The China World Bank Scandal
Underwhelming is the most charitable way to describe the World Bank’s contribution to reducing global poverty over 75 years. And now the organization’s most useful service, its annual Doing Business ranking, has been shelved, thanks to some untoward lobbying by China.
The survey, first published in 2003, “measures aspects of business regulation affecting small domestic firms located in the largest business city of 190 economies.” It covers a wide range, from registering a business to resolving bankruptcy. This massive undertaking involves nearly 50,000 experts across the globe, and its conclusions guide perhaps billions of dollars of investment.
But an independent investigation by the law firm WilmerHale has concluded that former World Bank CEO Kristalina Georgieva and other leaders pressured staff to improve China’s Doing Business 2018 ranking. World Bank management commissioned the probe after data irregularities were reported internally last year. The report says China rose seven places after the changes. China ranked 31st in the 2020 report, which was ahead of Switzerland in 36th. Does that sound plausible for a regime that considers business a servant of the state?
“Rank-and-file employees were told that the instructions to change China’s data came from the highest rungs of Bank management,” the report says. “Employees felt that they could not challenge an order from the Bank’s president or CEO without risking their jobs.”
Ms. Georgieva, now managing director of the International Monetary Fund, has said the accusations are “false and spurious.” She also claims to have stopped an effort by ex-World Bank President Jim Yong Kim’s office to improve China’s position by including Hong Kong’s data with the mainland’s ranking.
Current President David Malpass has said the report speaks for itself and has put Doing Business on ice. Instead the banksays it’s “working on a new approach to assessing the business and investment climate.” Providing raw data and letting investors reach their own conclusions would be best if World Bank judgments are corrupted by national politics.
Concern on the Hill has been bipartisan. This week Senators Jim Risch, a Republican, and Bob Menendez, a Democrat, called on the Treasury Department to “ensure full accountability” for what happened and why. One possibility is that bank leaders made the Doing Business concession to China amid a dispute over China’s role in recapitalizing the bank. Beijing is frustrated that it wasn’t allowed a larger say in bank governance, and the concession might have been a consolation prize.
This scandal is a symptom of the larger problem of rising Chinese influence in multilateral institutions. China’s economic rise will inevitably give the country more sway across the United Nations and organizations like the World Bank and IMF. But China has a habit of turning these institutions to serve the interests of the Communist Party. The World Health Organization’s fealty to Beijing during the Covid-19 pandemic shows the risks.
The World Bank scandal also implicates the IMF by dint of Ms. Georgieva’s position. Bloomberg reported this week that Treasury Secretary Janet Yellen has declined to take Ms. Georgieva’s calls since the scandal broke. Her hold on the IMF job is precarious.
The Biden Administration believes in multinational institutions for their own sake. But if they can’t be trusted, they corrupt their mission and undermine American interests and values.