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Economy

Asian Development Bank to hike lending rates for China

Beijing's financial clout in Asia and Africa spurs calls for higher contributions

A sales assistant displays a 1000 gram gold bar as an investment for a customer at Caibai Jewelry store in Beijing. China's per-capita income exceeds that of less-well-off nations receiving aid from the Asian Development Bank.   © Reuters

MANILA -- The Asian Development Bank will raise financing rates for China under plans announced Tuesday, seeking contributions commensurate with its rising income level.

Starting January 2021, China will be designated an "upper-middle income country" and pay an additional maturity premium of 20 to 30 basis points. The only other countries in this category are Kazakhstan and Malaysia, which currently does not borrow from the ADB.

This follows the World Bank's decision last year to increase borrowing rates for China and others. China, the world's second-largest economy, has expanded its financial presence in Asia and Africa through its own Asian Infrastructure Investment Bank. Given this, developed-nation members in the Japan-led ADB have called for reassessment of the borrower status Beijing enjoys. 

China's gross national income per capita exceeded $9,000 last year -- well above the ADB's lending threshold of $6,975. But the country still receives ADB loans to support environmental measures and senior health care.

During the ADB annual meeting hosted by Fiji this May, Japanese Finance Minister Taro Aso urged nations above its income threshold to "graduate" from borrowing. ADB President Takehiko Nakao told Nikkei at the time that the institution started discussing higher interest rates for China and countries with similar income levels.

The ADB will maintain loans to China in specific areas. But in exchange, China will contribute to the bank financially by assuming interest rates set at appropriate levels, according to a senior ADB official.

China borrowed a total of $2.6 billion from the ADB in 2018. Although the amount is trending downward, China still accounts for 12% of the total -- second only to India.

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