IMF Chief called out for 'putting pressure' to lift China's rankings in Doing Business Report

kristalina georgieva, imf, doing business report, china, imf board

Kristalina Georgieva risks seeing her authority as head of the International Monetary Fund undermined just weeks before an annual meeting of global finance chiefs, after being accused of influencing a report in China’s favor when she worked at the World Bank.

Georgieva on Thursday said that she “fundamentally” disagreed with the finding — by an outside law firm engaged by the World Bank — that she had applied pressure on the bank’s staff to boost China’s ranking in an economic report. She informed the IMF board of the allegations on Thursday and will be addressing the fund’s staff Friday, according to people familiar with the matter.

The substance of the charge — putting “undue pressure” on World Bank staff to adjust the rating in the “Doing Business” report when she served as chief executive officer — was the latest in a series of scandals that have plagued the troubled report in recent years. So beleaguered, subjective and controversial is the methodology for the report, which measures the ease and transparency of operating in an economy, that the World Bank announced it will stop producing it.

But for Georgieva, 68, the scrutiny may only be starting.

The ranking that she is accused of pressuring staff to improve is that of China, a magnet for criticism in Washington over everything from trade to geopolitics. The U.S. Treasury sees the accusations as serious and is “analyzing the report,” the department said; the U.S. holds veto power over major IMF and World Bank decisions. Republican lawmakers could use the issue to renew criticism of an expansion in IMF resources under Georgieva’s leadership.

Justin Sandefur, a senior fellow and World Bank watcher at the Center for Global Development, a think-tank, said the report could end up affecting her relationship with IMF members.

“The IMF is in charge of ensuring the integrity of international macroeconomic statistics and holding countries to account for the integrity of their data,” Sandefur said in an interview. “This report just has Georgieva red-handed actively involved in the manipulation of data for geopolitical purposes. That seems pretty damning.”

The episode offers a rare window into how China has exerted influence on the leaders of international financial institutions in recent years, and how reactive those senior officials have been to sensibilities in Beijing.

The World Bank-commissioned report, penned by lawyers at WilmerHale, goes out of its way to exonerate China from having done anything wrong. “To be clear our review should not be read to imply that there was any inappropriate conduct on behalf of any Chinese or other government officials,” they wrote.

Georgieva was serving as the bank’s CEO under Jim Yong Kim, who was nominated by President Barack Obama and spent much of his tenure as president of the World Bank conducting geopolitics, often by necessity. He worked hard to build a relationship with both China and the rival to his own institution that it had established — the Asian Infrastructure Investment Bank.

Kim’s current employer, an investment fund called Global Infrastructure Partners, didn’t respond to a request for comment on Thursday’s report.

The politics have only become more difficult as China has grown increasingly assertive under President Xi Jinping and as the relationship between Washington and Beijing has grown more tense on a number of fronts, including trade and economics.

Paul Romer Delivers Keynote Address At Evidence to Action 2018: The Reality & Future of Work

Economics Nobel Prize winner Paul Romer delivers the keynote address during the Evidence to Action 2018 event in San Francisco, California, U.S., on Thursday, Nov. 1, 2018. Romer warned against the unintended consequences of being too protective of emerging technologies such as artificial intelligence, even as the U.S. tries to contain China’s ambitions to dominate AI and other sensitive sectors.

Paul Romer, the Nobel winner who was the World Bank’s chief economist until he left in early 2018 — after falling out with Kim and Georgieva — said in an interview that China had often applied pressure on bank staff to alter draft reports. It was his parting criticism of the “Doing Business” process, in an interview with the Wall Street Journal, that led to the investigation into the report and the politics surrounding it.

China’s position in the 2018 report, released in October 2017, should have been seven places lower — at No. 85 rather than 78 — the World Bank said in a review released last December. Kim and Georgieva had influenced a reworking of the rating, WillmerHale found.

“You couldn’t have engineered a more embarrassing collection of facts for Kristalina vis-a-vis critics of the fund on Capitol Hill,” said Sandefur.

Georgieva, the first head of the IMF to hail from an emerging market — Bulgaria — has been overseeing an historic expansion in the reserve assets of IMF members, of $650 billion, meant to help countries deal with mounting debt and the fallout from the Covid-19 pandemic. Republican lawmakers have criticized the move in part as a reward to undemocratic nations, including China.

GOP Representative Andy Barr of Kentucky in a statement late Thursday called the report “alarming” and urged the Treasury to “evaluate” Georgieva’s actions in the run-up to the allocation of that money, known as special drawing rights, in light of the report’s findings.

“Ensuring integrity at the IMF is essential,” Barr said.

According to the report and one person familiar with the events, Georgieva took charge of what was seen within the bank as an unusual intervention on China’s behalf. In the past, senior staff had done their best not to intervene with the team overseeing the “Doing Business” report for fear of violating internal rules, the person familiar with what happened said.

It also came at a time of intense sensitivity in China about the “Doing Business” rankings. Earlier that year Li Keqiang, the premier, had grumbled about China’s poor showing, triggering a surge in domestic efforts to improve its performance. Those efforts were too late to affect the 2018 standings, though they later paid off. In the 2020 rankings, China finished 31st, ahead of France.

The issue was raised at least twice in dinners Kim had with senior Chinese officials during visits that year, according to the person familiar with the events. They also were raised by Chinese officials with Georgieva during a visit she made as part of the China Development Forum.

On the World Bank’s side, they also came as Kim and Georgieva were engaged in delicate negotiations with China, the U.S. and other members to raise the bank’s capital. In the end China accepted both a smaller shareholding in the bank than it sought and higher interest rates on bank loans it received as part of a plan to defuse opposition from the Trump administration.

The episode detailed in the report highlighted an inherent tension in leading the Washington-based IMF and World Bank, Romer said. Both are institutions where the leaders have to be shrewd diplomats to both win and keep their jobs — which increasingly means securing the approval of Beijing as well as Washington.

Yet those necessary politics can be at odds with their missions to be scrupulously independent keepers of important data and analysis. That means the latest episode will have a cost to the credibility of not just the World Bank but also the IMF, Romer said.

By tradition under an unwritten transatlantic agreement, Europe has selected the managing directors of the IMF while the U.S. chooses presidents of the World Bank. Georgieva is the second woman to have run the IMF, following current European Central Bank President Christine Lagarde.

Attention on the WilmerHale report is unlikely to go away quickly, according to longtime observers of the fund’s politics.

“The full report is worth reading, it’s quite something,” Stan Veuger, a senior fellow at the American Enterprise Institute, a conservative Washington think tank, wrote on Twitter. “Some remarkable actions” by Georgieva, he said.

Internet Explorer Channel Network
News Related


Exercises within Runet stability law framework successful — official

The goal of exercises was to test readiness of communication networks or communication network segments for certain deviations in operations Read more »

Rains force auto companies to shut production at Uttarakhand plants

Production at most of the automotive and component manufacturing plants at Pantnagar in Uttarakhand has come to a standstill following incessant rain that has claimed at least 34 lives in the hilly ... Read more »

Surge in onion prices adds another layer of pain for India's consumers

Buying vegetables at a small market on the outskirts of Mumbai, Shubhangi Patil laments the recent rapid rise in the cost of everyday essentials, from cooking oil to sugar and ... Read more »

US futures ETF lists, Bitcoin nears all-time high

Representative image Bitcoin hit a six-month high and was within striking distance of its all-time peak on Tuesday as traders bet the listing of the first bitcoin futures-based U.S. exchange-traded ... Read more »

GlobalFoundries seeks $25 billion valuation in US IPO as chip demand soars

Chipmaker GlobalFoundries, owned by Abu Dhabi’s sovereign wealth fund Mubadala Investment Co, is aiming for a valuation of about $25 billion in its initial public offering in the United States. ... Read more »

Coal crisis: Number of power projects with less than 4-day coal stock dips to 58

The coal stock situation at thermal power projects has improved further as the number of non-pit head projects having less than four days of coal (supercritical stock) reduced to 58 ... Read more »

Toyota Kirloskar drives in Innova Crysta Limited Edition at Rs 17.18 lakh

Toyota Kirloskar Motor (TKM) on Tuesday said it has launched Innova Crysta Limited Edition, priced between Rs 17.18 lakh and Rs 20.35 lakh (ex-showroom). The petrol trims are priced between ... Read more »

HGV driver crisis: 'Things are not visibly getting better at this stage'

Industry bosses told a select committee hearing that the crisis could last a year and that it was resulting in "terrifying" price rises for the hospitality sector. Read more »

The NBA arena that plans to end single-use plastic starting this season

Footprint Center exteriorSource: Suns Legacy Partners & Footprint When the Phoenix Suns open the 2021-2022 NBA season at home on Oct. 20, fans will likely notice the new banner hanging ... Read more »

Govt extends ability of existing air quality early warning system to have decision-making capability

The Centre on Tuesday extended the ability of the existing air quality early warning system (AQEWS) to have decision-making capability for air quality management in the Delhi-NCR region. Union minister ... Read more »

ICICI Securities Q2 PAT up 26% to Rs 351-crore; announces interim dividend of Rs 11.25/share

ICICI Securities on Tuesday reported a 26 per cent jump in profit after tax to Rs 351 crore in the three months ended September 2021 on account of growth in ... Read more »

China's property and construction sectors contract in third quarter as Evergrande crisis and tougher regulation hit home

China’s property and construction sectors contracted in the third quarter for the first time since the start of the pandemic, hurt by a slump in real estate as the Evergrande ... Read more »

Apple is selling this piece of cloth for $19

Apple’s polishing cloth goes for $19. Apple At least it’s cheaper than an iPhone. Apple is now selling a “Polishing Cloth” for $19 — even though similar products go for ... Read more »

China's EV sales expected to exceed 35% in 2025, Xpeng CEO says

FILE PHOTO: People look at XPeng’s P7 sedan model displayed at the Guangzhou auto show in Guangzhou BEIJING (Reuters) – New energy vehicles (NEV) are expected to make up over ... Read more »

Inflation is not going away any time soon. Here's how top financial advisors are handling it

Shoppers at a New York supermarket on Aug. 11, 2021.Wang Ying | Xinhua News Agency | Getty Images One looming question for the U.S. economy is how long inflation is ... Read more »

Mumbai sees 313 new COVID-19 cases, 4 fatalities, 511 recover

PTI The financial capital on Tuesday reported 313 new coronavirus positive cases and four fatalities, taking the tally of infections to 7,51,494 and the death toll to 16,188, a civil ... Read more »

STI up 0.79%, taking the cue from Wall Street rally

SINGAPORE (THE BUSINESS TIMES) – Overnight Wall Street indexes rallied and gave the Straits Times Index (STI) and key regional barometers reasons to be bullish on Tuesday. The STI rose ... Read more »

Sembcorp Marine expects significant H2 loss with supply chain crunch

SINGAPORE (THE BUSINESS TIMES) – Sembcorp Marine (Sembmarine) expects to post “significant losses” in H2 ending Dec 31, 2021, potentially in the range of the S$647 million loss in the ... Read more »

Brussels kicks off debate on EU countries' budget rules: unity is hard to find

The fiscal rules, officially the Stability and Growth Pact (SGP), are mainly known for the limits on the national debt (maximum 60% of gross domestic product) and the budget deficit ... Read more »

Over 300 people rescued from flood-affected Uttarakhand: NDRF

Representative image The National Disaster Response Force (NDRF) has rescued over 300 people from flood-affected areas of Uttarakhand, the federal force said on Tuesday. The NDRF has deployed 15 teams ... Read more »

Rallis India consolidated Q2 PAT down 32.53% at Rs 56 crore

Representative Image Rallis India, a Tata group company, on Tuesday reported a 32.53 per cent decline in consolidated profit after tax (after exceptional items) during the quarter ending September 30, ... Read more »

Wall Street start higher; J&J leads gains for health care sector

Source: Reuters Stocks are moving modestly higher on Wall Street in early trading Tuesday as corporate earnings reporting gets into full swing. The benchmark S&P 500 was up 0.3% in ... Read more »

Wall Street opens higher as earnings whip up risk appetite

U.S. stock indexes opened higher on Tuesday as upbeat quarterly reports from Johnson & Johnson and Travelers fired up risk appetite, after big banks kicked off the third-quarter earnings season ... Read more »

Morgan Stanley says SpaceX's Starship may 'transform investor expectations' about space

Starship prototype 20 is stacked on top of Super Heavy Booster 4 on August 6, 2021.SpaceX Elon Musk's SpaceX has become one of the world's most valuable private companies, and ... Read more »

Gold prices climb above Rs 47,500/10 gm on positive global trend, weaker dollar

Gold prices soared above Rs 47,500 per 10 gram on October 19 tracking firm global trend and feeble dollar. The precious metal is trading above $1,780/oz levels breaching the intraday ... Read more »

COVID-19: Mumbai's R-value drops below 1, showing infection rate declining

After being over one in the first half of October, Mumbai’s R-value, which reflects how rapidly the coronavirus pandemic is spreading, has dropped below one, according to researchers of the ... Read more »

SBI board wanted letter of support from govt before approving Jet Airways resolution plan: Rajnish Kumar

SBI’s board members were keen on a letter of support from the government before giving nod to the resolution plan of crisis-ridden Jet Airways , the bank’s former chairman Rajnish ... Read more »

Stock Blog: Higher Starts on Wall Street; AEX flirts with 800 points

Wall Street will start higher on Tuesday. Johnson & Johnson is in good shape, while Procter & Gabler has to give up ground. AEX is just below 800 points in ... Read more »

How the US faces catastrophic defeat by China or Russia in a hypersonic Third World War

Hypersonic warfare The recent test of a hypersonic nuclear-capable missile by China is a reminder that any future major war between great powers will look very different to the last. ... Read more »

Kerala logs 7,643 COVID cases, 77 deaths

Representative image Kerala on Tuesday logged 7,643 new COVID cases and 77 deaths, taking the caseload to 48,59,434 and fatalities to 27,002. The state has been showing a decline in ... Read more »

Biggest gainers & losers of the day: Speciality Restaurants soars, Jubilant Ingrevia bleed

New Delhi: Domestic equity markets snapped the seven-day winning streak as the benchmark indices erased the early gains and settled in the red. IT stocks held the gains but profit ... Read more »

HUL's Q2 volume growth falls short of expectations, disappointing investors

Hindustan Unilever Ltd’s (HUL) September quarter results (Q2FY22) weren’t encouraging for investors, which is evident from the more than 3 percent drop in its share price on the National Stock ... Read more »

Alembic Pharma Q2 PAT may dip 49.2% YoY to Rs 169.4 cr: ICICI Direct

India business helped by COVID-19 and lower base of last year rose 57 percent to Rs 481 crore. ICICI Direct has come out with its second quarter (July-September’ 21) earnings ... Read more »

China's reported hypersonic missile test "an important surprise"

Hong Kong — China is shooting down a report claiming it successfully tested an advanced weapon known as a hypersonic missile. Beijing described the launch as a “routine” test of a ... Read more »

Axis AMC, Inversion to raise Rs 3,500 crore buyout fund to invest in underperforming companies

Representative image Axis Asset Management Company and Inversion Advisory Services on October 19 announced a partnership to invest in underperforming companies. The two entities plan to jointly raise up to Rs ... Read more »

Nestle India Q3 Results | Profit rises to Rs 617 crore, revenue grows to Rs 3,883 crore on broad based domestic sales growth

Nestle has reached out to consumers through its advertisements in newspapers and asked them to reach out directly and raise their concerns about its products. FMCG giant Nestle India Limited, ... Read more »

Reliance Retail acquires 52% stake in Ritu Kumar brand

Ritu Kumar (Image: Company website) Reliance Retail Ventures on October 19 announced that it has acquired a 52 percent equity stake in Ritika Pvt Ltd that owns Ritu Kumar, Label Ritu ... Read more »

Coal, railway, power ministers discuss coal supply situation at power plants

Coal minister Pralhad Joshi on Tuesday discussed ways to improve coal stocks at thermal power plants with railway minister Ashwini Vaishnaw and power minister R K Singh. The meeting comes ... Read more »

Rural growth moderated in second quarter: HUL CMD Sanjiv Mehta

REUTERS/Danish Siddiqui Consumer demand in rural India, which was resilient since the onset of the pandemic, is now plateauing as the second wave of the pandemic wanes, Sanjiv Mehta, chairman ... Read more »

Congress announcing 40% tickets to women in UP polls 'pure election drama', says Mayawati

Mayawati BSP chief Mayawati Tuesday termed a “pure election drama” the Congress’ announcement to give 40 per cent of tickets to women in the 2022 Uttar Pradesh Assembly polls, saying ... Read more »