U.S. Move Could Net China $2 Billion in Loans : World Bank: The White House portrayed its decision on ‘basic human needs’ as very limited. But officials say 18 projects fit that category.

The Bush Administration’s decision to support a resumption of loans to China by the World Bank for “basic human needs” such as disaster relief could open the door to as much as $2 billion in financing over the next two years, U.S. officials said Thursday.

Although the White House portrayed the decision as very limited, Administration officials conceded that about 18 projects, amounting to $2 billion of the $7 billion in loans that the World Bank has proposed for China, have been classified as “human needs” proposals.

They said initial indications suggest that the Administration will probably support between one-third and one-half of these, paving the way for loans totaling up to $1 billion for China over the next 24 months. But they said the Administration could come under pressure to support even more of the $2 billion in potential loans.

Approval, which is to be on a case-by-case basis, would mean loans totaling substantially more than senior Administration officials had implied earlier this week.

What is more, although the White House has insisted that it will continue to oppose the remaining $5 billion worth of broader World Bank loans, other U.S. officials and World Bank sources are skeptical. “They have given up some of their purity,” one official here said.

The decision to support the “human needs” loans, made at a meeting late Tuesday by Secretary of State James A. Baker III, Treasury Secretary Nicholas F. Brady and National Security Adviser Brent Scowcroft, overruled the advice from some low-level advisers, who feared a backlash in Congress.

U.S. officials insisted that the decision had “nothing to do with” China’s announcement Wednesday that it was lifting the martial law imposed on Beijing last May at the height of the pro-democracy demonstrations in Tian An Men Square.

However, there were some suggestions Thursday that the Administration’s insistence may have stemmed at least partly from legal considerations. Under the World Bank’s regulations, the bank may freeze a loan only for economic reasons, not political ones.

The World Bank has about $780 million in loans to China that are ready for final approval as soon as the United States and other industrialized countries say they are willing to consider them. Another $6.1 billion worth are in some kind of planning stage.

U.S. officials said Thursday that the Administration would consider only those loans that are designed to improve human living standards in China--such as construction of water and sewage-treatment plants. A $25-million earthquake relief loan for a project near the Chinese city of Datong is ready for action.

Senior World Bank officials said the organization has no plans to consider the earthquake relief loan this week, although the proposal could come up for a vote later in the month now that the United States has softened its position.

On Wednesday, State Department spokeswoman Margaret Tutwiler described the new willingness to consider humanitarian loans as only “a partial change” in the previous position. “We will still be discouraging project loans,” Tutwiler said.

However, critics of the Bush Administration’s China policy have noted that any relaxation of the earlier freeze on World Bank loans would give Beijing renewed access to new lending from commercial banks at a time of severe recession.

The slump has sparked growing discontent among urban workers. Some critics argue that Washington should maintain the pressure in order to force Beijing to relax its stance on human rights.

But President Bush has asserted that the United States should help bring China out of the isolation in which it has found itself since the massacre of pro-democracy demonstrators and other Chinese in Beijing last June.

Bush on Thursday welcomed the lifting of martial law in China as a “very positive” move and “a very sound step.”

“For those who are interested in the human rights and reform that was on the move that we’d all like to see go forward, there’s no way you can look at that but say it’s very positive,” he said.

On Thursday, Japan’s Foreign Ministry announced that it would consider resuming disbursements on a $5.6-billion loan to China that were suspended earlier this year. It said the head of the overseas aid division will fly to Beijing next Thursday to discuss the issue.

A Foreign Ministry spokesman said Japan had not decided whether to join the United States in supporting a resumption of lending by the World Bank. But he said it is only a matter of time before both Japan and the World Bank resume their loans.

And Kuniji Miyazaki, a spokesman for Japan’s banking industry, said the ending of martial law will provide a better environment for making new loans.

Even so, both U.S. and Japanese officials portrayed Beijing’s announcement as mainly a symbolic gesture. “Security in Beijing today is as tight as it was yesterday,” a Japanese official said Thursday. “As usual, China has two policies--one for the outside world and one for its own citizens.”

BACKGROUND

World Bank is an informal term for two U.N. agencies: International Bank for Reconstruction and Development (IBRD) and its affiliate, the International Development Assn. (IDA). It was formed in 1945 to help postwar reconstruction of Europe. Today, it makes loans around the world to assist economic development. It has 151 member nations. All of them also belong to the International Monetary Fund (IMF), which facilitates foreign exchange and trade. Voting rights in the World Bank are linked to IMF shares. The United States has the largest percentage, 18.93% in 1988; Japan takes a distant second with 6.72%. The bank’s total capital was more than $91 billion in mid-1988.

BEIJING SQUARE OPENED--Chinese visit Tian An Men as martial law ends. A14