I almost forgot to post about this recent event that does not seem to have attracted much attention from IPE scholars, but should. As I've mentioned several times now, China isn't exactly an exemplar of a market-based economy as the state has repeatedly stepped in to interfere in its operations. Witness its current desperation to prop up its stock markets to mixed effect. In particular, the allocation of capital is hardly determined by market forces as the state often dictates when, where and how the galaxy of state-owned firms should generate capital.
Recently, a World Bank called China out on this level of intervention in a regularly scheduled China report. A whodunit has recently emerged as the presumably offensive report has subsequently been withdrawn from the World Bank website with little explanation. Naturally, the suspicion is that the PRC made its displeasure known and had the report removed. The World Bank, however, denies that it was pressured to recall the report:
The section of a World Bank report that calls on China to reduce government interference in the nation’s financial system starting “at the highest level” has been removed from the bank’s website two days after it was released. A note on the website said the section was taken out because it “had not gone through the World Bank’s usual internal review and clearance procedures...”Even if China did not pressure the World Bank to remove the sharply-worded report, it does raise questions about the internal controls at the organization. If this section was not meant for public consumption, then how did it end up being released anyway (for at least a few days)?
The now-removed section of the bank’s semiannual “China Economic Update,” released Wednesday, urged Beijing to reduce the government’s ownership stake in the nation’s commercial banks and shield regulators from political interference. The government’s direct and extensive involvement in allocating resources has “no parallel in modern market economies,” the report said, impeding competition and fostering local-debt increases that threaten to undercut long-term growth.
The World Bank’s decision to remove the finance section doesn’t reflect well on the global development institution, some observers said. “If the stated reason is correct, it would seem to point to a pretty serious deficiency in the World Bank’s internal controls,” said Guy de Jonquières, a senior fellow at the Brussels-based European Center for International Political Economy. “If it’s not, it suggests the World Bank had sudden second thoughts or faced possible external pressure from China. Either way, this doesn’t inspire huge confidence in the integrity and independence of the bank’s economic research and analysis,” Mr. de Jonquières said...So much trouble the World Bank is encountering for...being honest about China's activities.
This isn’t the first time questions involving possible Chinese pressure on international organizations have surfaced. In 2010, the International Monetary Fund opted to issue a summary instead of a full report on the Chinese economy that included a discussion over whether China’s currency was undervalued. IMF directors disagreed over the issue.
