Yellen says IMF and World Bank are important counterweights to China

Treasury Secretary seeks support from Congress for financial backing of international lenders

US Treasury Secretary Janet Yellen during a House Financial Services Committee hearing in Washington. Bloomberg

US Treasury Secretary Janet Yellen on Tuesday cast international financial institutions as American-aligned counterweights to China’s growing influence in the developing world, as she seeks to garner congressional support for financial backing of those lenders.

In the face of what is likely to be Republican scepticism when she testifies on Capitol Hill, Ms Yellen lauded institutions such as the International Monetary Fund and the World Bank that “reflect American values”.

“Our leadership at these institutions is one of our core ways of engaging with emerging markets and developing countries,” she said in prepared testimony before the House Financial Services Committee.

“The IFIs provide real resources to tackle the challenges the world faces – from weathering economic storms to spurring long-term economic development.”

The aid, she added, “serves as an important counterweight to nontransparent, unsustainable lending from others, like China”.

The Treasury chief’s remarks showcase the battle lines between the world’s two largest economies as they vie for influence in the developing world. China has become the largest official lender to many of the poorer nations across the globe.

Asked about Ms Yellen’s forthcoming remarks, Chinese Ministry of Foreign Affairs spokesman Wang Wenbin said the IMF and World Bank should reflect the interests of “all member states”.

“The IMF and World Bank are multilateral financial institutions, they are platforms reflecting greater democracy in international relations, and they are platforms for international co-operation,” he told reporters at a regular press briefing in Beijing on Tuesday.

“They are not called the IMF or the World Bank of the United States.”

Republican concerns

But her praise for the IFIs set up in the aftermath of Second World War is likely to be countered by Republicans, who now control committees in the House.

Some Republican members have criticised the World Bank and IMF for straying outside their mandates to spur economic growth in developing countries.

Ms Yellen has championed a plan to expand the World Bank’s scope. Beyond country-by-country projects, she wants all the multilateral development banks to back cross-border efforts that address broad threats such as climate change and pandemics.

The Treasury chief could also draw questions about President Joe Biden's economic policies with respect to China.

She and other administration officials have outlined an approach that seeks to limit China’s access to sensitive technologies out of national security concerns, while also limiting US dependence on Beijing for critical goods and materials.