Unexpected Resignation

By Zhang Maorong

World Bank President Jim Yong Kim stepped down on February 1， after his abrupt announcement of resignation on January 7， more than three years before his term was scheduled to end in 2022. Kims differences with U.S. President Donald Trumps administration regarding policies may have been important reasons for his decision.

Nomination for a new World Bank head kicks off on February 7， and will last until March 14. Although the president is always a U.S. citizen nominated by the United States， countries will undoubtedly launch maneuvers surrounding the selection of the new president and World Bank reform during this process. Moreover， the change of leadership at the World Bank is likely to have a big impact on Chinas interests.

Reasons for leaving

Born in Seoul， Republic of Korea， Kim immigrated to the United States with his family when he was very young and is a naturalized U.S. citizen. Before becoming the 12th World Bank President in 2012， Kim was a doctor and anthropologist who once managed programs to fi ght tuberculosis and AIDS in some of the poorest areas of the world. Kim plans to work for a private equity fi rm based in New York focusing on infrastructure investment in developing countries after his resignation.

As the fi rst president born in Asia since the establishment of the World Bank in 1945， Kim broke the tradition that the World Bank presidency had to be held by government officials or members of the fi nancial community. It was former U.S. President Barack Obama who nominated Kim， and by so doing， made overtures to emerging economies on the one hand and safeguarded the U.S. monopoly of the presidency on the other.

Kims unexpected resignation is believed to be due to his differences with Trump on climate change and foreign aid， since World Bank priorities have consistently been at odds with the Trump administration.

During his tenure， Kim promoted a financing plan for green energy and slashed investment and support for coal power. In December 2018， the World Bank announced that investment to fi ght climate change would be increased to $200 billion from 2021 to 2025.

However， Trump has made revitalizing the U.S. coal industry one of his priorities， announcing U.S. withdrawal from the Paris Agreement after becoming president in 2017. Moreover， Trumps administration deems that the World Bank should not continue offering large-scale loans to middle-income countries such as China， which Kim did not agree with.

In April 2018， Kim pushed for a World Bank capital increase， but the United States set shrinking loans to China as a precondition for a capital increase. Kim had to agree to cut lending to China while raising its proportion of contributions to realize the capital increase.

In short， Trump hoped his country—the largest funder of this international organization—could continue to play a decisive role in the World Bank. But the deepening disagreement led to Kims early departure.

Debate aroused

Due to Kims resignation， it has become urgent to fi nd a successor before the Spring Meeting of the World Bank in Apri l. The Board of Executive Directors of the World Bank is controlled by Western countries led by the United States and has the fi nal say on the confi rmation of the new president. Like a joint-stock company， the World Banks major issues are voted on by member countries and their voting rights depend on the number of shares they hold. As the largest shareholder， the U.S. voting power accounts for 17.37 percent of the total. Since major decisions have to be approved by at least 85 percent of shareholders， the United States is the only member state that retains a veto power. Thus， Trump will have a huge influence on the selection of the organizations successor.

However， this practice has been facing challenges. In recent years， as the strength of emerging economies has increased， some countries that support a multilateral system have sought international institutional reforms to increase the voting rights of emerging economies and developing countries. Although developed countries transferred 3.13 percent of voting power to developing countries during the second round of World Bank reform in 2010， their dominant role has not fundamentally changed.

Since Trump took office， the United States has repeatedly withdrawn from international multilateral institutions and treaties， which has drawn multiple criticisms. It is very likely that emerging economies will disagree with the candidate nominated by the United States as they are skeptical of the Trump administration.

According to UK media， Kims resignation may spark a debate about whether to continue this outdated practice where the United States always gets to choose the World Bank president， considering Trumps suspicions regarding multilateral organizations. It is clear that this policy is under increasing scrutiny.

The United States still dominates， at least for now， and most likely there will be a 13th U.S. citizen as head of the organization. However， the new president will face greater challenges than his predecessors in trying to achieve a balance between defending U.S. interests and pushing for reform inside the organization. Kims successor needs to act fairly in a tense geopolitical environment and implement major structural reform. The long-term stagnation of World Bank reform has caused heightened dissatisfaction among its members.

Former president of the Bank of India， Raghuram Rajan， stressed that if the World Bank， the International Monetary Fund （IMF） and other institutions want to become more attractive， they must end the practice of U.S. monopoly over World Bank presidents and Europes monopoly over the IMF presidency.

Impact on China

Since Kims early resignation offers Trump an opportunity to nominate his predecessor， the World Bank may become another big stick with which Trump can bash China. The U.S. could nominate a hardliner， which will undoubtedly be a challenge to China. Judging from Trumps past removals and appointments of officials， making World Bank reform align more with his “America first” policy may be his principal consideration when nominating the World Bank head.

Kim visited China many times as president and was committed to promoting cooperation between China and the World Bank. He spoke highly of Chinas support for multilateralism and globalization. Kim also praised Chinas great achievements and its efforts and progress in poverty alleviation over the past four decades since adopting reform and opening up. He has reiterated time and again that the World Bank was willing to deepen cooperation with China under the framework of the Belt and Road Initiative.

Kim once revealed that the World Bank was conducting comprehensive assessments of the economic impact of the Belt and Road and cooperating with related Chinese institutions in setting standards for Belt and Road programs. However， with Kims departure， such cooperation will face greater uncertainty.

According to Japanese media， loans to China will again become a focus after the new president assumes office. The World Bank was involved in tensions between China and the United States when Kim was in office. As has been stated， U.S. officials pressured the World Bank to reduce loans to China and warned of Chinas influence on the agency. As a result， the World Banks financing to China decreased by nearly 30 percent to $1.8 billion in 2018.

Currently， possible U.S. candidates are all hawkish， except for Indra Nooyi， the former CEO of PepsiCo， who is hard working with no clear political stance.

One of the potential candidates is Nikki Haley， former U.S. Ambassador to the United Nations and also a spokesperson for U.S. interests. She was tough and aggressive in her remarks and actions during her tenure at the UN.

Other possible candidates include David Malpass， Under Secretary of the Treasury for International Affairs， and Mark Green， the Administrator of the U.S. Agency for International Development.

Against the backdrop of intensified competition between China and the United States， the new World Bank president is very likely to take a tougher attitude toward China. Meanwhile， China needs to be prepared for this outcome.