By: Dr. Mike Campbell
One of the functions of the World Bank is to work towards the alleviation of poverty in the world’s nations. This is achieved, in part at least, by the provision of low interest, or interest-free loans for development projects. Between 2008 and 2010, the World Bank provided more than 100 billion Dollars in such loans.
According to a report prepared by the Financial Times (FT), China’s own loans to developing nations have now eclipsed World Bank lending. In the period between 2009 and 2010, the FT report estimates that two Chinese development banks the China Development Bank and the China Export Import Bank have provided $110 billion to businesses and governments in developing countries. Explicit details were not provided to the FT reporters, but garnered from public announcements concerning specific loans made by the recipients or the Chinese government; as such, it is likely to be an underestimate.
A major difference between the World Bank funding and the Chinese loans is that the Chinese provisions are made because they believe it to be in their national interest, rather than for purely altruistic reasons. The China Development Bank is interested in ensuring that China has supplies of the raw materials it needs and in opening new markets for Chinese products. It has been instrumental in securing oil supplies from Russia, Brazil and Venezuela.
However, in terms of Foreign Direct Investment (FDI) abroad from the private sector, the picture is different. Outward FDI from China was $50 billion in 2010, whereas inbound FDI was about twice this figure. The outbound FDI figure is the fifth largest amount for any country whereas the Chinese economy is now the world’s second largest.