World Crisis Online

By CSC staff, Shanghai In its quest to shore up the economies of the developing world, the World Bank is seeking cooperation with China, encouraging it to use a portion of its huge foreign reserve for equity investment in developing countries, and to shift its production surpluses to Africa.

On a recent visit to China, World Bank President Robert Zoellick visited the China Investment Corporation (CIC) to discuss the possibility of its participation in the World Bank’s asset management company, which mainly focuses on equity investment in sub-Saharan Africa and Latin America. The discussion also touched on the feasibility of investing in the field of infrastructure.

Zoellick explained that it is a new model of financial development, combining sovereign funds with African development through equity investment, different from the traditional model of raising money through debt and giving loans to less developed regions. The asset management companies can play an intermediary role. Some sovereign investment funds and pension funds have already shown interest. “We hope that this work can be completed before autumn this year,” Zoellick said. Although CIC has shown interest in investment in this area, its decision is yet to be made.

Zoellick and Commerce Minister Chen Deming discussed possibilities of Chinese enterprises investing in Africa. Many Chinese manufacturers show strong interest in the region, an interest not limited to resource development and infrastructure. Zoellick sees that the investment China has made to strengthen its infrastructure has led to surplus production, and those surpluses will gain higher added value being shifted to Africa.

Some Chinese analysts have put forward a Chinese version of the “Marshall Plan,” investing in developing countries by making use of the huge foreign reserve.

During his meeting with Premier Wen, Zoellick spoke highly of China’s fiscal and monetary policies in response to the financial crisis. Zoellick said that from that meeting and talks with other officials he could see that the Chinese government is pleased at signs of recovery, but is also aware that many uncertainties remain in the economic situation and will maintain the stability of the current financial and monetary policy rather than quit it.

Zoellick says he is not worried the loose policy at present will lead to inflation. He believes that the focus is still to maintain economic recovery through expansionary fiscal and monetary policies.

“In reality, both developed and developing countries are concerned about the reverse of liquidity. But I don’t think now is the best time,” Zoellick said.

“At present the whole world is watching China’s economic growth. If China’s leaders maintain a prudent approach to this situation, I think that is a good reminder to the whole world.”