The U.S. is once again turning up the heat on China—this time through the world’s biggest financial institutions. On Friday (17th), Treasury Secretary Scott Bessent urged the International Monetary Fund (IMF) and the World Bank to take a tougher stance on Beijing’s state-driven economic policies, calling for sharper oversight and a return to what he described as the lenders’ "core missions."
IMF: Shine a Light on Imbalances
In remarks to the IMF’s Steering Committee, Bessent said the Fund should not shy away from "difficult issues" and must more clearly highlight internal and external imbalances in large economies like China. He argued that industrial policies and subsidies in major economies can distort global markets, create overcapacity, and spill over into trade imbalances.
The comments echo long-standing U.S. criticism of China’s state-led growth model, which Washington says has flooded global markets with cheap goods. Beijing counters that its success in industries like electric vehicles comes from innovation, not subsidies.
IMF Managing Director Kristalina Georgieva acknowledged the concerns, saying the Fund is working on a "deeper dive into global imbalances" and reviewing its lending terms. She admitted she left the meeting with "a long to-do list."
Debt Restructuring: "Not a Cash Machine"
Bessent also took aim at how the IMF handles debt restructuring for heavily indebted countries. Without naming China directly, he criticized "resistant creditors" for dragging out negotiations and worsening liquidity pressures. China, the world’s largest bilateral creditor, has often pushed for multilateral development banks to share losses in restructurings for countries like Zambia, Chad, and Sri Lanka.
"IMF funds should not be viewed as a ‘cash machine’ to repay bad debts on behalf of creditor countries," Bessent said.
The IMF’s Ceyla Pazarbasioglu noted that despite trade tensions, the U.S. and China are still cooperating through the Global Sovereign Debt Roundtable. Georgieva added that debt coordination must accelerate, with the IMF playing a "good coordination role" between creditors and debtors.
World Bank: End Support for China, Shift Priorities
Bessent also called on the World Bank to strengthen its "graduation policy," phasing out support for countries like China and redirecting resources to nations with greater development needs. He accused Chinese state-owned enterprises of anti-competitive behavior in World Bank procurement and urged restrictions on firms "not operating in a commercial manner."
In a move aligned with the Trump administration’s stance on energy, Bessent also criticized the Bank’s climate financing goals. He urged the institution to roll back its pledge to allocate 45% of annual financing to climate projects and instead adopt a "comprehensive energy" strategy that would bring back funding for natural gas, oil, and coal alongside renewables.
The Bottom Line
The U.S. is pressing the IMF and World Bank to take a harder line on China’s economic model, debt practices, and role in global development finance. While the IMF signaled it is reviewing its policies, and the World Bank faces pressure to shift priorities, the debate underscores a broader theme: global institutions are being pulled into the U.S.-China rivalry. For now, the message from Washington is clear—no more business as usual.