The World Bank, whose main goal is to reduce poverty, defended its decision adopted last week to provide China with up to $1.5 billion in low-interest loans annually through June 2025, dismissing objections from president Donald Trump and high-level officials of his administration.
The World Bank's board "expressed broad support" for its engagement in China's structural and environmental reforms and its five-year lending strategy plan published Dec. 5. It said its lending to China will eventually be reduced in line with reforms agreed under a $13 billion capital increase in 2018.
The World Bank lent China $1.3 billion in the 2019 fiscal year that ended June 30. This amount was 49% lower than the $2.4 billion it lent during fiscal 2017. The new plan will see World Bank lending "gradually decline" from the previous five-year average of $1.8 billion.
"Lending levels may fluctuate up and down from year to year due to normal pipeline management based on project readiness," said the World Bank.
It revealed China had requested continued financing from the World Bank's International Bank for Reconstruction and Development (IBRD) "as platforms for reform, institution building and knowledge transfer."
More specifically, the bank said its loans to China are aimed at advancing market and fiscal reforms to encourage private sector development; promote greener growth by reducing pollution and reducing carbon emissions and increase Chinese citizens' access to health and social services.
"The World Bank, using American tax dollars, should not be lending to wealthy countries that violate the human rights of their citizens and attempt to dominate weaker countries either militarily or economically," said Senate Finance Committee Chairman Charles Grassley last week.
Treasury Secretary Steven Mnuchin also blasted World Bank lending to China. He told a House Financial Services Committee hearing the Treasury department objects to the World Bank's five-year lending strategy plan. He demanded the World Bank "graduate" China from its concessional loan programs for low- and middle-income countries.
Trump later joined his officials in criticizing the World Bank for still loaning money to China.
"Why is the World Bank loaning money to China? Can this be possible? China has plenty of money, and if they don't, they create it. STOP!" tweeted Trump on Saturday.
In reply to Trump's criticism, the World Bank pointed out "lending to China has fallen sharply and will continue to reduce as part of our agreement with all our shareholders including the United States."
