U.S. to Oppose World Bank Loans to China

In an indication that it is slowing its efforts to repair relations with the Chinese leadership, the Bush Administration has decided to oppose the resumption of a massive $700-million World Bank loan program to China.

World Bank loans are the most important single benefit China has lost from the West since the crushing of the democracy movement at Tian An Men Square last June. Officials of the bank had hoped that, in the aftermath of the visit to Beijing last month by National Security Adviser Brent Scowcroft, the United States would support their move to lift the six-month freeze on loans.

But White House, Treasury and State Department officials told The Times this week there is no chance that the United States--the major donor and dominant influence in the World Bank--will alter its opposition to new loans for China, at least until the Chinese leadership changes its policies.

“I see no prospect (for the World Bank loans) just now. We have real questions about the World Bank’s programs in China, given the changes in China’s overall policies,” one State Department official said. He said the Administration’s decision was based both on China’s violations of human rights and also on its apparent reversion to a centrally planned economy.

Refusal to lift the freeze on World Bank loans would be a serious blow to China’s economy. Commercial banks in Japan, the United States and Western Europe have held off on making new loans to China until the World Bank resumes its program.

A hold on World Bank loans thus could deny the Chinese leadership the ability to raise capital from abroad at a time when the country faces a severe recession and growing discontent among urban workers.

It is doubtful that the World Bank will be able to win approval to go forward with its loans in the face of opposition from the United States. Most of the voting power on the bank’s 22-member board of directors rests with representatives of the major industrial countries.

Western European countries such as France and West Germany are said to have their own reservations about lifting the freeze. And although Japan has favored a more conciliatory policy toward the Chinese leadership, it is not likely to take a stand that would put it at odds with the United States and Western Europe.

World Bank officials said this week they have not been formally notified of the United States’ opposition. “If they (Bush Administration officials) have made up their minds, they haven’t told us,” one senior World Bank official said.

Bush Administration officials declined to say exactly when or under what conditions they might be willing to support new loans for China. But they made clear that they will require more than minor or cosmetic changes in China before they make further concessions to the Chinese regime.

On Tuesday, the Associated Press reported from Beijing that authorities were preparing to lift martial law at least in certain parts of the Chinese capital, which has been under military control since last May.

But a White House official told The Times that a lifting of martial law in Beijing would not make any difference in the Administration’s opposition to the World Bank loans. “Doing that would not be the sort of thing that would cause us to change our position,” this official said.

In the wake of last month’s mission to Beijing by Scowcroft and Deputy Secretary of State Lawrence S. Eagleburger, the Bush Administration took several concrete steps toward ending China’s international isolation. President Bush cleared the way for American-made satellites to be launched in China. He also granted a special waiver allowing a continuation of loans from the U.S. Export-Import Bank to China.

However, these U.S. overtures have failed to produce any dramatic changes in China’s policies.

The Bush Administration has been unable to reach any agreement with China that would free Chinese dissidents Fang Lizhi and Li Shuxian from their confinement inside the American embassy in Beijing. The Chinese regime’s efforts to crack down on internal dissent have continued and perhaps intensified, apparently because the leadership feels threatened by the overthrow and execution of Romanian dictator Nicolae Ceausescu.

One knowledgeable State Department official noted this week that federal law requires the United States to oppose World Bank loans to any country that is found to be a “gross and consistent violator” of human rights.

He compared the current situation with the one in the 1970s in which the United States opposed World Bank loans to Chile under Gen. Augusto Pinochet. “There’s a parallel, in the sense that China is a human rights violator,” he said.

Several U.S. officials said they believe there are also economic reasons for turning China down. “Increasingly, we have questions about whether economic reforms are something the Chinese take seriously or whether they just mouth allegiance to the idea,” said one official.

If the Administration had decided to open the way for the World Bank loans, it would almost certainly have faced determined opposition in Congress.