Business / Economy

Asian Development Bank chief says Japan-backed lender will continue loans to China

by Kazuaki Nagata

Staff Writer

The Asian Development Bank will keep lending billions of dollars to China, taking a different stance from the World Bank and its plans to reduce loans to the world’s second-biggest economy, the ADB chief said.

“We don’t intend to significantly cut the amount of lending to China,” ADB President Takehiko Nakao said during an interview with media outlets in Tokyo on Monday. “We will keep the current level (to finance projects) related to climate change and those that will positively affect neighboring countries.”

Last year China borrowed about $2.6 billion from the Japan-backed ADB, the Manila-based development bank, making it the second-biggest borrower after India. Yet China is now a major economy and has also been reportedly lending billions of dollars to other developing countries for its “Belt and Road” initiative.

Whether China should continue to depend on loans from the World Bank, which focuses on middle- and low-income nations, has been a hot topic at the bank where the U.S. boasts the most voting power. Last year, its shareholders agreed to slash the amount in coming years.

Moreover, starting this month, the World Bank has a new chief backed by U.S. President Donald Trump: David Malpass, a former senior U.S. Treasury official and advocate of cutting loans to China. The World Bank lent about $2.4 billion to China in 2017 and $1.8 billion in 2018.

Nakao said the ADB’s stance is a bit different from the World Bank, saying income from Chinese loans helps poorer nations borrow at lower interest rates while it diversifies the bank’s portfolio.

“In that sense, the lending to China benefits the bank and other countries,” he said, adding it also contributes to maintaining ties with China.

Regarding U.S.-China relations, the world has been keenly watching how their trade friction will affect other communities.

The ADB estimated last year that if tariffs were imposed on all traded goods between the two nations, Chinese gross domestic product would fall 1 percentage point while U.S. GDP would decline 0.2 percentage point. For now the impact seems limited, but Nakao said further damage to consumer and investor sentiment might more seriously hamper growth in other regions. As for Asia’s growth outlook, the ADB projects that it will slow down to 5.7 percent from 5.9 percent in 2018 and 6.2 percent in 2017.

However, Nakao is optimistic about the region’s economy, saying it is still “solid” with developing territories, excluding Hong Kong, China, South Korea, Singapore and Taiwan, expected to stay above 6 percent this year and next year. Nakao also stressed the bank’s plan to boost commitment to climate change-related projects, saying the ADB wants at least 75 percent of its three-year rolling financing projects to help such initiatives by 2030, from 52 percent between 2016 and 2018.