American lawmakers, intent on reducing China’s influence on the United States economy, are pushing the Treasury Department to help curb the outsized role of Beijing at the Inter-American Development Bank, which supports economic and social development in Latin America and the Caribbean.
The bipartisan group of lawmakers say Beijing is using the bank as a tool to expand its influence in the region. And they want the United States, the biggest voice at the bank, to do more to rein in the awarding of projects to Chinese firms and to block Chinese attempts to acquire more shares at the bank.
Representative Mike Gallagher, the Republican chairman of a new House select committee focused on China, is the lead sponsor of the legislation, which is being introduced on Tuesday, seeking to understand and reduce Beijing’s power at the bank.
The Inter-American Development Bank Transparency Act would require the Treasury to issue a report every two years on the scope and scale of Chinese influence and involvement in all aspects of the bank, including a list of Chinese-funded projects and an action plan for the US to reduce Chinese involvement at the bank.
“For too long, the Chinese Communist Party has exploited its presence in the Inter-American Development Bank to advance its own geopolitical, economic, and technological goals,” Gallagher said in a statement. “Latin American citizens deserve to have the IDB serve their economic development, not as a vector of CCP malign influence.”
The IDB is a non-commercial bank made up of member countries. The bank, for instance, disbursed a record US$23 billion last year intended to alleviate poverty made worse by the coronavirus pandemic in the region. The US is the largest shareholder, with a roughly 30 per cent voting share. At issue is the number of contracts the IDB awards to Chinese firms relative to its meagre share of the bank, which hovers around 0.1 per cent.
China formally joined the bank in 2009 as its 48th member nation, and its influence in Latin America, both economically and diplomatically, has grown exponentially in the past two decades.
In 2022, Latin American and Caribbean trade with China rose to record levels, exporting roughly US$184 billion to China and importing an estimated US$265 billion in goods, according to a Boston University Global Development Policy Center analysis.
More than a dozen Republican and Democratic lawmakers have signed on with Gallagher as co-sponsors of the legislation, including Senator Robert Menendez, the Democratic chairman of the Senate Committee on Foreign Relations.
It’s seen as a first step at addressing China’s influence over the multilateral development banks. And while the Biden administration already has the authority to do much of what lawmakers are seeking, the legislation is intended to force the issue.
Menendez said in a statement that “as China continues to use economic tools to advance its coercive economic agenda across the Western Hemisphere, it’s more important than ever that we protect the integrity of the IDB and ensure its critical work can continue unhampered by Beijing’s interference”.
Diplomatic relations between Latin America and China have also increased. In March, Honduras cut diplomatic ties with Taiwan in favour of China, following the steps of El Salvador, Nicaragua, Panama and the Dominican Republic in turning their backs on Taiwan.
Enrique Dussel Peters, a professor and coordinator of the Center for Chinese-Mexican Studies at Universidad Nacional Aut?noma de M?xico, said the US effort to compete with China in Latin America “comes 20 years too late”.
“In many cases, in many countries such as Brazil, Argentina, Chile, Peru,” he said, “China is already the most important trading partner and it has become a very dynamic investor in these countries, from lithium to raw materials to oil to gas, to whatever issue you can image.”
Other development banks have also been scrutinised for possible undue influence by the Chinese.
In 2021, IMF Managing Director Kristalina Georgieva came under fire after allegations that while she was a World Bank official, she and others pressured staffers to change business rankings in an effort to placate China. The IMF’s 24-member executive board reviewed Georgieva’s actions and concluded that she “did not conclusively demonstrate” an improper role.
The House formed the new China committee in January to focus on improving US competitiveness with China, economically and militarily. The committee’s early work has included investigations into partnerships that American companies and universities have entered into with Chinese entities, as lawmakers take a harder look at efforts that could benefit Beijing at the long-term expense of the US.
Gallagher said earlier this month that, whether they know it or not, every business entering China takes on a business partner in the Chinese Communist Party.