IFC Distressed Debt Update: China's On Board

Last week I discussed IFC's new plan to launch a vehicle to purchase toxic assets in emerging markets. The initial report indicated that much of the financing was expected to come from private sector banks. Reuters is now reporting that China's Sovereign Wealth Fund, China Investment Corp, is interested in participating in the project:

China has shown interest in investing in a new International Finance Corp program to acquire and restructure distressed debt in developing countries, World Bank President Robert Zoellick said on Monday.

Zoellick, speaking at a ceremony to launch the program that that aims to mobilize more than $6 billion to help banks and companies sell or restructure troubled assets, said he recently discussed the program with China Investment Corp, Beijing's sovereign wealth fund.

"They're interested in investing in distressed debt. They told us 'we can do it in the United States, but we're a little wary of doing it in the developing world because we don't want to be accused of anything'," Zoellick said. "To come in with us in a real restructuring program, they have some significant interest."

In other funding news, Robert Zoellick has requested up to an additional $5bn in assistance for the World Bank's efforts to mitigate the effects of the financial crisis.

From the World Bank's annual meetings blog:

The joint World Bank-IMF advisory body, known as the Development Committee, committed to the G20’s call for more resources for the Bank to help developing countries respond to the global economic crisis.

Concluding its first day of talks on the Bank’s work and impact at the 2009 annual meetings, the committee expressed support for a general capital increase, a multimillion multilateral food trust fund, and a new facility designed to provide urgent funds to the world’s 79 poorest countries.

Most developing nations voiced support for Zoellick's request, while some OECD countries were skeptical. There seems to be a general friction between OECD economies, which are suffering from fiscal deficits and are reluctant to contribute more resources to development banks, and emerging markets, which are in good fiscal shape, have positive growth prospects, and benefit from World Bank assistance.

Is this the shape of future debates to come?