The researchers found that World Bank staff changed the data to improve China’s ranking in the 2018 and 2020 ‘Doing Business’ report, which measures trading conditions around the world.
The World Bank is canceling a prominent report on trade conditions around the world after investigators found that bank leaders pressured staff members to modify data on China and some other governments.
The bank said Thursday it would suspend “Doing Business” following an investigation prompted by internal reports of “data irregularities” in its 2018 and 2020 editions and possible “ethical issues” involving bank staff.
Staff members changed the data on China to improve its ranking under pressure from the office of then-World Bank President Jim Yong Kim and then-CEO Kristalina Georgieva and one of his advisers, an investigation by the Washington WilmerHale law firm for the bank. .
Georgieva, now head of the International Monetary Fund, said she disagreed with the findings.
“I fundamentally disagree with the findings and interpretations of the Data Irregularity Investigation as it pertains to my role in the 2018 World Bank Doing Business report,” Georgieva said in a statement.
The Washington-based World Bank is one of the world’s largest sources of development finance. Some governments cite business activity, which looks at taxes, bureaucracy, regulation and other business conditions, when trying to attract investment. It ranks countries based on factors such as how simple or burdensome it is to register a business, legally enforce a contract, settle a bankruptcy, obtain an electrical connection, or obtain building permits.
Timothy Ash, senior strategist for emerging markets sovereign strategy at fixed income manager BlueBay Asset Management, said he “cannot overstate” the report’s importance of doing business for banks and companies trying to assess risk in a country in particular.
“Any quantitative model of country risk has incorporated this into the ratings,” he said. “Money and investments are listed on the back of this series.”
He added that if an analyst at a bank or rating agency had done what is alleged, “I bet they would be fired and subject to a regulatory investigation.”
China has tried for the past two decades to increase its influence over international institutions, including the IMF, the World Health Organization, and their policies.
Changes in the 2018 report followed China’s lobbying for better rankings and preceded a World Bank campaign to raise capital in which Beijing was expected to play a “key role,” according to the report. China is the bank’s third largest shareholder after the United States and Japan.
Changes by the analysts who prepared the 2018 report raised China’s ranking by seven places to 78th, according to the report. Other changes affected the rankings of Azerbaijan, the United Arab Emirates and Saudi Arabia.
A senior director at the World Bank acknowledged that Doing Business leadership made changes to “push data in a certain direction to accommodate geopolitical considerations,” according to the report. He said Georgieva thanked him for doing his “two cents for multilateralism.” The senior director interpreted that to mean “not angering China” during the capital increase negotiations, according to the report.
The World Bank investigators knew the changes “were inappropriate” but “expressed fear of retaliation” from Georgieva’s assistant Simeon Djankov, according to the report.
China’s Foreign Ministry expressed hope that the World Bank would “carry out a thorough investigation” to “better maintain the professionalism and credibility” of Doing Business.
“The Chinese government attaches great importance to optimizing the business environment,” said a ministry spokesman, Zhao Lijian.