Alex Lo
SCMP Columnist
My Take
by Alex Lo
My Take
by Alex Lo

IMF chief another victim of China-US rivalry

  • The IMF and World Bank are the two latest multinational bodies to be dragged through the mud in the bitter struggle between the superpowers

These days, anything that may have made China look good is bound to cause controversy and criticism. Just ask the last president of the World Bank, Kristalina Georgieva, and the current one, David Malpass. And now more multinational bodies are being dragged through the mud.

In itself, the latest “scandal” may seem like a storm in a teacup, but one should never underestimate the ability of US politicians – or their friendly British press – to make a big fuss if there is an unstated political agenda to advance.

Georgieva took over the International Monetary Fund (IMF) in 2019 after serving as CEO and then interim president of the World Bank. Lately, she has been accused, while she still at the bank, of pressuring a data team responsible for the bank’s flagship annual publication Doing Business to nudge China’s rankings up seven places to 78th in its index, in the edition for 2018.

The scandal broke when a law firm hired independently to probe the data manipulation claims, concluded the allegations were credible. She has disputed the findings.

Americans distrust each other more than Chinese

Whatever she did or didn’t do, an improvement of seven places in a country’s business climate and ease of doing business seems rather minor, especially given the stellar improvement in China’s rankings since Malpass, a former United States Treasury official under Donald Trump and a China hawk, took over the bank. During his tenure, China jumped to 31st in 2020, and then 25th in the unpublished 2021 report. The influential publication, which started in 2002, has been terminated because of the furore.

In an April 2020 official statement, the bank praised China’s rise in the rankings: “China has witnessed an unprecedented improvement in its business environment over the last two years, as measured by the World Bank’s Doing Business report. China moved up by almost 50 places from 78th position in Doing Business 2018 to 31st position in Doing Business 2020 and was included among the top 10 global reformers for two years in a row.”

Kristalina Georgieva, managing director of the International Monetary Fund, delivers a speech. Photo: AP

A hawkish critic of China’s trade practices, especially during his time as a senior Treasury official in charge of international affairs, Malpass had reportedly wanted to change criteria for the index’s rankings which would have pushed up the US, in sixth place in the last 2020 publication, but lowered China’s. According to a Bloomberg report, Malpass wanted to double the number of representative cities in the report to four for the three countries with the largest population: China, India and the US. He also wanted to restore the metric for “ease of employment”, which would have caused China’s rankings to drop four places and the US’ to rise by three.

But they never got around to reforming the methodology as, in the meantime, the bank had abruptly announced it was cancelling the annual survey, which had been widely followed by country leaders, policymakers, investors and senior corporate executives.

Suppose both China and the US are in decline …

Now several US congressional politicians – and The Economist magazine – are calling for Georgieva’s resignation at the IMF over the data manipulation “scandal”. But what they seem upset about is not what she did at the World Bank, but what she is doing at the IMF.

The US is the IMF’s largest shareholder, with 16.52 per cent of total voting power and has unique veto power over major policy decisions. China has long wanted to change this governance structure. Georgieva is seen by Washington, rightly or wrongly, as potentially favouring changing the quotas and voting power allotted to member states.

It seems some US politicians are also peeved that the IMF under Georgieva has heavily funded China and other developing countries, especially low-income ones, to help them out with the economic devastations from the Covid-19 pandemic.
The International Monetary Fund (IMF) headquarters building in Washington. Photo: Reuters

Of US$650 billion denominated in Special Drawing Rights (SDRs) distributed among member countries based on their quota shares in the IMF, US$275 billion was allocated to developing countries, including US$21 billion to the poorest nations, equivalent to as much as 6 per cent of gross domestic product (GDP) for some countries.

In an official letter, several US congressional politicians have demanded the Treasury Department investigate. They wrote: “Georgieva’s interactions with Chinese representatives at the fund during her deliberations and decision-making process leading up to the August 2, 2021 announcement by the IMF … to approve a US$650 billion general allocation of SDRs, which included an estimated US$42 billion to [China].”

However, some prominent economists have come to her defence. Writing in the Financial Times, Jeffrey Sachs of Columbia University has called the US campaign against Georgieva “anti-Beijing hysteria” and “McCarthyite treatment”.

Describing her as “a bold leader in confronting the economic fallout of the pandemic, as well as in positioning the fund as a global pioneer on climate change”, the Nobel Prize-winning economist Joseph Stiglitz has criticised the US campaign as “a coup attempt at the IMF”.

Some China experts do get things right

In a Project Syndicate opinion piece, he wrote: “The real scandal is the [investigation’s] WilmerHale report itself, including how David Malpass, the World Bank president, escapes unscathed.

“The report notes another episode – an attempt to upgrade Saudi Arabia in the 2020 Doing Business index – but concludes that the bank’s leadership had nothing to do with what happened. Malpass would go to Saudi Arabia touting its reforms on the basis of Doing Business just a year after Saudi security officials murdered and dismembered the journalist Jamal Khashoggi.

“He who pays the piper, it seems, calls the tune. Fortunately, investigative journalism has uncovered far worse behaviour, including an unvarnished attempt by Malpass to change the methodology of Doing Business to move China down in the rankings.”

Unfortunately, it’s all “he says, she says” at the moment. The general public will probably never know what happened. The real losers are the IMF and World Bank, two more multinational bodies being dragged into the bitter rivalry between the world’s two superpowers.