World Bank not offering new funds to help China battle virus

World Bank has only offered technical assistance on virus outbreak as China has ample resources, its chief says.

Medical workers in protective suits attend to novel coronavirus patients at the intensive care unit (ICU) of a designated hospital in Wuhan, Hubei province, China February 6, 2020. Picture taken Febru
The number of deaths due to the new coronavirus in China exceed 1,000 on Tuesday [File: Third party via Reuters]

The World Bank is offering technical assistance to China to help battle the coronavirus epidemic but no new loans, the development lender’s president, David Malpass, said on Monday.

Malpass told Reuters News Agency the bank was working with the World Health Organization (WHO) to aid China, including offering advice about past health crises, but did not plan any financial assistance because China has ample resources of its own.

“My thought is that we all wish them a speedy way to address the coronavirus in China,” he said in an interview on Monday. “We’ve offered technical assistance in the area of health, sanitation and disease policies.”

Formed after World War II to rebuild Europe, the World Bank has some $470bn in assets and counts China among its largest borrowers, with $14.8bn in loans committed since 2011. China is also the bank’s third-largest shareholder after the United States and Japan.

“China has its own large international reserves,” and new loans are not being considered at this time, said Malpass, a former Trump administration Treasury official who took over as president of the bank last April.

China reported that it held $3.115 trillion in foreign exchange reserves in January.

In a January 29 statement, Malpass expressed sympathy for losses suffered by the Chinese people, adding: “This is a severe public health challenge for China and the rest of the world. It calls for ongoing coordinated action and continued transparency inside China and around the world.”

He said the bank’s experts were in discussions with Chinese authorities and could provide immediate assistance on disease surveillance, food safety, lessons from previous pandemics and analysis of the outbreak’s effect on China’s economy.

Inside China, more than 300 companies from food delivery services to smartphone makers are seeking more than $8.2bn in loans to ease the effects of the coronavirus, banking sources told Reuters.

Economic growth is expected to slow to 5 percent or less this quarter because of the virus, one Chinese government economist estimates.

Malpass declined to offer an estimate of the effect of the crisis on China’s or the world’s economic growth. He said it was too early to say if the bank’s already tepid full-year forecast would be cut.

“Clearly, coronavirus is slowing growth in the first half of 2020. What the long-term consequences are we’ll have to see as the response occurs and the adjustments are made,” he said. “China is just coming back from a long Lunar New Year holiday, so we’ll have to evaluate the growth.”

Too wealthy

Since taking his job at the Treasury in 2017, Malpass had been critical of the bank’s continued low-interest lending to China, arguing that the world’s second-largest economy was too wealthy for such aid while it was loading up some countries with debt from its Belt and Road infrastructure programme.

A former Bear Stearns and Co chief economist who advised US President Donald Trump‘s 2016 election campaign, Malpass has called for more of the bank’s resources to be devoted to poorer countries in Africa, Asia and Latin America.

A February 3 pledge by the bank to review financial resources that could be deployed quickly was aimed at poorer countries that could be affected by the pandemic, a bank official said.

China agreed to a decline in borrowing as part of reforms associated with a $13bn capital increase for the bank approved by shareholders in 2018.

The bank in December adopted a new five-year China plan that calls for $1-1.5bn in annual lending, down from a $1.8bn annual average over the previous five years.

Malpass said lending to China in the 2020 fiscal year, which ends June 30, would likely fall below that range.

Although the bank is “winding down” its lending to China under terms of a 2018 capital increase, the bank would grant financing for certain “global public goods”, Malpass said.

These include environmental projects, private sector development and reforms to state-owned enterprises.

The only new China financing approved by the bank so far in fiscal 2020 is a $150m loan towards a $686m project to sustain forests in the upper reaches of the Yangtze River basin.

Source: Reuters