A Closer Look at the World Bank’s Sizable China Portfolio

Scott Morris is a senior fellow and director of
the US Development Policy Initiative at the Center for Global
Development  
Gailyn Portelance is an MA candidate at Stanford
University.

By Scott Morris and Gailyn Portelance
WASHINGTON DC, Jan 10 2019 (IPS)

China continues to borrow an average of $2 billion a year from
the World Bank, making it one of the Bank’s top
borrowers—despite being the world’s second-largest economy and
itself a major global lender, according to our study released
today. By doing a project-level analysis of recent World Bank loans
to China, we found that the World Bank’s International Bank for
Reconstruction and Development (IBRD)—which offers loans to
middle-income and credit-worthy lower-income countries—has loaned
more than $7.8 billion to China since the country surpassed the
bank’s “graduation” income threshold for lending in 2016. The
World Bank’s current threshold to trigger IBRD country graduation
discussions is $6,895 in gross national income (GNI) per
capita.

Lending to countries above this threshold has been
controversial, with the United States particularly critical of
ongoing lending to China. Critics have pushed for strict graduation
standards that would make wealthier borrowers ineligible for bank
loans (i.e., “graduation”). Under the 2018 agreement, World
Bank shareholders agreed to limit loans to countries above the
threshold to only projects that focus on:

• global public goods (projects that benefit the world at
large); and,
• capacity-building (projects that help the countries
“graduate” away from World Bank lending).

As shown in the figure above, less than half of China’s
lending has gone to either of the approved categories, by strict
definitions of these categories, since China crossed the income
threshold in 2016. Capacity-building projects contribute to only 5
percent of its portfolio, and global public goods make up 38
percent of China’s borrowing portfolio.

However, a broader conception of capacity-building, which
focuses on the allocation of resources to the poorest provinces
within China improves that picture. Fifty-eight percent of lending
to China has been directed to provinces with per capita incomes
below the graduation income threshold.

And with a third of the portfolio supporting the reduction of
carbon emissions in the country, the bank is meeting a clear global
public good mandate. As the world’s largest polluter, China will
need to make sizeable investments in climate-friendly finance if we
are to make meaningful progress on this critical agenda.

The world has a lot to gain from a sustainable and productive
China-World Bank relationship. To lower political heat from the
United States and other critics, the Bank should request more from
China in terms of interest charges on loans and ensure that all
project lending adheres to the 2018 standards.

The post
A Closer Look at the World Bank’s Sizable China Portfolio

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Excerpt:

Scott Morris is a senior fellow and director of
the US Development Policy Initiative at the Center for Global
Development  
Gailyn Portelance is an MA candidate at Stanford
University.

The post
A Closer Look at the World Bank’s Sizable China Portfolio

appeared first on Inter Press
Service
.

Source: FS – All – Ecology – News
A Closer Look at the World Bank’s Sizable China Portfolio