ADB may phase out aid to China, says incoming boss

ADB may phase out aid to China, says incoming boss

Asian Development Bank president-elect Masatsugu Asakawa speaks during an interview with Reuters in Tokyo. (Reuters photo)
Asian Development Bank president-elect Masatsugu Asakawa speaks during an interview with Reuters in Tokyo. (Reuters photo)

TOKYO: The Asian Development Bank must be ready to discuss whether to phase out aid to high- and medium-income borrowers like China, the institution's next president Masatsugu Asakawa said.

Asakawa, who will take the helm in January, also said that "while China's economy is likely to slow, Beijing is expected to engineer a smooth landing that will help Asia achieve a moderate pick-up in growth next year.''

"Deep-rooted, structural problems have led to a gradual decline in China's potential and real economic growth. A slowdown in Chinese growth is unavoidable," he told Reuters.

"Given its huge size, a hard-landing will have a huge impact not just on China but on the global economy. We hope China engineers an orderly soft landing. I'm sure the authorities are fully mindful of the need for that."

Despite its ageing population, excess capacity and bad debt problems, China has become the second-largest economy in the world.

That has led some to say it should no longer receive loans from the ADB, a Manila-based multilateral lender whose aim is to lift hundreds of millions of Asians out of poverty.

Asakawa was cautious about drawing a quick conclusion on a move that would no doubt be unpopular in China.

"There need to be thorough discussions among ADB members about deciding how to phase out loans to high- and medium-income borrowers,'' he said.

"It depends on how discussions unfold," Asakawa said, when asked whether ADB aid to China could soon be phased out.

Asakawa said any such decision must be based on criteria such as whether the country has access to capital markets at a reasonable cost and the stage of development of its economy.

Incumbent head Takehiko Nakao had rebuffed the idea of China coming off ADB aid any time soon, saying in April that he saw value in continuing to lend to the country.

The ADB said yesterday that Asakawa, a former top Japanese currency diplomat, would succeed Nakao as its next president.

Asakawa said he hoped to boost ADB efforts to help low-income countries invest more in human capital, address gender inequality that hampers growth, and mitigate the damage incurred from climate change.

"I don't agree with people who say economic growth and environment- friendly policies cannot co-exist," he said, adding that poverty was one of the reasons behind climate change and environmental destruction.

"Poverty and environmental issues are interwined. We need to find a way to address both issues."

Founded in 1966, the ADB has 68 member countries, with its largest donations coming from Japan and the United States.

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