The World Bank's mainland lending policies face new challenges with Beijing set for World Trade Organisation entry and with its 'graduation' from the World Bank's soft-loan lending window. The bank, which last year lent US$2.1 billion to the mainland, is preparing a new country assistance strategy for the mainland which will direct future lending policies. Beijing is expected to see its lending from the World Bank fall by almost a quarter in the financial year to the end of June. Bank officials are devising the most efficient method of funding with the more limited resources available. The new policy also will have to take into account that Beijing is no longer eligible for the cheapest loans the World Bank offers through its International Development Association (IDA). Beijing now qualifies for lending only from the bank's International Bank for Reconstruction and Development (IBRD). Unlike IDA, the IBRD charges interest for its loans and demands a shorter pay-back period. It also has no policy for debt rescheduling. Poorer mainland provinces however, may find repayments to the quasi-commercial IBRD difficult, said Julian Schweitzer, the bank's Asia-Pacific director of strategy and operations. He said that the autonomy of most provinces meant that the burden of repayment would be left to provincial capitals, some of which might not be able to meet IBRD's demands. Furthermore the emphasis of the bank's future policy could be on more soft loans to areas like education and health which do not create direct revenues. 'If we want to stay focused on poverty in China, then we have got to find a mechanism to do it,' Mr Schweitzer said. There is a wide gap between poor and rich which open further once the mainland joins the WTO, especially if poorer provinces find foreign imports tough opposition. 'That's the really big worry,' Mr Schweitzer said. 'There are areas in western China that are poorer than I have seen anywhere, where people are living on $60 a year. 'There is a huge economic disparity between the coastal regions and what's going on in the inland areas.' LENDING
