China, self-appointed protector of the Third World, may soon be edging out other poor nations in the race for international development funds.
World Bank officials now considering loans for 20 projects here predict that China eventually could displace India as the largest borrower because of its huge population, vast development needs and low per capita income.
China could qualify as early as next year for a huge chunk of the bank's soft loans--up to $1 billion yearly, a major share of the overall lending pot for needy countries, economists say.
By the middle of this decade, total loans to China are expected to reach at least $2 billion annually.
"We are still far from reaching our cruising altitude with regard to China," said Munir P. Benjenk, World Bank vice president for external relations who recently conducted talks with Chinese planners here.
Benjenk insisted that China's involvement need not drain funds from other developing nations if wealthy donor countries fulfill their obligations to contribute.
But China's looming demand for loans at a time when donors like the United States are reluctant to increase their financial stake already has created pressure on Third World countries to look elsewhere for credit.
"If China pitches its demands, what will happen to the rest of us?" asked an Asian diplomat from a developing state. "If it gets $1 billion a year, there will be nothing left for the poor nations of Africa, for India and places like Bangladesh."
Chinese officials who feel their nation was unfairly excluded from world lending bodies for 30 years while Taiwan occupied its seat say they have no compunctions about asking for China's fair share.
"We need the funds and we have the right to them," Ge Fucun, China's chief international loan expert, was recently quoted as saying.
Soft loan diplomacy is a new pursuit for Communist China, which fashioned a self-help strategy for three decades under Chairman Mao Tse-tung. Even after taking its United Nations seat in 1971, Peking rejected international credit and aidwhile shunning world lending institutions.
But Mao's successors shifted from self-reliance to self-interest and pinpointed the world lending pool as a ready source of needed development funds.
As China's political role in international organizations began expanding in the late 1970s, so did its claim to their money.
Peking began taking the initiative in 1978 to obtain technical assistance and credits from U.N. agencies. Since then, it has received $35 million to settle Vietnamese refugees, $24 million to help flood and drought victims, $51 million in grain and $15.6 million to buy computers for its population census.
"China has learned the ropes and is becoming forceful in making demands," said a U.N. official in Peking. "At first, they were cautious and said they only wanted to contribute to U.N. efforts in other countries. Now, they've become full partners."
Chinese demands have only begun to be felt on the real sources of easy money -- the International Monetary Fund and World Bank. China joined both in May 1980.
Three months after becoming an IMF member, China got its loan quota doubled to $1.57 billion, foreshadowing massive future requests. By March 1981, a standby loan of $450 million had been approved.
China entered the World Bank after the last round of loans in the agency's three-year cycle had been allocated. Nevertheless, the bank made special arrangements to grant a $200 million loan to upgrade key Chinese universities and a $60 million loan for an agricultural desalinization project in north China.
China will be eligible next year when the bank's International Development Association (IDA) decides how to divvy up its new cycle of interest-free, long-term loans.
China is known to favor the World Bank loans because they are not "tied," or required to be spent in one country.
IDA and its parent bank, which makes more conventional loans, are now considering projects calling for $135 million to develop ports in three cities, $75 million to improve agricultural institutes, $100 million to develop oil fields and $80 million to expand a grain basin.
"The Chinese are playing it for all its worth," said a World Bank official who has visited China on inspection tours. "You go to a factory and the plant manager tells you what he wants and when he wants it. There's nothing subtle about it."
How much China will get still is uncertain, but economists say its per capita income of $280 last year ranks among the lowest anywhere, qualifying the world's most populous na-tion for a hefty slice of the lending pie.
Chinese officials are sensitive to charges that they are planning to raid the financial cupboards at the expense of Third World nations they cultivate as allies and claim to speak for.
At a joint meeting of the IMF and World Bank last year, Finance Minister Wang Bingqian urged the developed nations to "do their duty and honor their commitments" to indirectly finance development projects though their annual contributions.
He appealed to wealthy donors like the United States to increase their contributions so as "to help to meet the urgent needs of developing countries."
But with most donors opposing any substantial rise in their financialobligations, China may be faced with what one Southeast Asian diplomat calls "the uncomfortable job of reconciling Third World interests and self-interests."
Ge, the Chinese official who lines up international financing, believes poorer nations should have priority for soft loans but foresees no difficulty in reconciling China's twin commitments.
"We're all developing countries," he told a reporter recently. "We don't want to take away from other countries. We just want our fair share."