paper shows how the Chinese delegation at Bretton Woods played a constructive role on issues such as quotas (where China had the fourth largest share, after the US, UK and Soviet Union) and decisions on currency values. ‘The Chinese delegation adhered to their principle “Do not give up our rights; do not evade our duties”, seeking to demonstrate the Chinese people’s spirit of international teamwork, ’ Jin writes.

In a foreword, David Marsh, OMFIF managing director, says, ‘Jin Zhongxia’s scholarly paper on the Chinese representation at the 1944 Bretton Woods conference comes at a propitious time… [China] was plainly seeking a greater voice, next to the US, in a fast-changing monetary and financial world where it was fighting to find its feet – just as is the case today. Jin’s paper throws light on the parallels as well as on the contrasts.’

Jin’s paper says, ‘The narrative is of course from the perspective of the Kuomintang government and there could be some inflated elements… Yet the archives do offer a rather clear and complete outline of the Chinese delegation’s participation.’ The Chinese official adds, ‘The Chinese delegation to Bretton Woods contained some Chinese Communist party members. The delegation, to a certain extent, was a product of the co-operation between the Kuomintang and the Communist party.’

‘As a prime example, Ji Chaoding, assistant to the chief delegate, was an underground Communist party member. In the context of the Bretton Woods conference, Chinese Communist party members used their intelligence and talents and co-operated quietly with the Chinese government, with a view to safeguarding and enhancing China’s international standing.’

Jin notes convergence between east and west. ‘The Bretton Woods conference agreements, with inter-governmental co-operation as their framework and exchange rate intervention as their base, embody a mixture of the thoughts of both the socialist and capitalist economies. The conference itself was an event in which both capitalist and socialist nations participated. It was an important trial and a form of rehearsal for countries of different social systems to learn from one another and to seek common ground while preserving differences under the name of peace and co-operation.’

unnamed (64)A leading personality in the narritavie is Kong Xiangxi (also known as H.H Kung and Kung Hsiang-hsi), vice-premier of the Executive Yuan, finance minister, and governor of the Central Bank of China. A banker and businessman who was a major figure in the Chinese Nationalist government between 1928 and 1945, Kong led the 32-strong Chinese delegation at Bretton Woods and made an opening speech after the US Treasury secretary at the start of the conference.

OMFIF has been at the forefront of initiatives to track the growing international use of the renminbi in official and private sector transactions. This has been coupled with gradual moves towards ‘renminbi-isation’ of worldwide capital and commodity markets. As a service for official institutions, OMFIF has started the Renminbi Liaison Network to keep Global Public Investors up to date with latest developments and apprise them of future changes.

The purpose of the RLN is to provide an informal and confidential information hub to enable GPIs to build up knowledge and improve practices in dealing with the renminbi as an increasingly important investment and transaction currency. The emphasis is on the collaborative and practical nature of the information exchanges, mainly involving public sector participants. The RLN’s work includes collating information on trading and investment practices and regulations, including developments in China’s capital account liberalisation; assembling balance of payments and other macroeconomic data; exchanging views on renminbi use in cross-border trade, investment and capital market transactions; updating procedures for clearing and settlement.

For more information on the RLN, please contact William Baunton, Economist atwilliam.baunton@omfif.org | +44 (0) 02 3008 5263

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