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Opinion: Efforts to Cut Off China From World Bank Lending Are Misguided (Caixin)

May 17, 2018

From the article (op-ed by Scott Morris)

Overshadowed by China’s role as the world’s creditor is the uncomfortable reality that it also continues to be one of the largest recipients of multilateral assistance through major development agencies like the World Bank and Asian Development Bank. This juxtaposition of China as lender and borrower has marked a long simmering tension with the West, and one that now threatens to boil over as political attitudes in the United States point to a much tougher approach toward the Chinese.
 
All of this is coming to a head at the World Bank, as the official lender seeks a capital injection from its member countries this spring to support more development lending. China, it turns out, happens to be the bank’s largest borrower at the moment, garnering nearly $2.5 billion in loan commitments from the bank in 2017.
 
The World Bank was created to support countries that could not access capital on reasonable terms to meet their development needs. That doesn’t seem to describe China today, a country that holds the world’s largest foreign exchange reserves and enjoys some of the most favorable borrowing terms among sovereign borrowers. In light of China’s borrowing from the World Bank, U.S. officials have taken a dim view of the bank’s case for a capital increase, arguing that the lender could free up some existing capital by cutting off the Chinese and other wealthier borrowers.
 
But is there actually a case for China’s continued borrowing? And why in fact does China choose to borrow?
 

Read the full article here

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Photo of Scott Morris
Senior Fellow, Director of the US Development Policy Initiative