IMF forced to come to terms with the power of the Asian tigers

Asia hosts the International Monetary Fund's annual meetings this week for the first time since the region suffered a massive financial crash, which critics blamed on policies imposed by the IMF. But as ministers from the IMF's 184 countries gather in Singapore, they know that the balance of power between Asia and the West has reversed dramatically since that crash almost a decade ago.

In 1997 - the year the IMF met in Hong Kong - the fund imposed tough conditions on indebted Asian countries in exchange for loans, triggering an outbreak of rioting across the region as economies slumped.

Nine years on and the IMF has embarked on a radical reform it admits is necessary to restore its credibility in a world economy dominated by the Asian tigers such as China and India.

The IMF is expected to forecast that China will post GDP growth above 9 per cent in 2006 and 2007 for the fourth year in a row while India will hit 7 per cent. This contrasts with growth of just 3 per cent in the advanced economies. The red-hot growth combined with record dollar surpluses built by Asian nations fearful of being in debt to the West again have forced the IMF to address the growing power of the regional tigers. "These countries have effectively passed a vote of no confidence in the IMF," one observer said.

It will propose boosting the voting share held by China and South Korea as well as Turkey and Mexico to give them a voice in the fund that reflects their economic power.

If ratified, it would put China at sixth among the 184 member countries, up from its eighth position now.

The next stage would be a radical review of the whole structure aimed at boosting the votes of other emerging markets while ensuring that poor countries - the IMF's major clients - do not get left with even less say.

However, there is likely to be a fierce debate. Major emerging countries from the Middle East, Asia and Latin America opposed the package, which can only be approved or rejected outright.

EU finance ministers have indicated they will not back any reform that would re-weight voting rights solely based on GDP.

It could lead to a reform of the 24-strong executive board that is currently dominated by eight seats held by EU countries. The EU does not want to be reduced to one seat but its position will be undermined by calls from the UK for a single seat for eurozone countries.

The IMF has also responded to the growing power of China by organising multilateral consultations between the Asian superpower, the US, oil-rich Saudi Arabia and the EU.

The talks are aimed at resolving the imbalance between record deficits in the US and record trade and financial surpluses in China and the Opec countries.

Meanwhile, ministers from the G7 rich nations that includes the UK will ratchet up the pressure on China to end the artificial weakness of its currency, the yuan, that the US blames for the flood of cheap imports that it says is the cause of its trade deficit.