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Trump administration questions level of World Bank lending to China
The Trump administration is blocking a capital is increase for the World Bank until it overhauls its lending policies, in a move that is seen as mainly aimed at China.
Michael Marray 18 Oct 2017

THE Trump administration is holding out against a capital increase for the World Bank until it overhauls its lending and investment policies.

World Bank President Jim Yong Kim has been pressing hard for a capital increase in order to grow the bank's activities. But the US side views the World Bank as highly inefficient, and believes that it lends too much to countries which have developed to the point that they have plentiful access to other sources of capital. Although US officials have not called out China by name, high levels of lending to (and investment in) China are understood to be one of the main points of contention.

“More capital is not the solution when existing capital is not allocated effectively,” says US Treasury Secretary Steven Mnuchin. “Demand for cheap capital will invariably exceed its supply – the key is to ensure that these resources are deployed where they are needed most and can achieve effective and sustainable results.”

World Bank member the International Bank for Reconstruction and Development (IBRD) is the world's largest development bank, and the International Finance Corporation (IFC), another of the five members of the World Bank, makes equity investments alongside local players in developing countries.

As of July 2017, the IFC's committed portfolio in China is US$3.6 billion, and much of this is in the natural gas sector, as part of an effort to reduce dependence on coal fired power stations, and so reduce pollution. For example, the IFC has investments in Tian Lun Gas, which is a fast growing, medium-sized natural gas distributor with 52 city gas concessions and 44 gas refueling stations across 15 provinces. It is well positioned to spur natural gas usage across its concession areas and meet the increasing energy demand resulting from urbanization, in response to the new government emissions reduction goals.

According to the IFC, support for Tian Lun Gas fits in with its broader efforts in China, which focus on investing in commercial enterprises and private sector projects that deal with climate change issues and promote sustainable development. China is the IFC’s third-largest portfolio country in terms of commitments.

The World Bank notes that, in spite of its impressive economic growth, China remains a developing country. In fact, IBRD commitments to China have been steadily rising over the past few years, from US$1.65 billion in fiscal year 2013 to US$1.99 billion last year, and increasing to over US$2.5 billion in the current year.

Photo: Shiny Things/Wikimedia

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