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WASHINGTON – While China still receives loans and other aid from multilateral institutions like the World Bank and UN agencies, it has also emerged as one of the most powerful donors, in some ways eclipsing the US, according to a sweeping new study from the Center for Global Development.
China is simultaneously a major donor, shareholder, aid recipient, and commercial partner of the international institutions—giving it a uniquely influential position, the report finds.
Researchers tracked China's rising donations, voting power, and presence in leadership roles, as well as its firms' success in winning commercial contracts at 76 major global institutions, including development banks like the World Bank, UN agencies like the World Health Organization, and funds like the vaccine supplier Gavi. The study provides the most comprehensive picture of China's power across the multilateral system, which dispenses nearly $200 billion a year to developing countries.
“There’s been a lot of attention to China’s Belt and Road lending to developing countries, but a lot less on its growing footprint at global institutions like the World Bank. Now we have a clearer picture of exactly how important China has become to the international system,” said Scott Morris, a senior fellow at the Center for Global Development and an author of the study.
The study found that China’s contributions and power had expanded considerably:
With more than $66 billion in total capital provided, China has eclipsed Japan to become the second-largest contributor to the system of development banks that provide subsidized loans to poor countries, mostly for infrastructure.
China is now the fifth-largest overall donor across the range of UN agencies focused on development, including the UN Development Programme, World Food Programme, and World Health Organization.
While some of this increase has been driven by automatic contributions based on the size of its growing economy, China has also substantially increased its voluntary donations, including at the World Bank’s low-income lending arm IDA, where it is now the 6th largest donor
China founded and contributed almost $40 billion to two new, large development banks, the Asian Infrastructure Investment Bank and the New Development Bank, both headquartered in China.
“China clearly made a deliberate choice to increase its power and influence in the international system: raising its contributions above and beyond what’s required, founding new institutions, and setting up new, special funds at existing organizations like the World Bank,” said Sarah Rose, a policy fellow at the Center for Global Development and another author of the study.
At the same time, China remains a significant borrower and aid recipient from many of the institutions to which it contributes, particularly the development banks. China ranks among the top-ten borrowers at each bank it borrows from, though often down from the second or third place earlier in the decade.
Chinese firms also dominate the procurement contracts for infrastructure and social services that these development banks fund, particularly at the World Bank, Asian Development Bank and African Development Bank. In 2019 alone, more than $7 billion flowed to Chinese firms, more than any other country. The researchers caution that these procurement systems are highly transparent and rooted in a “lowest bid” standard for awarding contracts. But China’s success in capturing these commercial benefits from the development banks can cause political tensions among other leading countries like the United States.
“China is in a unique position: it’s taken its place as a major donor alongside countries like the US and Japan, but it’s still benefiting from the system at the same time, to the tune of billions of dollars in subsidized loans and procurement contracts. It’s a position that gives China quite a lot of power and influence across these institutions,” said Rose.
These findings come as the United States and other western governments increasingly view China as a strategic competitor in providing aid to developing countries. But the study's authors caution that it would be a mistake to view China's multilateral contributions as a threat.
"This isn't necessarily a cause for alarm. The US and other governments have pushed China to contribute more to the international system for years, and they should continue to do so. With these institutions’ high standards around things like transparency and environmental safeguards, it’s better for everyone to have China working inside the system instead of outside of it," said Morris.
The full study is available here.