The World Bank is “working hard” to ensure China improves transparency in lending to developing countries, World Bank President David Malpass said in an interview.
“Debt transparency is important for borrowing countries to connect the debt to good projects, including quality infrastructure,” said World Bank President David Malpass, who began his five-year term in April.
“It is necessary to involve not only China but also many other countries”
China has increased development loans to other nations in concert with its cross-border Belt and Road infrastructure initiative. But Beijing faces accusations of leading borrowing nations into “debt traps” that have resulted in China taking over operations of ports and other strategic installations.
“If debt is executed in an opaque manner, it is difficult for other lenders to know the conditions, making it difficult for them to invest in the business, which ultimately hinders the development of the borrowing countries,” Malpass said in the interview Saturday.
One solution Malpass proposes is for China to fully join the Paris Club, an informal association of creditor countries that shares data on lending in the developing world. Participants include the U.S., Japan and western European nations.
“We encourage China to become a full member of the Paris Club, which will strengthen China’s relations with the international system and help with development in Africa, Asia and around the world,” he said.
Malpass, who served as an economic adviser for Donald Trump’s 2016 U.S. presidential campaign, is known as a China hawk. He has criticised China, the world’s second-largest economy, for taking low-cost loans from the World Bank that normally are extended to poorer nations.
“We agreed to reduce [the International Bank for Reconstruction and Development’s] lending to China during the implementation of the capital increase agreed to in April 2018,” Malpass said.
He was referring to the $13 billion paid-in-capital infusion from World Bank shareholders that lifted China’s holdings in the IBRD but incorporated a policy that charges higher rates for high-income borrower nations.
“China’s relationship with the [World] Bank is evolving to reflect the country’s economic successes,” he said.
Malpass did not offer a negative opinion when discussing trade tensions stemming from the Trump administration. But the World Bank chief seemingly distanced himself from the Oval Office when it came to environmental issues.
“The World Bank is helping raise the living standards of developing countries, taking into account the importance of environmental issues and climate change,” Malpass said.
As the largest shareholder in the World Bank, the U.S. historically has controlled the top post in the Washington-based lender.
Malpass visited Japan over the weekend to attend the Group of 20 gathering bringing together global finance chiefs.