World Bank and China Exim bank team up on lending to Africa

4 June 2007

Collaboration to focus on large infrastructure; move seen as attempt by World Bank to avoid growing competition with Chinese counterpart.

Reuters reports that the World Bank and the Export-Import Bank of China (China Exim) have signed a memorandum of understanding (MOU) to collaborate on projects in Africa. The Bank has indicated that these joint investments will focus primarily on infrastructure lending, namely in the transportation and energy sectors, and that their efforts will initially be concentrated on “sustained-growth” performers such as Ghana, Uganda and Mozambique.

Little is known about the terms of the new agreement between the two lenders, as the text of the MOU has not been disclosed. According to Reuters, the World Bank’s VP for Asia Jim Adams said the agreement is intended to make China “become part of the global donor system.” Some observers have speculated that the Bank’s decision to team up with China Exim is part of its strategy to avoid competition with its rapidly growing Chinese counterpart. It is less clear what China Exim's incentives are for joining hands with the Washington-based Bank.

China Exim, China’s official export credit agency, provides financing predominantly for overseas investment and construction projects to facilitate Chinese private investment. International Rivers Network (IRN) revealed in a new report that China Exim has loaned at least $6.5 billion to African governments, primarily for infrastructure projects. The increasing role of China in Africa has raised the specter among Western donors that Chinese investment will adversely affect governance and the environment on the continent, and that African governments will again rack up unsustainable levels of new debt.

The World Bank’s decision to join forces with the Chinese bank represents the latest about-face of multilateral lenders in their stance on China’s role in Africa. In recent months reactions from multilateral lenders such as the World Bank, IMF and European Investment Bank (EIB) have fluctuated between concern, outrage, and now, conciliation. Earlier this month, the African Development Bank (AfDB) held its annual meetings in Shanghai, signaling the continent’s growing ties with China.

Civil society has also become increasingly concerned about the growing role of Chinese banks in Africa and elsewhere. A new report from Friends of the Earth (FOE) and BankTrack entitled “Time To Go Green” details the need for stronger environmental standards and better compliance among Chinese banks, including China Exim. Meanwhile, IRN has voiced its concerns about China Exim’s involvement in a number of hydroelectric dams in Africa, particularly the highly controversial Merowe Dam in northern Sudan. The project has highlighted broader concerns about China’s apparent tolerance of human rights violations and lack of transparency around social and environmental safeguards.

Resources

• China's exim-bank, World Bank to cooperate on Africa by Lesley Wroughton, Reuters, May 22, 2007 (Reuters website)
• China Eximbank and World Bank come together to sign cooperation memo, World Bank, May 21, 2007 (World Bank website)
• Press Release: Chinese banks still have a long way to go on environment, Friends of the Earth and BankTrack, May 9, 2007 (FOE-US website)
• China’s Role in Financing African Infrastructure by Peter Bosshard, International Rivers Network, May 2007 (IRN website) (Acrobat PDF 200 KB)
• Merowe Dam Campaign page (IRN website)