Business

China and the World Bank

By Sean Nelson

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As a nation-state's economy grows and sees it people become wealthier, there is a new moral obligation that grows as well: to help other nations to experience economic growth as well as a means of fighting and ending poverty. China now finds itself at a unique point in its economic development as it has grown at a rapid pace for decades but still must combat poverty. Loretta Chao, writing in the Wall Street Journal recently, notes that the World Bank and the Chinese government are embarking upon a new stage in their relationship. She writes that "the World Bank will continue to work actively in China." However, China will now also be a donor nation as well. Specifically, China Daily reports, China will donate to the International Development Association, from which China once used to receive loans. The last time China received IDA loans, which over time added up to US$9.9 billion, was in 1999. According to the Financial Times, the World Bank will continue to offer targeted assistance to China, such as for environmental projects. World Bank President Robert Zoellick mentioned that China's donations to the World Bank will be spent on joint programs focused on African development. At the same time, China will also continue to receive loans from other sources, such as the US$100 million that the Asian Development Bank in Manila recently announced that it would lend China to help improve and develop its railway system, the Xinhua News Agency recently reported.

 It will be interesting to see how the China-World Bank relationship develops over the next few years. For one thing, China is not only the world's largest developing nation but is also the largest developing nation to see much consistent year-to-year economic growth for the past few decades. As such, the World Bank can learn much from China's recent experience and apply that to helping other countries experience economic growth. This will be aided by the fact that the World Bank will start hiring more Chinese staff. For those individuals trained in political science like myself, it will also be worthwhile to see if there is a China model of economic development that can be applied elsewhere.

Every time that a developing nation experiences long stretches of economic growth political scientists start to wonder if there is a model, such as an "East Asian Model" or a "Latin Model," that can be applied elsewhere. Often this elsewhere is sub-Saharan Africa, the same region where the China-World Bank joint projects will take place. However, once one claims that such a model does exist, it becomes difficult to define the specific model as something universally applicable beyond such already well-known policies as not placing tariffs on intermediate products used in the manufacturing of products for export (for instance, a country that has a comparative advantage in producing cars would likely be ill-served in placing tariffs on the steel needed to make the cars). Simply saying that a model is unique compared to other models is insufficient because those aspects that make a model unique must make that model superior in a way that other countries can adapt that model. The trouble with the developmental state that aided the economic development of countries like Korea and Japan was that necessary institutional arrangements and policy packages were dependent on those nations' Cold War relationship with the United States. The Washington Consensus promoted by the likes of the International Monetary Fund in the 1990's, based on the experience of Latin American countries like Chile, saw rather little success when implemented, including in Latin America, by the IMF's own admission.

It is possibly premature at this point to judge whether or not there is a "China Model" that can work in Africa. The differences in population size, trade patterns and climate affecting agriculture between China and sub-Saharan Africa will likely limit how much of a potential "China Model" could be applied in Africa. One of the reasons Africa failed to develop economically under European colonialism was that colonial administrators failed to recognize that local farming practices were optimal given local weather patterns and the current technology. European farming practices were developed for a more temperate climate that experienced a winter thaw, which differentiated Europe from Africa. What works well for farmers in Anhui may not work in Mozambique.

With that said, the World Bank can likely benefit from dealing with officials from a donor nation that know what it is like to be on the receiving ends of World Bank funds. Much of the World Bank's funds come from governments in North America and Europe, where few people know what it is like to live in a developing country. This new relationship gives World Bank officials a chance to learn to a greater extent how to see through the eyes of officials in charge of local development in their own backyard.

Key Vocabulary:

World Bank: 世界银行 shì jiè yín háng
Asian Development Bank: 亚洲开发银行 yà zhōu kāi fā yín háng
International Monetary Fund: 国际货币基金组织 guó jì huò bì jī jīn zǔ zhī
Economic development: 经济发展 jīng jì fā zhǎn
Bank loans: 银行贷款 yín háng dài kuǎn

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