China’s Voting Rights at World Bank Set to Rise After Capital Increase

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China will become the World Bank’s third most influential member following the international financial institution’s latest capital increase.

The World Bank announced on 12 April that a USD$13 billion capital increase plan has obtained the approval of shareholders, marking the institution’s first injection of funds since 2010.

“We have more than doubled the capacity of the World Bank Group,” said the bank’s president Jim Yong Kim at its spring meeting in Washington. “It’s a huge vote of confidence, but the expectations are enormous.”

The plan will see the provision of $7.5 billion in paid-in capital for the International Bank of Reconstruction and Development – the World Bank’s chief concessional lending vehicle, and $5.5 billion for International Finance Corp., its commercial terms lender.

Kim said that the capital increase would enable the World Bank to raise overall lending to almost $80 billion in the 2019 fiscal year from around $59 billion in 2017. The World Bank’s average lending volume per annum will rise to around $100 billion through 2030.

According to a report from Japan’s Kyodo News, following the capital increase China’s voting rights at the World Bank will rise by 126 percentage points to 5.71%, making it the third most influential member state after the US and Japan, who wield voting rights of 15.87% and 6.83% respectively.

While China’s clout within the World Bank will increase, its ability to access loans will decline under conditions set by the Trump administration for the capital increase.

China was the World Bank’s biggest borrower in 2017, accessing a total of $2.4 billion in funds that year from IBRD, equal to 11% of all credit that it extended for global education and health initiatives.

Under the new lending arrangements China will rise to a higher band for which borrowing rates are more costly, while the World Bank will commit to credit extension to poorer countries.

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