Nobody doubts China is a world power. But it is still underpowered at a number of global institutions. China could make progress in fixing that problem at the World Bank by increasing its contribution to IDA, the Bank’s soft lending arm for the world’s poorest countries, in the ongoing replenishment round. A modest commitment worth about 0.03 percent of China’s GNI per year over the next nine years would have significant economic and diplomatic benefits to the country.
IDA is a very efficient development partner, that delivers economic growth, vital infrastructure, and health and education outcomes aligned behind client country development strategies, and that works through local procurement and management systems. IDA helps build the export and import markets on which China increasingly relies and delivers on global public goods that benefit the one eighth of the globe that lives in China. Up to 2001, China itself was a recipient of nearly $10 billion in IDA credits and, today, Chinese firms win many IDA-financed contracts under the competitive bidding procedures encouraged by the institution.
But in the ongoing IDA21 replenishment round, the World Bank Group is struggling to raise resources from traditional large donors in Europe, North America, and Japan. The round will be considered a success if it manages to ensure IDA grant and credit volumes don’t decline from current levels over the next few years. This is far from what is needed if the world is to accelerate progress on sustainable development, especially in the poorest countries. It is also an indictment of the global donor community. A total IDA21 donor contribution of about $24bn is a little above expectations at the moment—that’s about 0.04 percent of high income country GNI. In global terms, $24 billion is margin-of-error stuff—indeed, less than half of the margin between original and final estimates for the semi-abandoned construction of a couple of high speed rail lines in the UK, for example.
Meanwhile, China’s vote share at IDA (largely dependent on cumulative contributions to IDA funding) is only about 2.5 percent. That’s a little below Canada’s and about one quarter of the US. At the last replenishment (IDA20), China financed about 3.8 percent of total contributions—just a little more than Canda and about one third the US share. At a time when China is on the cusp of high-income status, has the world’s largest economy in purchasing power parity terms, and after over two decades of considerable bilateral and multilateral support for infrastructure projects including in many of the world’s poorest countries, a larger role in IDA is surely appropriate.
Any increase in China’s IDA contributions would be welcomed by the global development community and recipient countries. Last time, during IDA20, China contributed an amount equal to about 0.01 percent of the country’s (market) GNI, or $1.3 billion. Compare the US, a comparatively miserly donor to IDA given its economic size, which still managed a contribution of $3.5 billion. Hopefully, China would at least want to match the US commitment in IDA21.
But that is a picayune proposal, when a larger increase could bring outsized benefits to China’s global standing. As it might be, a donation of $46 billion.
It would be easily affordable. Payments to each IDA round are made over a nine-year period: for China that suggests the average contribution over that period would be worth about 0.03 percent of (2023 market) GNI per year. And while such a donation would be of unprecedented scale in terms of an IDA contribution to a particular replenishment round, worthy of global recognition, it would not make China an outlier in terms of overall generosity to the institution. Adding $46 billion would raise China’s cumulative commitment to IDA resources to about 0.2 percent of its GNI, compared to the IDA20-era share of 0.5 percent for Italy, 0.9 percent for Japan or 1.2 percent for the UK. And, having caught up some of that distance in IDA21, China wouldn’t need to be quite so generous next replenishment around.
Beyond generating considerable gratitude from the global development community and IDA recipient countries, this still really rather modest outlay would give China considerably greater weight within the World Bank Group. In the last IDA replenishment round, a contribution of $17,670 was worth one additional vote. China currently has about 800,000 votes compared to the US with 3.4m votes. At the same vote cost, were China to contribute $46 billion to IDA21, this would garner 2.6m votes, leading to a total vote share about equaling the US.
There could be an additional effect on China’s voting power at the World Bank’s IBRD, where IDA contributions, heavily weighted towards the last three replenishment rounds, currently account for 20 percent of IBRD voting power according to the agreed formula. The other 80 percent of IBRD votes are meant to be allocated on the basis of the share in the global total of GNI (as measured by a combination of Atlas methodology and PPP).
Delayed voting reform at the institution means that China’s economic weight is poorly reflected in its vote share. Based on 2022 World Bank data, China’s share of the global economy (using a weighted average of PPP and Atlas methodology) is about 18 percent, which (along with current IDA contributions) should give it near to a 15 percent share in IBRD votes as compared to the current actual vote share of 6 percent. Add in the potential $46bn Chinese contribution on top of that predicted from other donors, and the country’s IBRD vote share under the formula would rise closer to 19 percent—enough to have a clear veto over major IBRD decisions under current rules (available to shareholders with a 15 percent or greater vote share). IBRD voting reform is an issue due to be addressed next year and a strong commitment to IDA would surely further improve China’s negotiating position.
That might be particularly the case when it comes to China’s negotiating position vis a vis the US. If the US matched its $3.5 billion donation from IDA20 in the IDA21 round, the US average share of three recent IDA contributions after China’s $46bn contribution would drop from about 11 percent (IDA 18/19/20) to about 8 percent (IDA 19/20/21). Given the current IBRD vote formula, this (alone) would decrease the US IBRD vote share by about half a percentage point (there would also be a small additional effect on IBRD vote share from the US loss in overall capital share of IDA). That might leave the US vote share below the 15 percent threshold necessary for the country to have its traditional veto power. But, like China, the US is underweighted in total IBRD vote shares given its share of the global economy. There would be no threat to US veto power if the full voting formula was (finally) adhered to.
The impact of a larger-than-expected donation by China to both the ultimate size of IDA and governance outcomes at the IBRD would depend on the reaction of other shareholders and what happens at next year’s discussions on IBRD voting reform. Perhaps in particular, IDA’s traditional donors might respond. Any attempt to simply block China’s generosity would surely come at high political cost at a time when traditional donors are already and increasingly viewed with skepticism by leaders in many of the world’s low- and lower-middle-income countries. And efforts to manipulate voting formulae or simply preserve the status quo would surely be met with the cynicism they deserve, at the risk of sidelining the world’s largest multilateral development institution. But, hopefully, the reaction by traditional donors would be to follow China, and considerably increase their own IDA contributions—to the benefit of the world as a whole but particularly to the world’s poorest countries. That would be a great statement of the potential power of Chinese global leadership for good, all at a bargain price.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
CGD is a nonpartisan, independent organization and does not take institutional positions.
