BEIJING - World Bank president Jim Yong Kim denied Friday that his organisation had been pressured by China to remove criticism of the country’s financial system from a report.
Early this month the Washington-based institution released its China Economic Update report in Beijing, including a section urging the country to accelerate reform of its state-dominated financial sector.
Among criticisms, the section noted that the Chinese state exerts strong control over a majority of commercial bank assets, making the world’s second-largest economy “an outlier by international standards”.
“Wasteful investment, overindebtedness, and a weakly regulated shadow-banking system” had to be addressed for China’s broader reform agenda to succeed, it added. Two days later it was removed, with the Bank saying on its website that it had not undergone proper vetting before publication.
Kim called the release of the section “simply an error” at a press conference in Beijing.
“It did not go through the regular clearance mechanisms within the World Bank Group and when we found that it had been put up without going through the regular processes we took it down,” he added
“There was no pressure or communication with the Chinese government at all,” said Kim, who met on Thursday with Chinese premier Li Keqiang.
“We think that the commitment to reforms and the fundamentals of this economy are very promising and that we will continue to work closely with the government on a range of issues,” he added.
Bert Hofman, the institution’s country director for China, said that the section was “not the official World Bank position”, and it would undergo a review process “in the future”.
Despite dramatic volatility on China’s stock markets Kim said its “economy is strong and its fundamentals sound”.
Beijing is in the process of setting up a new multilateral lender, the Asian Infrastructure Investment Bank (AIIB), seen by some as a rival to the Washington-based World Bank, but Kim said the institutions were looking to cooperate.
“The AIIB is an important new partner that shares a common goal with the World Bank Group: to end extreme poverty by 2030 and to boost shared prosperity,” Kim said.
China will be the biggest AIIB shareholder at about 30 percent, according to the legal framework signed late last month by 50 founding member countries.
The United States and Japan — the world’s largest and third-largest economies, respectively — have declined to join.