Markets

Hedge fund manager Kyle Bass supports bill to curb World Bank lending to China

Key Points
  • Bass says that a current bill would curb World Bank funding to China by graduating the country from a program designed to help middle- and low-income countries.
  • "We're lending money to the country that's the second largest in the world. That's putting up quantum-based satellites, that's the largest consumer of Patek Philippe watches," he said.
  • In recent years, Bass has doubled down on his pessimistic view of U.S.-China relations and the bitter trade war between the globe's two largest economies.
Kyle Bass at the 2015 WEF in Davos, Switzerland.
David A. Grogan | CNBC

Hedge fund manager Kyle Bass, the often-bearish investor and outspoken China critic, told CNBC on Wednesday that he supports an effort by a U.S. lawmaker to terminate China's candidacy for select World Bank loans.

He explained in an interview that U.S. Republican Rep. Anthony Gonzalez's bill would curb World Bank funding to China by graduating the country from its International Bank for Reconstruction and Development (IBRD) program, designed to offer financial aid to "middle-income and creditworthy low-income countries."

"Why on earth is the World Bank lending China $3 or $4 billion a year?" Bass told CNBC's "Squawk Box."

"We're lending money to the country that's the second largest in the world. That's putting up quantum-based satellites, that's the largest consumer of Patek Philippe watches, Rolls-Royce, Chateau Lafite Rothschild," he added. "And the U.S. consumer — the U.S. taxpayer — is the guarantor of World Bank loans," he added.

Bass, who founded Hayman Capital in 2005, rose to prominence on Wall Street a decade ago for his prescient bets against assets tied to the U.S. housing market.

In recent years, however, he's doubled down on his pessimistic view of U.S.-China relations and the bitter trade war between the globe's two largest economies. He told CNBC in August that, without state support, China's currency would plunge because so few investors choose to use the yuan to settle transactions.

One month later, he said that suspect investment standards in China make financial stakes in Chinese firms dangerous and called upon U.S. regulators to crack down on the "insane" nature of business standards between Washington and Beijing.

"Imagine what kind of fraud is behind these companies," Bass said in September. "All of the U.S. money that goes into Chinese companies, it goes into companies that don't operate under a rule of law."

But Bass' most-recent critique comes days before discussion over a bill introduced by Gonzalez, a Republican from the 16th District of Ohio. The congressman criticized the World Bank's continued financing of China despite exceeding the economic threshold for the World Bank's IBRD program.

"The United States cannot afford to give the World Bank a blank check as long as they continue to make cloudy investments and misuse taxpayer dollars by providing loans to countries that do not and should not qualify for them," he said in a press release last month. "I cannot stand by and allow my constituents' taxpayer money to go to China while they continue to abuse this nation and suppress democracy as we have seen in Hong Kong."

The rocky relationship between the U.S. and China has made headlines over the past week as the two nations work toward a phase one trade truce.

The Dow Jones Industrial Average fell as much as 450 points on Tuesday after President Donald Trump suggested that he'd be happy to strike a deal with Beijing after the 2020 election, worrying investors that the yearslong spat could go on even longer.

A Wednesday report saying that the two nations are nearing an agreement on the amount of tariffs that would be removed under a truce helped ease the trade angst.