What to make of Trump’s outburst over World Bank loans to China

The US president is angry that the World Bank is treating China like a developing nation but there is a deeper problem.

China World Bank Reuters
World Bank President David Malpass talks to Chinese Premier Li Keqiang following the "1 6" Roundtable meeting in Beijing, China November 21, 2019 [Florence Lo/Reuters]

In recent years, many in the West, especially right-wing populists such as US President Donald Trump, have accused China of trying to have its cake and eat it too. And there is some truth to these charges of opportunism.

Portraying itself as a “developing country”, the Asian powerhouse has managed to accrue all the benefits accorded to poorer nations under the current liberal international order. At the same time, however, it has made a bid for global primacy and rolled out some of the most ambitious development projects on Earth, such as the trillion-dollar Belt and Road Initiative (BRI).

Earlier this month, in response to the World Bank agreeing to continue lending $1bn to $1.5bn a year to China through 2025, Trump called for the multilateral organisation to cease all development assistance to the country. “Why is the World Bank loaning money to China?” he tweeted on December 6. “Can this be possible? China has plenty of money, and if they don’t, they create it. STOP!” 

On the surface, this appears to be a Trumpian expression of US frustration over China’s apparent ability to manipulate the US-dominated World Bank. In reality, however, it highlights not only Washington’s growing anxiety over the emergence of China as a formidable challenger to its global dominance, but also the World Bank’s failure to adapt to an increasingly multipolar world, give an equal voice to non-Western powers and acknowledge China’s growing influence over the global economy.

Twenty-first century mercantilism 

In the World Trade Organization (WTO), China, the world’s second-largest economy and already an upper-middle-income nation on the way to high-income status, has stubbornly preserved protectionist barriers normally permitted only for poorer nations. It has already faced multiple complaints by other nations regarding its abusive trade practices, such as imposing restrictions on exports of rare-earth minerals and dumping surplus products on foreign markets.

It refuses to be classified as a more-developed nation, despite becoming the world’s main manufacturing hub. It has similarly invoked its developing country status to absolve itself of robust commitments to reduce emissions during high-stakes climate change negotiations in the past decade.

Many have also accused Beijing, the world’s largest source of greenhouse gas, of effectively sabotaging efforts at collective environmental action. Thanks to its massive domestic and global infrastructure bonanza, China is pouring more concrete every three years than the US did throughout the 20th century. 

Moreover, Washington and its Western allies accuse China of engaging in an all-out campaign of technological theft, systematic disregard of intellectual property rights and cutting-edge corporate espionage to rapidly climb up the ladder of development. Faced with such attempts to coercively transfer technology and other forms of abuse, many foreign companies are exiting China. 

The upshot of this aggressive industrial policy is the emergence of China as a major player in smartphone production, artificial intelligence research, and cutting-edge military technology within less than a generation. Flushed with confidence and swimming in cash, it has also embarked on a trillion-dollar infrastructure project to create a “modern” Silk Road and change global trade forever. 

Make China great again

In the face of all this, however, the World Bank, the primary international body supposedly dedicated to providing financing, advice and research to developing nations to aid their economic development, has taken no action.

It has undeniably failed to hold Beijing to account for its actions damaging to the environment and the global economy. Even more concerning, however, the World Bank has also created the grounds for China to resist any such future intervention by refusing to give the country a voice within the organisation proportionate to its growing economic power and to disprove the perception that it is an American-dominated organisation whose primary concern is to protect the interests of the US and its allies.

Since it was founded in 1944, the Washington-based World Bank has always been led by an American citizen. In February this year, despite a long list of eligible candidates from the developing world, the bank once again appointed a US nominee, David Malpass, as its president. More importantly, the institution grossly underrepresents China’s global economic weight, while stubbornly maintaining the US’s veto-bearing voting share. The World Bank has a weighted voting system where votes are distributed in proportion with members’ capital subscriptions. The US has always been the World Bank’s largest share-holder and still holds about 16 percent of its total shares. This allows Washington to maintain its veto-bearing voting power, despite the dramatic growth of China.

Failing to achieve a proportional voice in the World Bank and other Western-dominated multilateral agencies such as the IMF, China has already established parallel institutions, such as the Asian Infrastructure Investment Bank, the New Development Bank, and, most ambitiously, the BRI.

In the past decade, China’s overseas development commitments have exceeded the combined efforts of the World Bank, the IMF and the Asian Development Bank. The ultimate goal, as one expert put it, appears to be creating a Chinese world order through Chinese credit, technology, industrial standards and manpower. 

China’s growing economic influence, however, has provoked a backlash not only in the West, but also across many developing countries, which fear the so-called “debt trap” under the heavy load of Chinese credit. 

In response, China has vowed to emphasise debt sustainability and environmental standards in its overseas projects. During the second BRI summit in Beijing earlier this year, Chinese President Xi Jinping promised to focus on “building high-quality, sustainable, risk-resistant, reasonably priced, and inclusive infrastructure”, which “will help countries to fully utilise their resource endowments”. 

China has rightfully advocated for a stronger voice in the World Bank and other multilateral institutions, which should embrace the post-American global order. But the Asian powerhouse should also respect the basic interests of beneficiary nations and desist from opportunistic invocation of its supposed “developing country” status given that it is an undisputed global industrial powerhouse

Beijing should embrace its new obligations as one of the world’s leading industrial nations and sources of development assistance. Both the West and China should jointly contribute to creating a stable and inclusive global order, and the World Bank should give emerging powers greater voting power, even if it marks the end of the anachronistic veto-bearing hegemony of the US.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.