China’s institution-building amidst (dynamic) network effects: how will the relations between the IMF and newcomer institutions evolve?

How will the regime complex of balance-of-payments lending evolve amidst ongoing global power shifts? In this paper, we challenge the hitherto static outlook on the viability of external institutional change within the International Monetary Fund’s (IMF) institutional environment. Dominant views in International Political Economy suggest that the IMF’s current focality will persist as China’s reformist approach to balance-of-payments lending and strong network effects favoring the IMF induce (inter-)institutional inertia. In contrast, we argue that the interests of challenger states – particularly China – and their exposure to network effects are dynamic. Depending on challengers’ evolving reformist or revisionist interests and their dynamic exposure to network effects, we derive pathways for external institutional change toward multiple inter-institutional relations between the IMF and newcomer institutions. Based on theoretical extrapolation and empirical trends, we claim that institutional hedging is a probable pathway for China’s institution-building efforts in the near future. For the more distant future, we introduce complementary layering and conflictual counter-institutionalization as highly contingent possibilities and discuss how the (inter-)actions of challengers and defenders during the hedging phase may shape their (non-)materialization. We thereby offer a methodologically innovative and policy-relevant outlook on future institutional change in international finance.