Beijing’s Ruthless Grasp Over IMF Boss Exposed
IMF Chief and “former” Communist Party bigwig Kristalina Georgieva has been exposed as a Communist Chinese puppet. The implications for the institutions of global governance are enormous.
Last week, the world discovered what has been well known for some time. Through its nationals or its puppets, China is at the head of multilateral international organizations. For most of them, like Interpol, WHO, FAO and UNESCO, there was no doubt. For others, such as the World Bank or the International Monetary Fund (IMF), there was room for suspicion. Not anymore.
An independent investigation released last week underlined that World Bank leaders, including then-Chief Executive the Bulgarian former Communist Party member Kristalina Georgieva, applied “undue pressure” on staff to boost China’s ranking in the bank’s “Doing Business 2018” report.
The investigation, launched by bank’s ethics committee, led to the formal conclusion by law firm WilmerHale about the overwhelming influence of China at the World Bank. The report by WilmerHale underscored especially the role and partial judgment of Georgieva – now managing director of the International Monetary Fund – in total favor of the Chinese. What she actually did was to change the report’s methodology to boost China’s score.
As a consequence, the World Bank Group canceled the entire “Doing Business” report on business climates, saying internal audits and the WilmerHale investigation had raised “ethical matters, including the conduct of former Board officials, as well as current and/or former Bank staff.”
The Chinese agent Georgieva, and her key adviser and compatriot, Simeon Djankov, had reportedly pressured staff to “make specific changes to China’s data points” and boost its ranking at a time when the bank was seeking China’s support for a big capital increase. At that time, in 2018, the World Bank in 2018 announced a $13 billion-paid in capital increase that boosted China’s shareholding stake to 6.01% from 4.68%.
WilmerHale reported that Georgieva visited the home of a “Doing Business” manager to retrieve a hard copy of the final report that reflected changes that boosted China’s ranking, and thanked the employee for helping “resolve the problem.” The investigation report disclosed a “toxic culture” and “fear of retaliation” surrounded the Doing Business report, and said members of that team “felt that they could not challenge an order from the Bank’s president or CEO without risking their jobs.”
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The U.S. Treasury Department, which manages the dominant U.S. shareholdings in the IMF and the World Bank, said it was analyzing what it called those “serious findings.” Treasury spokeswoman Alexandra LaManna said: “Our primary responsibility is to uphold the integrity of international financial institutions.”
And now additional voices are being raised, fearing a loss of trust in international institutions. The “involvement” of Kristalina Georgieva “in the manipulation of data for the benefit of China is alarming”, reacted Andy Barr, a Republican elected to the U.S. Congress, who believes that it is “essential to ensure the integrity of the IMF”.
His colleague French Hill also called the report “alarming” and said that “the reputation of multilateral lenders is now tarnished. He believes that if the allegations are true, “the IMF Board should quickly evaluate the actions” of Kristalina Georgieva as head of the institution. Hill called on Treasury Secretary Janet Yellen to report the situation to Congress and to find ways to “ensure strict and transparent data integrity in World Bank and IMF reports and assessments. He also denounced this new example of “the way the Chinese Communist Party systematically works to instrumentalize multilateral institutions”.
Likewise, Senator Marco Rubio of Florida said in a statement to Reuters: “Those complicit should be held accountable, and free nations need to seriously re-evaluate the role we allow Beijing to play in global institutions”. Senator Bill Hagerty, the top Republican on the Senate Banking Committee’s international trade and finance subcommittee, asked for “restoration of this valuable report under conditions we can trust rather than its cancellation.”
Relations between China and the United States have been particularly tense, ever since former Republican President Donald Trump rightly waged a trade and political war against the Chinese communist regime. Unfortunately, his successor Joe Biden does not seem to understand the major risks involved for America and the world.
The ball is now largely in the court of the United States, whose votes on the IMF board – the body responsible for choosing the managing director – carry the most weight. It also has veto power. For the head of the IMF to have been involved in data manipulation is a pretty damning allegation. It is a severe blow to the credibility of the international institution and of its finances system. For those reasons, the United States must therefore ensure that Kristalina Georgieva is fired without notice.
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Georgieva’s appointment to the IMF was unexpected. She was under investigation in her previous job at the European Commission and, according to insiders, her departure from the Commission was a decision made to avoid a possible formal investigation and subsequent dismissal from the top job. She was also suspected of using public funds in her campaign for the post of UN Secretary General in 2016.
The European Union was having a hard time agreeing on her candidacy but the EU finance ministers finally agreed to jointly support the candidacy of Kristalina Georgieva to head the IMF. The idea was to agree on a common candidate with extensive international experience and proven technical skills, noted a European source, before conceding that the process quickly became politicized. In this game, nationalities as well as political affiliations weighed in the balance.
Of the five candidates in the running, the final duel was between the former president of the Eurogroup, the Dutch socialist Jeroen Dijsselbloem, and the number two of the World Bank, Kristalina Georgieva, from the center right. The Bulgarian candidate had the support of France, but the fact that she will be a year older than the age limit set by the IMF (65 years) and her lesser experience in financial matters have served as arguments for her detractors.
They also criticized her for coming from a country outside the euro zone. No comments whatsoever at that time though about her close relations with China. Ms. Georgieva had “all the skills, experience and international credibility” to succeed Christine Lagarde, said the then French Finance Minister Bruno Le Maire, who was chairing the discussions. In the end, Georgieva received the support of 15 member states, including France, Italy and the Eastern European countries. Germany, the Netherlands, Spain and the Nordic countries voted for Mr. Dijsselbloem. The United Kingdom abstained.
Kristalina Georgieva served as European Commissioner for Humanitarian Aid between 2010 and 2014. She was also vice-president of the Juncker Commission in charge of budget and human resources for a year between 2015 and 2016.
At the UN Security Council in early October 2016, a last-minute push by the Bulgarian Prime Minister at that time Boyko Borissov succeeded in putting European Commissioner Kristalina Georgieva on the ballot for the next Secretary-General. Though she lost the vote, Georgieva remained a Vice-President of the European Commission.
Yet serious questions have been raised about her past in Soviet-era Bulgaria, as well as her alleged present family ties with a business conglomerate that U.S. diplomats in Sofia have described as “once the doyen of Bulgarian organized crime”.
The issues surrounding Georgieva and her connections to China speak to a broader problem: too often, both the United Nations and the European Union have appointed leadership figures without vetting them, let alone subjecting the process to public scrutiny. At a time of crisis throughout the globe, the credibility of these international bodies depends on reforming the selections process to include due diligence and transparency. Only thus can the peoples whom the candidates represent feel assured of their integrity — and, by extension, the integrity of the institutions they lead.
While Georgieva’s appointment to the IMF came as a surprise, China, on the other hand, played its cards with its usual style of ruthless bullying. Kristalina Georgieva is clearly a small piece of the puzzle in China’s domination of the United Nations.
The ascendency over both the World Bank and the IMF is a big issue at stake for China. Due to its restrained external trade and investment relations, China was absent from the international financial system until the 1980s. As a latecomer, it has, however, gradually integrated into the existing international financial architecture, with the assistance of international financial institutions and became an increasingly active member of global governance of monetary policies.
Before the 2008 financial crisis, China had participated in various IMF programs to get access to advanced methods and techniques of financial governance that met the international standards and useful feedback for its domestic economic development. After the crisis burst, China and the IMF acknowledged further each other’s increasing importance in the post-crisis global monetary governance and strengthened their collaboration.
For example, under the pressure of ‘US dollar trap’, China called the IMF for taking the initiative in shifting the focus of international monetary system away from the US, while seeking leadership in the reformed system. This example of shows the development in China’s relationship with international economic organizations, referring to the evolution from merely China learning from the international organizations to China influencing the international organizations for its even greater influence in global governance.
China is currently the IMF’s third largest member by voting share. This is a recent result of China’s decade long struggle for larger voices in the IMF’s formal governance. Thus, China has benefited from three most recent IMF governance reforms, launched in 2006, 2008 and 2010, respectively. Among all, the 2010 reform represented the largest power shift in favor of the Fund’s emerging and developing economy members in the history according to the then IMF Manager Director Dominique Strauss-Kahn.
The 2010 reform nevertheless only became effective in January 2016. It was mostly because the US Congress did not ratify the reform in time, without which the reform could not be implemented according to IMF regulations. The Chinese authorities repeatedly urged the IMF to implement the reform, but the IMF could not do much without the U.S. approval.
This is precisely why the United States must continue to use its dominant influence and get rid of the Chinese agent who now serves as IMF managing director. By doing so, the U.S. will demonstrate its political will counter China’s relentless hostile moves against the American interests. China will not be stopped by empty words or statements like those of European leaders. China takes the competition for supremacy much more seriously than most people realize!
Chinese aggressive policy of influence relies on a wide range of tools, from traditional public diplomacy to clandestine activities, and has its own operational command center. Located in the city of Fuzhou, directed by a military and political commissioner, this headquarters of Chinese influence is responsible for articulating the strategy of the “Three Wars” – a war of public opinion, a psychological war and a war of law.
The work of the Party, the State, the People’s Liberation Army and big tech and other Chinese companies converge towards these three objectives. Several hundred thousand Chinese citizens or foreign sympathizers are mobilized, on a permanent basis, on these three types of confrontation set by Beijing with the aim of shaping and imposing a narrative serving the interests of the country (war of public opinion), dissuading or even terrorizing enemy forces (psychological warfare), and finally using justice as a “weapon of war”, the war of law, to attack against or sanction individuals or states considered hostile to the communist regime.
The Chinese diplomacy is leading a uncompromising offensive to occupy senior positions in the UN agencies. Four specialized standard-setting agencies are now under its control: UNIDO, in charge of industrial development; ITU, the International Telecommunication Union; ICAO, the International Civil Aviation Organization; and FAO, the Food and Agriculture Organization. UNESCO is also under the Chinese control with a Deputy Director general from China and with a non-existent Director general from France.
No other country holds so many senior positions in the UN today, and never before has the UN system been under the complete control of the Chinese agents.
The United States must mobilize to counteract the gigantic, protean and aggressive action articulated by Beijing in recent years to impose its vision of the world, to convince or coerce governments and populations of the validity of Chinese communist party policy. It must also get rid of all its agents at the head of international organizations. The dismissal of Kristalina Georgieva would be a good start.