China and the World Bank

The partnership between China and the World Bank began in April 1980 when Deng Xiaoping first met the then president of the World Bank Robert McNamara, since then the World Bank has began its dedication in assisting China's economic development.[5] The World Bank served as a catalytic role in kick-starting China's economic development,[6] when the country initially received approval of its first project loan in 1981.[7] These projects have primarily focused on financing technical assistance such as pension reform, urban housing reform, energy market reform, environmental protection, labor market development, social safety net development, interest rate liberalization and external trade liberalization.[8] Also as important, the technical assistant from the World Bank in areas such as how to appraise and implement priority projects, how to encourage innovation and introduce new technologies, and how to develop institutions and policy instruments needed for good economic management.[5] Since then, China has become one of the largest borrower of loans and recipient of technical assistant from the World Bank.

Initially, China was a recipient of International Development Association (IDA), the Bank’s low-income country arm, and received up to $9.95 billion in concessional loans until 1999. Later when China was categorized as middle-income country, it switched to International Bank for Reconstruction and Development (IBRD) as its main borrower, and had borrowed $39.8 billion until 2011.[2] Currently China is categorized as an upper-middle-income country, and work with the World Bank mainly for funding small-scale projects. According to World Bank Group’s Country Partnership Strategy, the bank's activity is classified under five pillars: "integrating China in the world economy; reducing poverty, inequality, and social exclusion; managing resource scarcity and environmental challenges; financing sustained and efficient growth; and improving public and market institutions"[2] Since the beginning of relation, there has been many success in development over 30 years, which includes economic performance since the market reforms of 1979, urbanization, social developments, and education & health services. [8]

China has also been increasing its involvement in the World Bank's administration and contribution to the bank. As China grows in its economic power, it overtook large European nations in voting power at IBRD in 2010, with a jumping increase from 2.77% to 4.42%. [9] In the end of 2019, China holds 5.05% of total votes in IBRD, behind United States (16.37%) and Japan (8.21%), while having more voting power than Germany (4.3%), UK (4%), France (4%), and India (3.11%).[10] As of 2019, China has 2 out of 32 management members on the World Bank leadership.[11] Financially, in 2016, China approved its first SDR bond issuer to IBRD by People's Bank of China, to serve its increasing involvement in international finances.[12]

In 1981, IDA provided $200 million as its first loan to China for higher education, since then IDA has involved with a catalytic role in China's modernization.[16] By 2007, China was becoming a contributing partner by providing finance and policy input through the replenishment process.[16] China has graduated from IDA in the fiscal year of 1999,[17] and as September 2019, China shares a 2.25% of IDA votes for its increasing role in the IDA finance contribution and technical assistant.[18]

Since its first investment in 1985, the International Finance Corporation (IFC) has invested and activated over $13.4 billion to support over 390 projects across 30 provinces,[15] in which as of July 2017, IFC has committed $3.6 billion in China's portfolio.[19] IFC invest and mobilize capital for private sector projects which supports sustainable economic development in China , particularly those that help mitigate climate change, promotes balanced rural-urban development, and promote sustainable investments in emerging markets.[15]

Created in 1988, MIGA encourages foreign direct investment in developing nations by providing political risk insurance to foreign investors and lenders, while also provides strategies for countries to attract and retain foreign direct investments.[15] Since 2000s, MIGA has been providing guarantees for investments into China, particularly for projects that involve sub-sovereign risk, such as water and waste.[15] Meanwhile, MIGA also supports its Chinese partners with their outward investments abroad, including both private lenders and governmental administration. [15]

In 2012 at the fourth BRICS summit, the leaders of Brazil, Russia, India, China and South Africa considered the possibility of setting up a new Development Bank to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries. In 2016, the New Development Bank (NDB) has become fully operational, and has approved loans involving financial assistance of over $3.4 billion for projects in the areas of green and renewable energy, transportation, water sanitation, irrigation and other areas.[20]

In 2016 China projected Asian Infrastructure Investment Bank (AIIB) as a "multilateral development bank with a mission to improve social and economic outcomes in Asia".[21] As of 2019, it has over 100 members, a co-financing framework with the World Bank and partnership with ADB, ADF, ADB, EDB, EBRD, EIB, IADB, IAIC, IsDBG, and NDB.[22]

In 2013, China proposed the Belt and Road Initiative, a transcontinental development project that includes 1/3 of world trade and GDP and over 60% of the world's population. According to World Bank, the string of infrastructure investment could "lift 32 million people out of moderate poverty conditions if implemented fully". However, as the World Bank report suggest, the cost of project might out-weight the economic benefits, while there has been a lack of transparency.[23]

One highly controversial World Bank Project was the Gansu and Inner Mongolia Poverty Reduction Project in 1999, which included a 40-meter dam that was projected to displace around 60,000 inhabitants within Qinghai Province. This led to the World Bank ruling to withdraw funding for this section of the project to stop this controversial debate.[2] In the year 2000, the World Bank also stopped the China Western Poverty Reduction project that was originally going to resettle over 58,000 Chinese farmers into Tibet. After reports were released by inspection panel, the project was forced to be withdrawn because reports indicated that the World Bank violated social and environmental policies.[24]