Jin-Yong Cai: An activist at the IFC

By:
Elliot Wilson
Published on:

The new head of the International Finance Corporation, Jin-Yong Cai, tells Euromoney about the need for the World Bank’s private-sector arm to take more risks and be more activist in developing policy ideas in such areas as infrastructure development and poverty reduction.

These are interesting times on Washington’s H Street, home to the IMF and the World Bank.

Neither institution has ever been particularly loved. The World Bank, thanks to its fallible leader, Vietnam War architect Robert McNamara, threw gobbets of cash at third-world countries in the 1970s. The result: economy-hobbling debts, finally written off in the last decade. The IMF is charged variously with being asleep at the switch during the 1997 Asian financial crisis and bungling the recent Greek and Cypriot bailouts.

It’s hard to see why people seek to run such institutions, but they do. Both Bretton Woods multilaterals are currently overseen by capable but diverging characters who easily fit one of the two classic moulds. First, the career bureaucrat, represented by Jim Yong Kim, Barack Obama’s choice as World Bank Group president. Second, the glamorous/intellectually dominant politician, embodied by Europe’s choice as IMF chief, Christine Lagarde.

Jin-Yong Cai, head of the International Finance Corporation
Then there’s Jin-Yong Cai, who doesn’t appear to fit into either category. Appointed last October as the chief executive and executive vice-president of the International Finance Corporation, the World Bank’s private-sector arm, Cai knows what it’s like to be both wealthy (unlike some of his predecessors) and very poor (unlike all of them).

Meeting with Euromoney at the InterContinental Hotel on London’s Hyde Park on a breezy summer’s day, Cai, a Chinese national, is refreshingly open, honest and engaging about his early years, a time of crushing poverty and gnawing hunger. An impoverished Beijing, disoriented from Mao’s mad years, was still regaining its balance when Cai won entrance to the prestigious Peking University in the early 1980s. “I remember the canteen,” he says, shaking his head and visibly wincing. The end of his sentence drifts away into thoughts of glutinous rice, stringy vegetables and mystery meat. (Many of Cai’s sentences go unfinished: he rarely completes one thought without clambering onto the back of another.)

Such visceral memories from a human being’s early development seldom fail to colour later experiences. Many individuals from that era wanted, more than anything, to get as far away as possible; to seek money, fame and glory far from dour, throttling Beijing. Many later returned, to serve a rising power that had regained its composure and, increasingly, its global clout.

So it is with Cai, just 16 years of age when Mao died in 1976. He worked hard in college, joining the World Bank as a graduate trainee in 1982. Three years later, he moved to an institution still revered by mainland financial graduates, Goldman Sachs, before rejoining the World Bank, then accepting a senior position at Beijing investment bank CICC. In the early 2000s, he was rehired by Goldman as the CEO of Beijing-based investment firm Goldman Sachs Gao Hua.

All of this bodes well for the IFC. Viewed from any angle, Cai’s appointment last year by his boss, Jim Kim, was a judicious one. More than ever, multilaterals and particularly the IFC, a body devoted to private-sector development and slashing poverty, need to think outside the box in order to tackle the challenges facing the developing world.

In this context, risk is everything. There was a sense under Cai’s predecessor, the wooden Swede Lars Thunell, that the IFC was treading water. Cai talks lucidly about how he sees the institution’s role: as an “orchestra conductor or an idea provider” rather than just a finance provider – helping boost infrastructure, introduce private-sector competition and cut poverty in the world’s needier places.

Of course this requires action over talk – multilaterals, sinks of huge collective intelligence, are famously better at the latter than the former – and Cai is clearly determined to look back on his years at the helm of the IFC with relish not remorse. There is regret, notably when he talks of the “transformational types of transactions” that in the past and for the usual reasons (bureaucratic rigidity, risk aversion) stymied any attempts to adopt a more assertive role on projects.

He warms to his theme, noting that the IFC is “much more afraid of risks” than it should be. “We have tended to shy away from controversies. I’m not saying we are looking for controversies, but when there are differing views on issues, we should be able to actively engage in those conversations.”

Risk, for Cai, means being unafraid of taking on the biggest projects. He points many times to Africa, a continent likely to present some of the greatest challenges over the next few decades. Conflict is waning as wealth and prospects rise, at least in sub-Saharan Africa, but corruption remains endemic, and the need to create private-sector jobs, as Africa’s population continues climbing past 1 billion, is paramount.