"China has grown up, cut off the money"... U.S. Treasury Secretary's 'direct hit' [Lee Sang-eun's Washington Now]

Scott Besant, the U.S. Treasury Secretary, demanded that the World Bank and the International Monetary Fund (IMF) stop supporting China.

He made this statement as a speaker at the International Finance Institute (IIF) Global Outlook Forum held at the Willard Hotel in Washington, D.C., on the 23rd (local time).

Secretary Besant criticized that the two institutions, which were the result of the Bretton Woods system aimed at creating the foundation of Pax Americana (peace by the United States), have "deviated from their original track" as their mission has expanded. This was aimed at the participants of the ongoing World Bank and IMF meetings in Washington, D.C.

He stated that 'America First' is about "expanding, not reducing, American leadership" in these institutions and "restoring fairness to the international economic system." He added that the U.S. is "facing the harsh reality of a massive trade deficit due to an unfair trade system," which is "unsustainable in terms of economic and financial stability."

Secretary Besant argued that "China, in particular, is a country that needs rebalancing," stating that "China's current economic model is structured to overcome economic crises through exports, which is an unsustainable model harmful not only to China but to the entire world." He emphasized that "the IMF's mission is to promote international monetary cooperation, support balanced growth of international trade, and curb harmful policies like competitive currency devaluation," and that "spending excessive time and resources on issues like climate change, gender, and social issues is not the IMF's mission." He also stated that countries like China, which have pursued distorted policies and opaque monetary policy practices for decades, should be held accountable and pushed to implement economic reforms. He added that countries that do not should not be lent money.

He also called for significant changes to the World Bank. He stated that "the World Bank, like the IMF, has deviated from its initial mission," and "should not expect unconditional (U.S.) support with only marketing filled with empty terms and half-hearted promises of reform." He also emphasized that "resources should be used as efficiently and effectively as possible" and "focus on expanding energy accessibility." The World Bank recently included nuclear energy as a support target, moving away from a focus on renewable energy, aligning with the Trump administration's stance. Secretary Besant welcomed this move, stating it would "innovate energy supply in emerging countries."

Secretary Besant demanded that the World Bank stop lending to China. He stated that "it is foolish to classify China, the world's second-largest economy, as a developing country," and that "continuing to lend is unjustifiable," while praising China's rapid growth but emphasizing that China should not expect to be treated like a child when it is already a 'grown-up economy.'

The U.S. holds the highest share and voting rights in the IMF and World Bank as the largest contributor, with shares of 17.42% in the IMF and 16.57% in the World Bank. China's share is 6.40% in the IMF and 4.59% in the World Bank, making it the third-largest shareholder in both institutions after Japan.

Traditionally, the World Bank president has been appointed by the U.S., and the IMF managing director has been appointed from Europe. The current World Bank president is Ajay Banga (former Mastercard CEO), appointed by former President Joe Biden, serving since June 2023. The U.S. has not yet nominated a U.S. representative for the vacant board positions of the two institutions since President Trump's inauguration.

Washington Correspondent Lee Sang-eun selee@hankyung.com