World Bank is set to become the next US-China battleground, writes Kabelo Khumalo
Why does a large part of the bank’s lending go to financially sound countries?
THE TIME has come for China and its BRICS peers to grow up and leave the World Bank nest.
The shoo-in appointment of US Treasury Under-secretary for International Affairs David Malpass as the next head of the World Bank spells bad news for China and its investment projects in developing countries.
With 12 days to go before the nomination period for the presidency of the World Bank closes – it is becoming clear that emerging markets will continue to be bystanders in crucial multinational institutions.
Lebanon this week said it was “forced” to withdraw the nomination of Ziad Alexandre Hayek to run for World Bank president.
This leaves Malpass as the sole candidate to continue a multi-year agreement between Europe and the US to have exclusive control of the World Bank and the International Monetary Fund.
Japan, which is the bank’s second-largest shareholder behind the US, has already indicated it will support the candidature of Malpass.
The odd nomination by US President Donald Trump of Malpass – a known critic of China – means the bank may be the next battleground for world economic dominance between the two biggest economies in the world.
Malpass, who in his current role as US Treasury under-secretary for International Affairs has been instrumental in the tariff wars between Beijing and Washington, is on record decrying loans the World Bank grants to China.
China is the bank’s biggest borrower – a situation Malpass has argued against.
“The World Bank’s biggest borrower is China. Well, China has plenty of resources. And it doesn’t make sense to have money borrowed in the US, using the US government guarantee, going into lending in China for a country that’s got other resources and access to capital markets. Another… big borrower is Brazil,” Malpass argued at the Council of Foreign Relations forum in 2017. “And so one of the things we’ve challenged the World Bank to do is graduate countries, that as they are successful, let’s reduce the lending there and allow more lending to countries that need it.”
China, which previously shunned the capitalist bank, has taken out loans totalling more than $60 billion (R850.32bn) over the past four decades.
Former World Bank president Paul Wolfowitz this week also took aim at China, accusing it of using World Bank funds to expand its global reach. Wolfowitz told Fox Business that: “The one thing I would say where it’s not negligible, which I find disturbing, has been a tendency to promote these Chinese investment projects in developing countries with funds borrowed frankly from the American taxpayer recycled into countries of great strategic and economic importance and putting them in debts that they cannot repay.”
There is a school of thought that says China is doing the World Bank a favour by borrowing, because people realise it’s not going to default on those loans.
So there is an economic argument that a large part of the World Bank’s lending goes to financially sound countries.
The economic rise of China, India, Japan, South Korea and Africa has done little to open up the IMF and World Bank to reflect the current world economic order.
The US has chosen every leader of the World Bank in the 74 years of the lender’s existence.
The fact that an American will once more lead the lender at a time Trump has abdicated the US’s role as the guarantor of Western-influenced multilateralism challenges emerging economies, especially BRICS countries to rise to the occasion and define their interests and take their future into their own hands.
The five BRICS countries are among the most populous countries in the world. Together they make up more than 40 percent of the world’s population. By comparison, the US has just about 4.3 percent of the world’s population.
As of 2018, China, Brazil, Russia, India and South Africa had a combined nominal gross domestic product of $18.6 trillion, about 23.2 percent of the gross world product
BRICS must graduate from being merely a forum of discussion among its members, but must build a wider framework of integration in the developing world.
Trump’s disdain for China might just be the tonic BRICS needs to get on with its business and foster a new global economic integration.