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During the Cold War, communist China shunned the capitalist World Bank. But once China embraced the institution in 1980, it quickly became one of the bank's largest borrowers of all time — having taken out loans totaling more than $60 billion over the past four decades.
Today China is sitting on cash reserves of some $3 trillion. It is the world's second-largest economy, behind the U.S. It directly lends more money to other nations each year than the $2 billion or so it borrows from the World Bank annually.
So some analysts are questioning whether the World Bank's subsidized loans could be better deployed elsewhere in the world.
The World Bank, based in Washington, D.C., was established after World War II to help European countries rebuild. Its mission has evolved over the years and is now to finance development in low- and middle-income countries with the goal of eliminating extreme poverty. Once a borrowing country's annual per capita income exceeds a certain threshold — roughly $7,000 at the moment — the country is supposed to be weaned off the World Bank's loans. China passed that income threshold in 2016 yet was the bank's largest borrower the next year, securing access to $2.4 billion in 2017.
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"From a pure economic vantage point, there is no good reason for the World Bank to continue making loans to China," says Eswar Prasad, a professor of economics at Cornell University.
"The Chinese don't need the money," Prasad says. "There is a glaring optics problem." He adds that the argument could be made that the money lent to China could be put to better use elsewhere.
And it's not as if the World Bank has an infinite amount of money to parcel out. Its lending budget, drawn from reserves, donations and the interest it earns on capital, is limited. So a dollar lent to China is a dollar that is not available for a project somewhere else in the world. The Trump administration, which regularly beats up on China, accusing it of manipulating global trade rules for its own benefit, has blasted the World Bank for lending too much to China.
Prasad says the World Bank's lending to China is becoming "untenable" and will have to stop fairly soon.
Bert Hofman, the World Bank's country director for China, says the amount of money China is borrowing each year from the global bank is just a small fraction of what the country is investing each year in domestic programs. And he believes that a motivation for China's borrowing goes beyond money.
"The reason they still borrow is because they feel that the expertise of the World Bank is valuable to them," Hofman says.
World Bank loans come with advisers and auditors who help implement (and monitor) bank-funded projects.
China gets access to international experts. The World Bank remains engaged with China and is able to see how new projects play out in this booming middle-income country. Hofman sees it as a win-win.
Prasad agrees that there are still some good reasons for the World Bank to remain engaged with China. Many of the bank's loans to China are for projects addressing climate change and mitigating pollution from the country's booming factories.
"The risk the World Bank faces is that if it only lends to very poor countries, it might end up not having much of a role to play in the large, fast-growing emerging-market economies," Prasad says. "So the World Bank, in a bid to remain relevant and push its agenda on issues such as climate change and social development, has continued to lend to China."
An analysis of the World Bank's lending to China, released earlier in January, found that most of the new loans are focused in the poorer, inland parts of the country. The analysis, by the Center for Global Development, also found that about 38 percent are targeted for what the bank calls "global public goods" — issues that affect people beyond China's borders, such as climate change and pollution.
"China is the world's largest polluter today, and the biggest single category of expenditures for the World Bank is in this area," says Scott Morris, a senior fellow at the Center for Global Development and the report's lead author.
The World Bank, however, is also lending money to China for agriculture and education projects. And it is funding roads. Morris says China continues to get loans for some industrial infrastructure projects that are clearly not about global public goods or eradicating extreme poverty. China's rivals say the loans give the Asian giant an unfair economic advantage in the global marketplace.
For instance, in 2017 the World Bank ponied up $200 million to finance a port and logistics park for shipping containers on the Yangtze River as part of the Three Gorges Dam project.
In fact, Hofman says the bank's lending to China is likely to decrease in the years to come as China grows wealthier.
"Going forward, we'll have a more focused program that increasingly focuses on the global public goods," Hofman says. "But it also still helps China in developing its institutions for sustainable development, so it's a good relationship."
Managing that transition in the relationship between China and the World Bank may be one of the most pressing issues facing the next president of the World Bank. Jim Yong Kim is stepping down as head of the global financial institution on Jan. 31. The United States, as the largest shareholder in the 189-nation bank, has traditionally been able to appoint the head of the World Bank, but bank watchers say that this year the debate over who should be the bank's next leader could get heated. Smaller emerging nations and global powerhouses like China are likely to push for a president with ties to — and possibly even a passport from — the global south.