Treasury Secretary Janet Yellen on Tuesday will 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 US financial backing of those lenders.
In the face of what’s likely to be Republican skepticism when she testifies on Capitol Hill, Yellen will laud institutions like 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 the text of testimony she’s scheduled to deliver at 10 a.m. 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 Yellen’s forthcoming remarks, Chinese Foreign Ministry 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 cooperation,” 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 World War II is likely to be countered by Republicans, who now control committees in the House. Some GOP members have criticized the World Bank and IMF for straying outside their mandates to spur economic growth in developing countries.
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 like climate change and pandemics.
The Treasury chief could also draw questions about the Biden administration’s economic policies with respect to China. Yellen 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 China for critical goods and materials.
Outbound Investment
The House committee’s chair, North Carolina Republican Patrick McHenry, is expected to quiz Yellen on a planned executive order that would restrict certain US investments in China.
McHenry wrote a letter to Yellen in May questioning whether the order would be effective in preventing China from developing sensitive technologies.
--With assistance from Colum Murphy.