A new report from the United States Government Accountability Office (GAO) highlights the dominance of the People’s Republic of China (PRC) and its state-owned enterprises in securing financing for economic development projects. The report shows that China secures nearly 30% of all funding, compared to the US, which receives less than 1%. The report raises concerns about whether there is an unfair playing field, as China has over 150,000 state-owned enterprises, accounting for 60% of China’s market capitalization.
The World Bank, which was founded in 1944, does not allow state-owned enterprises to secure contracts in their own country. However, it allows them to win contracts in other countries. The GAO’s analysis shows that Chinese companies won 41% of all civil engineering projects, while US companies won only 0.3%. This has led to concerns that China is using the World Bank to further its goals at the expense of US taxpayers and other democracies.
Chinese companies have often imported workers from China, which causes negative cultural impacts while limiting their impact on local development. Moreover, Chinese contractors working on World Bank projects have even raped local girls. These companies are also selling sanctioned Huawei and other equipment to systems that enable oppressive regimes to spy on dissidents and minorities. Given all the ramifications, it is unacceptable that American taxpayers are subsidizing China’s activities.
The GAO report confirms that US companies have little interest in bidding for projects as they cannot compete with their Chinese state-owned counterparts. However, when a US company bids, it wins around 70% of the time. The report highlights the need to reform procurement practices and devise objective standards that rely on non-subsidized costs. The report also raises concerns about China’s broader role in the World Bank, given that it receives about $2 billion a year in loans from the bank and remains a significant recipient of World Bank funds despite being one of its top 10 debtors.
The report concludes that China clearly meets the criteria for graduating from developing country status and should no longer be allowed to take advantage of World Bank loans. DJ Nordquist, the former US Executive Director of the World Bank, calls on the new president of the bank to address these issues and consider China’s broader role in the organization.