Where is ADB's engagement in China headed?

MANILA — China’s economic growth and increasing clout as a financing source for infrastructure projects is putting a spotlight on its future relationship with multilateral banks. Should banks continue to engage China as a borrower, or start engaging it more as a financial resource? At the World Bank, that question was the subject of a series of negotiations that reached some middle ground — middle-income countries such as China can continue accessing loans from the bank, but at higher costs. China will also have to increase its percentage share to the International Bank for Reconstruction and Development, the bank’s lending arm for middle-income countries, from 4.68 percent to 6.01 percent. These changes are meant to be finalized at the bank’s annual meetings in October. But at the Asian Development Bank, President Takehiko Nakao is certain he wants to continue lending to the Asian giant. “I want to continue to lend to China in a meaningful way,” he said during his press conference at the just-concluded 51st ADB annual meeting. Nakao didn’t expound much, only that the bank’s support to China will continue to be a combination of financing and knowledge expertise. We analyzed the bank’s latest China country operations business plan 2018-2020 to get a sense of their current and future engagement, including their top priority sectors for collaboration. Here are our main takeaways from the data. China’s financial independence In 2017, ADB lending approvals reached $1.9 billion for a total of 10 projects. Estimated Chinese government financing for the same projects amounted to over $13 billion. For 2018-2020, ADB firm commitments for its lending pipeline are at $6.15 billion dollars, while total cofinancing is at $8.5 billion, the bulk of which comes from the Chinese government. These figures show the Chinese government financing a larger sum of its projects with ADB in China than ADB itself, although it is not supporting each individual project. In our analysis of ADB country operations business plans for 2018-2020, Thailand is the only other country where government financing is larger than ADB financing. Increasing knowledge partnership The bank has a total of 46 technical assistance projects lined up for 2018-2020 for China, amounting to over $20 million. But apart from that, ADB also has a long list of publications and events meant to generate knowledge regarding its work in line with the Chinese government’s priorities. These numbers underline Nakao’s comment that ADB financing to China is maybe covering a small portion of project costs, but that bank support is increasingly combining financial and knowledge expertise. ADB’s involvement in China’s Belt and Road Initiative Regional integration is a cornerstone of China’s ambitious Belt and Road Initiative, and the bank is supporting the government here, including through policy and technical advice. ADB’s technical assistance is broadly distributed across the sectors, and part of it focuses on support of the BRI, including a $400,000 study on the characteristic tourism along the BRI in five northwestern provinces, and another $400,000 technical assistance focused on human resource development cooperation. In 2016, the bank supported a study of the BRI. Part of that study’s goals is to scope other regional integration initiatives happening in Asia Pacific, and see how BRI fits in and can coordinate with these other existing regional initiatives and platforms, as well as enhance the design of the China–Mainland Southeast Asia Economic Corridor. The study also aims to facilitate dialogue and understanding of the BRI among key stakeholders. Fostering regional cooperation and integration is part of ADB’s current and future strategic priorities. It is included in the bank’s draft Strategy 2030. In fact, looking at the bank’s funding for transport and economic infrastructure in China over the next three years, some of the projects promote regional cooperation, develop major cities’ economic zones, and build industrial capacity in Yunnan, Guangxi, Inner Mongolia, and Xinjiang, among others. Climate change and aging When looking at the amount of commitments per sector, transport, water, and other urban infrastructure projects and services, as well as agricultural productivity, natural resource and rural development continue to take up huge portions of the bank’s portfolio. According to ADB’s aggregated figures, the bank’s 2018-2020 commitments to projects in the water and urban infrastructure sector amount to $1.5 billion; for transport, $1.47 billion; and for agriculture, natural resource, and rural development, $1.4 billion. Many projects cut across various sectors, so ascribing them to any single sector is a bit reductive. All of the sectors however, including those such as energy, have climate-related components or programming. A number of the bank’s technical assistance projects, publications, and events share this. For example, the bank has in the pipeline a $400,000 knowledge and support technical assistance project on green financing and climate change bond. One planned publication for 2018 is also titled, “50 Climate Solution in Chinese Cities — Best practices from Chinese cities taking action on climate change.” Elderly care is another area where the bank has several technical assistance projects in the country. And among the list of potential publications and events in 2018 is a study on financing elderly care systems, and a seminar or workshop looking at key issues in developing long-term and elderly care systems. Further analysis Visit our Tableau visualization of ADB’s planned operations in China to perform more analysis and to see a comprehensive list of the upcoming projects. You can also compare the proportions of ADB funding and third party funding in China, India, and other countries where the bank operates. All of the project data is also available in Devex’s funding database as funding activities sourced from ADB's operational documents.