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International Monetary Fund Managing Director Dominique Strauss-Kahn called on leaders from the Group of 20 nations to maintain efforts to pull the world economy out of recession, and predicted China will play a larger role in shaping a sustainable recovery.

“Suddenly, we’re in a better position to have this kind of cooperation and economic coordination than we were before,” Strauss-Kahn said in an interview yesterday in Washington. G-20 talks in Pittsburgh Sept. 24-25 are a chance to “fix the way we work together governing globalization, and it may work.”

Policy makers are seeking to ensure the next expansion is more balanced after international gaps in savings, spending, investment and credit availability set the stage for the financial crisis. The world became too reliant on U.S. consumers for demand and borrowing by China and other emerging markets for low interest rates, economists say.

Strauss-Kahn said the U.S. can do its part by boosting the country’s savings rate and reducing its budget deficit, and China can contribute by fostering domestic demand, which would have the effect of revaluing its currency, the yuan. China may be more willing to cooperate when it gets a bigger role at the IMF, which leaders are expected to announce by calling for a shift in voting rights that would favor emerging markets, he said.

“The Chinese know they’re becoming a big player, they want to be considered a big player, and if they’re considered a big player they will behave as a big player,” Strauss-Kahn said.

Maintaining Stimulus

The Washington-based IMF, which has rescued economies from Pakistan to Hungary in the past year, is advising officials around the world not to withdraw economic stimulus programs too soon as they chart a path to lasting growth.

Even though a recovery probably will happen next year, it will be “rather sluggish,” Strauss-Kahn said. While the global economy is susceptible to a “double-dip” recession, Strauss-Kahn said that isn’t the “most probable” scenario.

“It’s too early to say the crisis is behind us,” he said. “It’s absolutely right to discuss the exit strategies, to prepare them, but it will be much too early to implement them.”

Banks still have “a lot to do” to clean balance sheets, said Strauss-Kahn, 60, who became head of the IMF in November 2007 after a career in French politics, including a stint as finance minister from 1997 to 1999.

The imbalances may already be closing. The U.S. current- account deficit narrowed in the second quarter to $98.8 billion, the least since 2001. Meantime, Credit Suisse AG predicts Chinese imports may rise 30 percent to $313 billion in the fourth quarter as the government’s stimulus program spurs domestic demand.

IMF’s Role

The IMF has a role to play in the global effort to narrow imbalances, Strauss-Kahn said, acknowledging that attempts in 2006 and 2007 at agreements between major economies yielded few results.

At the G-20 meeting, leaders from the richest countries such as U.K. Prime Minister Gordon Brown and from the largest emerging economies such as China’s Hu Jintao, will discuss “a framework for balanced and sustainable growth,” Dimitri Soudas, a spokesman for Canadian Prime Minister Stephen Harper, told reporters yesterday in Ottawa.

Under such an arrangement, sought by the Obama administration in advance of the Pittsburgh meetings, nations would commit to assessments of their economic policies and outlooks.

‘Balanced Growth’

G-20 members should pledge “to individually and collectively pursue a set of policies which would lead to stronger, better and more balanced growth,” wrote Michael Froman, deputy U.S. national security adviser for international affairs, in a Sept. 3 letter to his counterparts.

“A failure to rebalance the global economy would cause any recovery to be ultimately doomed,” said Gerard Lyons, chief economist at Standard Chartered Plc in London. “Aiming for a balanced world economy is a win-win situation.”

The U.S. wants to put the IMF at the center of a “peer review” process of assessing policy plans in the countries from the group.

Strauss-Kahn said it makes sense for leaders to have “a kind of machinery which provides policy notes and forecasts, and which follows up on decisions that have been taken at the big meetings.”

Strauss-Kahn said leaders would also give a “political guideline” on how much more power to give “underrepresented countries” at the lender, most of which are emerging economies. The main beneficiary of a shift in the IMF’s governance would be China, he said.

Voting Rights

Talks before the summit in Pittsburgh are focusing on a 5 percent shift of so-called IMF quotas from countries with disproportionate influence, two officials from G-20 nations said last week. Quotas determine members’ voting rights, financial commitments and access to IMF loans.

China has overtaken Germany to become the world’s third- largest economy with annual gross domestic product of about $3.9 trillion, according to Bloomberg data. China currently has a 3.7 percent voting share on IMF executive board decisions, compared with 3.2 percent for Saudi Arabia, whose economy is about one-eighth the size of China’s.

Brazil, Russia, India and China, the so-called BRIC countries, this month proposed a 7 percent shift in IMF quotas to emerging markets and developing countries, “to correspond roughly to their share in world” gross domestic product. That came after they agreed to contribute to a tripling of IMF coffers that G-20 leaders announced in April, a move richer nations linked to emerging countries’ demand for more clout.

China’s Purchases

China earlier this month signed an agreement to buy as much as $50 billion in IMF notes, and the other three BRIC countries have pledged to contribute by about $10 billion each, a move Strauss-Kahn said is “done” even if it hasn’t yet been formally approved.

“Imbalances and governance are very much interlinked,” he said. To resolve the issue, “you also need the countries accepting that they don’t need such a big amount of reserves, which means they can find the reserves somewhere else, which in turn means they are confident in the global institutions like the IMF.”

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