The bank, whose mission is fighting poverty in developing nations, lends about US$1 billion (HK$7.8 billion), or 4.5 percent of its annual budget, to China. Part of the interest payments from the billions of US dollars it has loaned China then goes to support loans to poorer countries.

''It's silly that China is still taking these huge loans,'' said University of Maryland economist Peter Morici. ''They're sitting on a huge amount of money.''

China's borrowing deserves a ``thorough investigation,'' said Representative Phil English, who sits on the influential House Ways and Means Committee. ``The bank is intended to give developing countries a boost. China has reached a point where I don't think it should be given these loans.''

China's economic output has quintupled since 1985 to about US$1.6 trillion and its net foreign assets have tripled over five years. State firms have tried to buy overseas companies, including a failed US$18.5 billion bid last month by CNOOC for Unocal, and a US$1.28 billion overture by Haier for Maytag. Last month, Morgan Stanley said state-owned tobacco firms may join forces to bid on assets outside China.

Those attempted acquisitions would have represented just a fraction of the US$35 billion China invested abroad in 2003, the most recent year of data available from the United Nations.

China also saves about 40 percent of its annual GDP and issues more than US$70 billion of debt on its own.

China's use of the loans to build projects such as roads frees up cash to spend on military equipment as well as US firms, said House Armed Services Committee chairman Duncan Hunter.

``It's evidence of a China that is happy to use all Western instruments, including trade and World Bank loans, to achieve economic expansion,'' said Hunter, who may hold hearings on the issue. ``We have to be very vigilant.''

Poverty in China is at an all-time low. The bank estimated that fewer than 5percent of mainlanders live in poverty, on less than US$1 a day, a far cry from the 49 percent in 1981.

The bank's total outstanding loans to China are projected to reach US$13.5 billion in 2006.

Of the bank's US$22.3 billion budget for the year to June, US$13.6 billion was earmarked for middle-income countries under its International Bank for Reconstruction and Development, the loan program China taps. The remainder was for no-interest loans and grants to poorer countries from its International Development Association.

Part of the interest from the reconstruction and development loans goes to support lending to the poorer nations, said Zou Jiaya, China's representative at the bank. ``It's a mutually supportive relationship,'' Zou said. ``I don't see any conflicts.''

The money China borrows doesn't come from resources that would otherwise go to poorer nations, said Johannes Zutt, the bank's program co-ordinator for China. To support China's borrowing, the bank takes out loans from the open market, charging the country a small spread on top of what it owes its creditors, Zutt said.

``The bank does not lose any money on China, it does not subsidize China,'' Zutt said. ``It actually makes a small amount of money on China.''

China has ``an investment-grade rating, they can borrow as much as they could possibly need,'' said Carnegie Mellon University economist Adam Lerrick in Pittsburgh.

Officials point to the logistical support and advice the bank provides on anti-poverty projects. While China can get loans with its access to the international capital markets, those loans wouldn't come with the same advice, Zutt said.

BLOOMBERG