World Bank moves to phase out China loans by 2031 under US pressure

By Seo Ji-yeon, The Herald Business

The World Bank is moving to phase out development loans to China by 2031, reflecting US pressure that the world's second-largest economy should no longer hold borrower status at international development finance institutions.

The Financial Times reported Tuesday that the World Bank plans to wind down lending to China by 2031, citing a plan the bank submitted to its board of directors.

According to a summary of the proposal obtained by the FT, World Bank lending to China will be capped at no more than $2 billion through 2031, after which it will end. The matter is scheduled to be discussed at the World Bank's weekly board meeting on July 20.

A World Bank official told the FT that the arrangement marks a new chapter for China. "When this period ends, China will have graduated," the official said.

"We recognize China's development journey," the official added. "We understand that China is ready to no longer rely on funding from development finance institutions like the World Bank."

World Bank lending to China has already been declining in recent years. According to the FT, annual lending fell from $2.4 billion in 2017 and is projected to reach $750 million in 2025.

The decision comes after the Trump administration and some member countries pressed the bank to end China's borrower status, citing the size of its economy.

A US Treasury spokesperson told the FT that China, as the world's second-largest economy, should not receive aid from multilateral financial institutions. "The World Bank Group stopping lending to China is a step in the right direction," the spokesperson said.

The spokesperson also urged other multilateral development banks to follow suit and reduce their own lending to China.

Earlier in July, the World Bank approved a similar transition plan for Poland, under which development loans would end by 2031, with exceptions carved out for Ukraine-related programs and nuclear energy.

The proposal for China, however, contains no such exceptions.

A senior US official told the FT that the language in the China proposal was "the most aggressive in modern history" — going further than the agreement Poland recently reached with the World Bank Group to end its borrowing.

The World Bank's move is the latest front in the US-China rivalry over the role of multilateral development banks in supporting developing nations. Washington has argued that China, already the world's second-largest economy and a major overseas investor, should be excluded from development finance. Beijing has maintained that regional disparities and development needs within China still remain.