David Malpass, US nominee for World Bank president and long-time China hawk, ‘will continue to take part in trade talks’
- Malpass will travel to Beijing next week with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, administration officials say
- ‘It doesn't make sense to have money borrowed in the US, using the US government guarantee, going into lending in China,’ the nominee said in 2017
David Malpass, a China hawk who is US President Donald Trump’s nominee to become the World Bank’s new president, will continue to play a “very important part” in trade negotiations with Beijing, senior US administration officials said on Wednesday.
The officials said Malpass, undersecretary for international affairs at the US Treasury, would travel to China next week with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin for the next round of negotiations, the officials said.
Malpass, a World Bank sceptic who has been vocal in his opposition to the spread of multilateralism, has figured prominently in the negotiations, which reconvened at the cabinet level in Washington last week.
The scheduling of more talks was one of the only tangible outcomes of last week’s discussions, which culminated in an Oval Office meeting between the Chinese delegates and Trump and a promise from Chinese Vice-Premier Liu He of a one-time, 5 million metric tonne purchase of soybeans, a pledge that observers dismissed as a token.
Malpass, 62, would continue to be a part of efforts to reach an agreement by March 1, said one official, referring to the end of the 90-day window agreed upon in December, after which US tariffs will increase in the absence of an agreement.
Appearing to temper expectations that a deal was a certainty, the senior official said: “March 1 is the deadline where we believe a deal will, you know – we’ll be focused on trying to get [one] achieved by that date.”
Malpass is also expected to drive a hard line with China should he be elected president of the World Bank, which was established in 1944 to fund the redevelopment in Europe after the devastation of the second world war.
In 2018, it lent a total of US$1.82 billion to China, the world’s second largest economy, for projects ranging from transport and urban development to energy and water management.
“China has plenty of resources, and it doesn't make sense to have money borrowed in the US, using the US government guarantee, going into lending in China for a country that's gotten other resources and access to capital markets,” Malpass said in 2017 at a Council on Foreign Relations event.
At the White House announcement of his nomination on Wednesday, Malpass made no mention of China or of reining in lending to particular countries.
“I am very optimistic that we can achieve breakthroughs to create growth abroad that will help us combat extreme poverty and increase economic opportunities in the developing world,” he said as Trump looked on.
One senior administration official said Malpass’ tenure at the World Bank would focus on changes such as improving debt transparency and updating the organisation’s lending programmes. Such changes, they said, were designed to focus the country programmes “on those countries that are the poorest and most in need of financial resources”.
Such movement would be a continuation of efforts already begun by the Trump administration to rein in lending to China, which is itself engaged in ambitious loans to other countries through its “Belt and Road Initiative”.
Critics say Beijing’s lending scheme lacks transparency and exploits vulnerable economies. During a trip to Latin America in October, Secretary of State Mike Pompeo said the US welcomed competition but objected “when state-owned enterprises show up in a way that is clearly not transparent” and was designed to “benefit the Chinese government”.
“We are working with allies and like-minded countries to guide the [multilateral development banks] away from what could be viewed as endorsement of China’s geopolitical ambitions,” Malpass said in written testimony to a Senate subcommittee in November. The World Bank is the most prominent multilateral development bank.
Organisations such as the World Bank could be an effective tool in “helping vulnerable countries better understand the risks and implications” of accepting China’s “excessive lending”, he wrote.
The World Bank, he said in response to senators’ questions, had agreed to wind down its lending to China from its reconstruction and development arm – a process he referred to as “graduating China”. World Bank lending to China dropped more than 26 per cent between 2017 and 2018.
The World Bank was committed to making its relationship with China “not as focused on lending and more dependent on knowledge transfer and knowledge sharing, given that China has substantial resources of its own”, a senior administration official said on Wednesday.
Despite the continuity between the administration’s and Malpass’s positions on the World Bank, his nomination has elicited strong opposition from some observers, who view him as a threat to multilateralism.
“An incorrigible arsonist will now be our fire chief,” tweeted W. Gyude Moore, Liberia’s former minister of public works. “Man spends his adult life denigrating multilateralism and now has the ‘pleasure’ of running one of its pillars.”
“David Malpass is a Trump loyalist who has committed economic malpractice on a wide range of topics, from dismissing the first signs of the 2008 global financial crisis to flirting with the abolition of the IMF,” Justin Sandefur, senior fellow at the Centre for Global Development, said in a statement.
— Holly Shulman (@HollyShulman) February 5, 2019
Malpass also served as chief economist at the now-defunct investment bank Bear Stearns, which collapsed during the 2008 financial crisis. Seven months previously, he had written a commentary for The Wall Street Journal titled “Don't Panic About the Credit Market” that played down indications of the looming financial disaster.
“There is no case for Malpass on merit,” Sandefur said. “The question now is whether other nations represented on the World Bank’s board of governors will let the Trump administration undermine a key global institution.”
Jim Yong Kim, the bank’s president since 2012, resigned abruptly last month, more than three years before the end of his term.
Although the election is by majority vote of the bank’s executive board, and while no country holds veto power, the organisation has never been led by a non-American.
If elected, Malpass, who said on Wednesday that a goal of his presidency would be to ensure that women achieve “full participation in developing economies”, would continue the World Bank’s 75-year history of all-male presidents.