Lawmakers press for more scrutiny over China’s ‘malign influence’ at development bank

WASHINGTON (AP) — Lawmakers intent on reducing China ‘s influence on the U.S. 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 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 U.S., 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.

Rep. Mike Gallagher, the Republican chairman of a new House select committee focused on China, is the lead sponsor of of the legislation, which is being introduced 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 U.S. 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 development bank made up of member countries. The bank, for instance, disbursed a record $23 billion last year intended to alleviate poverty made worse by the coronavirus pandemic in the region. The U.S. is the largest shareholder, with a roughly 30% voting share. At issue is the number of contracts the IDB awards to Chinese firms relative to its meager share of the bank, which hovers around 0.1%.

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 $184 billion to China and importing an estimated $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 Sen. 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 American and China have also increased. In March, Honduras cut diplomatic ties with Taiwan in favor 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 Autónoma de México, said the U.S. 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 scrutinized 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 U.S. 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 U.S.

Gallagher said earlier this month that every business entering China takes on a business partner whether they know it or not in the Chinese Communist Party.