U.S. Opposes World Bank Plan to Lend to China, Mnuchin Says

(Bloomberg) -- Treasury Secretary Steven Mnuchin said Thursday that the Trump administration opposes the World Bank’s latest plan for low-interest loans to China, which has received more than $1 billion a year from the lender.

The World Bank is expected to soon release its latest Country Partnership Framework document for China, which lays out its lending plans to the world’s second-largest economy. Under questioning by lawmakers, Mnuchin told the House Financial Services Committee on Thursday that China should be removed from the World Bank’s loan program.

“The Treasury Department has negotiated significant reductions on China lending by the World Bank,” Mnuchin said.

World Bank lending to China declined to $1.3 billion in fiscal year 2019 from $2.4 billion in fiscal 2017.

Several lawmakers voiced concerns about what they described as unannounced World Bank plans to continue lending to China despite rapid growth in the country’s per capita income. Mnuchin said the Treasury Department on Wednesday filed an objection to the World Bank’s latest plans.

Senate Finance Chairman Chuck Grassley, an Iowa Republican, said Thursday that Congress should intervene in the World Bank’s plans.

“China is now the world’s second largest economy and its per capita income is well above the level at which countries are supposed to ‘graduate’ from needing World Bank assistance,” he said in prepared remarks for delivery on the Senate floor. “The United States is the World Bank’s largest contributor and the spending bill that funds the World Bank includes a provision for a big capital increase for the bank. That’s an opportunity for Congress to weigh in and we should take it.”

Mnuchin advised President Donald Trump to recommend former Treasury official and Trump campaign adviser David Malpass to take charge of the World Bank earlier this year. One of his “key objectives” as Mnuchin’s undersecretary for international affairs at Treasury was to work with the World Bank to wean China from its loan program, the Treasury secretary said.

Mnuchin conceded that China no longer qualifies for World Bank loans and should be removed from the program. The U.S. is the largest contributor to the World Bank, which provides low-interest loans to low-income nations.

“Malpass worked on this with the World Bank when he worked for me, it was his No. 1 issue on reforms. Now as he’s leading World Bank and he’s working with China. He’s working on this,” Mnuchin said in response to questions.

The World Bank’s lending is in line with amounts approved by Congress and the Treasury Department, according to a person familiar with the matter. It is decreasing funding to China while pushing for market-oriented reforms in the nation, the person said, speaking on the condition of anonymity.

--With assistance from Jeff Kearns.

To contact the reporter on this story: Saleha Mohsin in Washington at smohsin2@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Justin Blum

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