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China agrees to buy $50b IMF bonds

(Xinhua)
Updated: 2009-09-03 04:40

The International Monetary Fund (IMF) said on Wednesday that China has agreed to buy the first bonds issued by the agency for about $50 billion.

IMF Managing Director Dominique Strauss-Kahn and Yi Gang, deputy governor of the People's Bank of China, have signed the agreement, the IMF said.

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According to the agreement, China would purchase up to SDR 32 billion (around $50 billion) in IMF notes.

"The note purchase agreement is the first in the history of the fund, and follows the endorsement by the Executive Board on July 1, 2009 of the framework for issuing notes to the official sector," said the 186-nation institution.

The IMF said that "the agreement offers China a safe investment instrument. It will also boost the fund's capacity to help its membership -- particularly the developing and emerging market countries -- weather the global financial crisis, and facilitate an early recovery of the global economy."

The global economy is beginning to pull out of the worst recession since World War II, according to the institution, but recovery is expected to be sluggish and financial systems remain fragile.

As part of its efforts to boost the world economy ,the IMF completed allocation equivalent to $250 billion of SDRs last Friday. That will be followed by an additional allocation of $33 billion on September 9.

With the two allocations totaling roughly $283 billion, the outstanding stock of SDRs would increase nearly ten-fold to about $316 billion.

Brazil, Russia and India -- the three other countries besides China that make up what is known collectively as the BRIC countries -- are seen as potential buyers of the IMF bonds and are also in the vanguard of developing countries' drive for greater representation in the international financial bodies.