“Why is the World Bank loaning money to China? Can this be possible?”, a characteristically clueless Donald Trump wondered, in a December 6 tweet.
It’s not only “possible”, but in fact customary. China receives billions in loans from the bank, although its lending to Beijing fell to $1.3 billion in fiscal year 2019 from $2.4 billion in fiscal 2017.
Last week, Steve Mnuchin told Congress that Treasury “has negotiated significant reductions on China lending” from the development institution, to which the US is the largest contributor and which Trump campaign adviser David Malpass leads. “Many observers expected the organization to change course once Malpass was installed in the job”, The New York Times notes. “However, in his first eight months, Malpass has defended the merits of the bank’s continuing work with China and steered clear of discussing its trade dispute with the United States”.
“[We’re on] a path to get below $1 billion”, Mnuchin said last week of the loans to China. “Yesterday we submitted our objection to the current country plan”.
This is yet another point of contention in the burgeoning Cold War between the world’s two largest economies. The issue, generally speaking, is that a sharp rise in China’s per capita income should make it ineligible for the bank’s loan program.
“I think many Americans would question why so many American tax dollars are going to support low-interest loans to China”, Chuck Grassley chided in the Senate. “I question why a country like China, whose economy has far surpassed the threshold at which it is supposed to graduate from World Bank funding, is still taking loans”.
Last year, the US begrudgingly approved a $13 billion capital increase for the bank. Despite being the largest shareholder, Washington doesn’t have veto power over lending decisions. Under the bank’s new five-year Country Partnership Framework, lending to China would average between $1 billion and $1.5 billion per year.
“Our engagement will be increasingly selective”, Martin Raiser, the bank’s country director for China said, adding that “future World Bank lending will primarily focus on China’s remaining gaps in policies and institutions for sustainable graduation”.
Well, Axios is out on Wednesday underscoring concerns that loans are being used to fund the Chinese police state in Xinjiang. To wit:
Chinese recipients of World Bank loans tried to secure funding for the purchase of facial recognition technology for use in China’s northwest region of Xinjiang, according to documents obtained by Axios.
In more than 8,000 pages of official World Bank Chinese-language procurement documents dated June 2017 and reviewed by Axios, Chinese recipients of the loan program requested tens of thousands of dollars for the purchase of facial recognition cameras and software, night-vision cameras, and other surveillance technology for use in Xinjiang schools.
The World Bank told Axios those funds were not disbursed.
This will invariably inflame tensions around a 2015 loan program which provided some $50 million over a half-decade to fund vocational schools in Xinjiang. That program came under fire amid growing international recognition of human rights abuses in the region. Essentially, the argument is that the World Bank is complicit. In November, the organization said it has no evidence to support that allegation, but decided to scale back the project anyway, and would only fund five original schools, not their partners.
The problem, Axios says, is that the 2017 procurement documents mentioned above “came from those five original schools, which continue to receive World Bank funding”. Oops. Here’s a bit more:
One of the items requested by a World Bank-funded school was a video management and facial recognition software system that can create a “blacklist face database that can be set and armed” so that “blacklist alarms can be performed when blacklisted individuals pass through” and the resulting images sent directly to Chinese police. Such systems have been used to flag Xinjiang ethnic minorities for extrajudicial detention.
Asked about the documents, The World Bank told Axios the schools had, in fact, requested the equipment, but said Beijing nixed the plan more than two years ago. The bank never provided any funds for surveillance equipment, the lender said.
Unfortunately, the documents show that the loan recipients were looking to obtain technology “compatible” with equipment made by Hikvision and Dahua.
In October, the US gave Hikvision the Huawei treatment, blacklisting the Chinese surveillance giant along with 28 public security bureaus and companies, including Dahua. The move was a rebuke of China’s human rights record and specifically, Beijing’s treatment of the Uighurs.
That decision was months in the making. Just a week after Trump blackballed Huawei in May, reports indicated Hikvision and other surveillance companies could be next. Just as the US rolled out the “national security” excuse to justify the Huawei move, the ban on Hikvision came pre-packaged with a lot of high-minded rhetoric about Beijing’s systematic disregard for human rights and China’s repressive tactics in Xinjiang.
None of this is likely to sit well with Congress, although frankly, it’s not realistic to suggest that an Axios scoop will move the needle one way or another.
Still, the administration and lawmakers are looking for all the ammunition they can get when it comes to pressuring Beijing over the Xinjiang issue. Earlier this month, Congress passed legislation that would mandate sanctions on Chinese officials found to be liable for the repression of Turkic Muslims. China promptly threatened unspecified retaliatory measures, and eventually said Beijing would sanction some US NGOs and suspend Hong Kong port visits for the US Navy.
As far as the World Bank is concerned, Axios’s reporting isn’t going to do anything to ameliorate Trump’s concerns.
“China has plenty of money, and if they don’t, they create it”, he said late last week, before demanding that the organization “STOP!” loaning China money.