World Bank fiasco reveals China's ease of doing business with multilateral institutions

china, ease of doing business, world bank, wilmerhale probe report, imf

The probe into the manipulation of China’s ranking in the 2018 World Bank’s ease of doing business report is a telling revelation on the hold Beijing has on multilateral institutions. More worrying is the extent to which top officials went to address Chinese demands, which included exploring the possibility of adding Hong Kong’s points to China’s tally to boost its ranking.

So, what really happened? China was ranked 78 in 2017 and wanted an improvement in 2018. Pressure was brought to bear from May 2017 onwards, five months before the Doing Business 2018 report was due. A senior Chinese official, as recorded in the WilmerHale probe report, let the Bank know in his meetings that if China’s ranking improved, then “everyone would be relieved”. He also met the then World Bank president Jim Yong Kim in September 2017 “with a personal plea to this effect”.

What followed a month later, to be precise between October 11 and 20, 2017 was to say the least, extraordinary. Kim’s office, which kept tabs on the issue, was informed on October 11 that China’s ranking was going to dip from 78 to 85. The president’s staff wanted to know whether there was a plan to address China’s “chronic complaint”.

On October 14, office of the DEC, the Bank’s premier data research arm, told the president’s office that while China had improved in “absolute terms”, other countries in the neighbourhood “did much better”. It was hoped this explanation would suffice.

On October 16, the report, with China at spot 85, was approved for printing. The same day, almost like a stop press, Kim’s office conveyed that the explanation was “not clear” and wanted a “plan to manage the political side of it”.

The next day, on October 17, a meeting was called at the instance of president Kim. His aides, according to the report, raised the issue of how to improve China’s ranking. It was suggested “incorporating data from Taiwan and Hong Kong”. The ranking team protested but it was decided to “simulate” and “recalculate” China’s score by adding just Hong Kong’s data.

On October 18, head of the doing business ranking team conveyed that China’s position jumped to 70 with Hong Kong’s data. At that point, then World Bank CEO Kristalina Georgieva, now in the IMF, stepped in and convened a meeting on the same day. She crossed out the Hong Kong plan citing “political reasons” and instead wanted to see if the methodology could be tinkered to just use the high scoring data of two cities — Beijing and Shanghai — than a weighted average model.

She also instructed the Bank’s country director to reach out to China’s executive director to “gauge how the country would react to a possible drop in rankings”. The outreach happened and China’s response was that it “would not be pleased”.

On October 19, Georgieva was informed that the Beijing-Shanghai plan would not work because while it improved China’s numbers, it would have to be applied equitably to peer countries. Which meant, their rankings too would improve bringing the issue back to square one.

So, a country-specific criteria had to be manipulated in China’s tables to ensure only it gains. And that too was done. For instance, the report notes that in the ‘Legal Rights indicator’ China was not given full reform points because of its law on secured transactions. This was reversed.

Similarly, the modifications “reduced the amount of time necessary to comply with various Chinese regulations”. In all, scores in three indicators – Starting a Business, Legal Rights and Paying Taxes – were changed to boost China’s score by “nearly a point” and raise its rankings to 78, the same as the previous year. “Wrap this up”, said Georgieva to her staff in a mail recorded in the probe report. And that’s how Doing Business 2018 was released October 31, 2017 with China at 78, not 85.

These revelations come in the backdrop of concerns on China’s pressure tactics with WHO on the origins of the coronavirus and reporting the initial spread, its growing influence at the WTO and increasing control over key UN bodies. While there may be denials now, the truth is, as the World Bank has realised, it’s time to uncover the China clout.

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