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220 38 A Conversation with the World Bank’s Shahid Javed Burki and Delegation1 October 21, 1988 ZRJ: I welcome our friends from the World Bank to Shanghai and thank you for your help in building Shanghai. The World Bank is the largest international financial agency supporting Shanghai’s construction. Burki: When I came to China in September of last year with our bank’s vice president, we reached an agreement for long-term loans. That is, the World Bank promised loans of US$600 million each to Shanghai and Jiangsu, with US$200 million to be paid out annually for three years, 75% of the loans to be hard loans, and 25% soft loans. These are to be used for building urban transportation facilities and industrial rebuilding, and we agreed that the loans would be transferred through your central bank. Mr. Mayor, this time we’ve come to Shanghai to hear your thoughts on which projects are the most suitable for the US$400 million for 1989 and 1990. At the same time, we’d like to share our thoughts from this visit to Shanghai. ZRJ: It seems that foreign interest in investing in Shanghai is now growing stronger and stronger. We recently leased out a plot of land in the Hongqiao Development Zone. It was very successful—1.29 hectares fetched US$28 million , which attracted the notice of many American real estate developers. This year, Shanghai is using foreign capital to speed up urban infrastructure construction . We have five major projects under way, and one of them—a combined sewage wastewater treatment project—is being built with a World Bank loan. Because Shanghai is too highly indebted, the pace of urban construction can be speeded up only by large-scale use of foreign preferential loans. In using large amounts of foreign capital, the first problem encountered is our ability to repay. Mr. Edwin Lim has pointed out that the debt-servicing ratio should be maintained at 15–20%. I recently read materials saying that the 1. On October 21, 1988, Zhu Rongji met with Shahid Javed Burki, World Bank country director for China; Edwin Lim, the World Bank’s chief representative in China; and Zafer Ecevit, chief of the Population, Resources, and Urban Construction section of the World Bank’s China Office. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 220 12/26/17 12:00 PM A Conversation with the World Bank’s Shahid Javed Burki and Delegation 221 Japanese feel it can be maintained below 25%, while Shanghai’s current debtservicing ratio is only 8%. I can say that Shanghai’s debt-servicing ratio for foreign loans is the lowest in the country, and it’s very far from the international accepted warning level. We estimate that the value of Shanghai’s total foreign exports this year may reach US$4.6 billion. Apart from US$1.5 billion that is to be turned over to the central government and the amount that must be spent to import raw materials and components for production, all the remaining forex will be used for building Shanghai. Shanghai therefore has sufficient ability to repay. In the past, Shanghai had few external loans; the repayment period for current loans is very long, and for some time to come, there will be fairly rapid growth in Shanghai’s production of export commodities. It seems there will be no problem in repayments of both principal and interest for foreign loans. What we worry about now isn’t that we won’t be able to repay. We worry that feasibility studies and preparations for foreign-funded projects won’t be able to keep up, so that we wouldn’t be able to use some foreign loans with highly preferential terms, such as the US$200 million annually promised by With World Bank China Country Director Shahid Javed Burki, who was in Shanghai attending an international symposium on Shanghai’s economic development, February 7, 1991. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 221 12/26/17 12:00 PM 222 A Conversation with the World Bank’s Shahid Javed Burki and Delegation the World Bank. The State Council has authorized Shanghai to use as much as US$3.2 billion of foreign capital by the end of 1990, but so far we’ve only used several hundred million dollars. Next, there’s also a question of our matching ability. To use foreign capital, there must be a corresponding amount of matching renminbi. Since implementing fiscal contracting...


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