International development will benefit from more diversification

The International Monetary Fund's executive board issued a statement on October 12 reaffirming "its full confidence in the managing director's leadership and ability to continue to effectively carry out her duties", thus putting an end to accusations that IMF Managing Director Kristalina Georgieva was "favoring China "and "pressing to improve China's business environment ranking".

This statement is in response to a report published by the international law firm WilmerHale in September that claimed to "review the internal circumstances at the World Bank that contributed to the data irregularities identified in 'Doing Business 2018' and 'Doing Business 2020' reports". According to the investigation report, from 2017 to 2019, Georgieva, then the World Bank's CEO, was suspected of exerting pressure on employees and demanding that China's ranking in the 'Doing Business 2018' report be improved. Judging from its October statement, the IMF did not endorse the conclusions of the WilmerHale report.

Since 2017, the relationship between the United States and the World Bank has been bumpy. Former US president Donald Trump had criticized World Bankled efforts to deal with climate change and didn't show much interest in the US' due responsibilities in international development as a major power.

In October 2017, the Trump administration criticized the World Bank's lending to China and other countries as an inefficient use of funds, and rejected a capital increase proposal for the bank. In 2018, the US agreed to increase capital to the World Bank on the condition that the bank would raise development financing interest rates for China and several other emerging economies.

In January 2019, then World Bank President Jim Yong Kim announced his resignation. In March of that year, Trump nominee David R. Malpass, then undersecretary of the Treasury for international affairs, was appointed as World Bank president.

After taking office, Malpass repeatedly criticized the World Bank loans given to China. Under the new country partnership framework, the World Bank reduced its loans to China and conducted more selective cooperation with China. The World Bank's business in China has been fully contracted, and its existing business has also been subject to stricter internal reviews.

In August 2020, the World Bank released the so-called "Doing Business－Data Irregularities Statement", which led to law firm WilmerHale's investigations. In October this year, WilmerHale's investigation report was released after being approved by the World Bank's Board of Executive Directors. It unavoidably harmed the organization's reputation.

The investigation was the spread of the tentacles of the US, the World Bank's largest shareholder, to the international development field in order to seek US geopolitical benefits. The history of the World Bank over the decades indicates that the US has high control over the bank, which significantly affects the amount of loans the bank provides to countries, the number of funding projects and the speed of loan distribution. The US interferes in the distribution of development financing in order to realize its international political and economic interests.

Similar influence also exists in the IMF, the Inter-American Development Bank, the Asian Development Bank and other international or regional financial institutions in which the US plays a major role. In recent years, the international political and economic landscape has changed rapidly. In order to maintain its hegemony and interests, the US uses its dominant position in these international institutions to suppress emerging economic forces represented by China.

Taking the World Bank investigation incident as an example, it should be noted that the annual Doing Business report is the flagship publication of the World Bank. According to Reuters, having a high ranking in the report may mean an increase in foreign investment, which can promote the development of the economy and financial markets of various countries. Therefore, countries vie to improve their rankings through policy adjustments. In the past few years, China's ranking in the Doing Business report has continued to rise.

When the US regards China as a strategic competitor, it refuses to recognize China's development and progress. The headline on an opinion piece in the Financial Times said, "Anti-China hysteria lies at heart of action against IMF's Georgieva".

At the same time, by deliberately making allegations to the World Bank during Georgieva's tenure as CEO, the US strengthened its control on the World Bank while giving the IMF and Europe a rap on the knuckles.

Traditionally, the president of the IMF is appointed by Europe, while the US appoints the president of the World Bank. The dual constraints of financing and administration determine the development dilemma of the World Bank. Shareholder countries, international institutions and management personnel have their own interests. When the goals of the three are inconsistent, the fate of the institution is easily trapped.

The recent rounds of interaction between the US and the World Bank clearly reflect these constraints imposed on the World Bank. With the decline of US hegemony and the decrease of national interests realized through international organizations, the US is likely to reform these international organizations to better realize its own interests. These possible reforms and their impact on China deserve attention.

In the coming period, promoting a prosperous development financing market and advocating the diversification of players in the field of international development will be important to ensure that developing countries have fair development opportunities. Studies have found that the development aid from China and India to Africa has significantly reduced the additional restrictions imposed on Africa in the World Bank's development assistance projects. In the new international political and economic landscape, more institutions are needed to promote international development.

China has been an active participant in and promoter of global development. It has promoted the establishment of the Asian Infrastructure Investment Bank and the BRICS New Development Bank, and has advanced international economic and trade cooperation under the Belt and Road Initiative.

It will be valuable for China to strengthen cooperation with international organizations and learn from their advanced practices, professional concepts and international networks in promoting global development. By doing so, China can deepen its reform and opening-up, actively participate in global governance, and better contribute Chinese wisdom and solutions to the world.

The author is a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences.