Asian Development Bank President "Considering Ending New Loans to China Starting Next Year"

Masatsugu Asakawa, President of the Asian Development Bank (ADB)
[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Asian Development Bank (ADB) is considering ending new loans to China. The decision aims to assess whether it is appropriate to continue providing loans with a strong economic support nature to China, the world's second-largest economy.

Masatsugu Asakawa, ADB President, said in an interview released by Japan's Nihon Keizai Shimbun on the 19th, "We plan to discuss from next year whether (China) can graduate from ADB," adding, "This is the first time we are considering China's graduation." Through its 2021-2025 lending plan, ADB will provide China with a total of $7 billion to $7.5 billion (approximately 9.3 trillion to 10 trillion won). This amount is reduced compared to $9 billion during 2016-2020, and ADB will review whether to stop providing additional loans to China after 2025.

According to the report, ADB is narrowing its lending targets to countries with ▲a Gross National Income (GNI) per capita of $7,455 or less, ▲difficulty in raising funds in international capital markets, and ▲development indicators such as social security below certain levels. China has already surpassed the GNI and funding criteria, and ADB is expected to verify whether it meets the development indicator standards. President Asakawa said, "The situation regarding social security differs between Shanghai and inland areas," and added, "We will discuss this properly."

As of the end of last year, China's outstanding ADB loans amounted to $19.6 billion, ranking second after India. Nihon Keizai reported that this accounts for 14% of the total. Last year, China's new ADB loan volume was $1.8 billion, ranking fifth after India and Pakistan.

Established with Japan's leadership and U.S. co-investment, ADB has 68 member countries and regions centered on Asia. The largest shareholding countries are the U.S. and Japan, each holding 15.6%, followed by China with 6.4%, ranking third. China leads the Asian Infrastructure Investment Bank (AIIB), which overlaps with ADB's lending targets.

President Asakawa said regarding China, which is strengthening its influence through infrastructure development in Asia, "There are now countries that argue China should graduate (from ADB)." However, in the interview, he also mentioned recent discussions about cooperating with AIIB to provide loans, stating, "Cooperation between the independent international organizations ADB and AIIB is a different matter from the relationship between the Japanese and Chinese governments. Decisions regarding relations with AIIB are not made with China in mind."

Countries that have graduated from ADB lending targets include South Korea and Singapore. Nihon Keizai reported that ADB member countries have voting rights based on their shareholdings and are involved in selecting support targets.