Ongoing Progress in China

Poverty Reduction: While the entire Bank program has poverty reduction as an implicit goal, a number of activities support direct poverty reduction initiatives, with an emphasis on rural development. The World Bank-sponsored Shanghai Conference on Scaling Up Poverty Reduction (May 2004) brought together more than 1,000 people, most from developing countries, to share experiences and practices in poverty reduction efforts. The conference, which included analysis of more than 100 case studies from around the globe, highlighted China's success in large-scale poverty reduction as well as the need for flexible approaches that engage the poor in finding solutions to poverty. Following the conference, the Bank, through WBI, has agreed to support the establishment of an International Poverty Research Center in China.  The Bank has also worked with the government to complete the 2009 national poverty assessment "From Poor Areas to Poor People: China's Evolving Poverty Reduction Agenda."  While World Bank financing for poverty reduction is modest by Chinese standards, the Bank continues working closely with the Government to identify and pilot innovative poverty reduction efforts. Besides raising incomes, improving food security, and expanding access to basic services, World Bank supported poverty reduction projects have been playing an important role in developing an effective multi-sector approach to poverty reduction. Lessons learned from these projects are now being replicated in poverty reduction programs across the country.  At present, the Poor Rural Communities Development Project is supporting participatory poverty reduction through the multisectoral approach in Guangxi, Sichuan, and Yunnan, and the proposed Sustainable Development in Poor Rural Areas Project will support the scaling-up of the CDD poverty reduction approach in Chongqing, Henan and Shaanxi.  In recognition of its poverty-reduction activities in China, in October 2004 the Bank became the first recipient of a Government of China award made to an international agency working to reduce poverty. 

Rural development: Out of a total 1.33 billion people, approximately 60 percent of China's population lives in rural areas. 600 million Chinese or about 250 million farm families are dependent on farming for their livelihoods. With 20 percent of the world's population but only 10 percent of the world's arable land, most farm households have land holdings of less than a hectare. Despite relatively high yields, supported by China's very successful plant breeding programs, high levels of investment in research and in more recent years high levels of input subsidies, land constraints and low water endowments limit further increases in farm household income.  Slow income growth in rural areas relative to the rapid growth in urban areas is creating a widening rural/urban income gap, leading to rural to urban migration. Managing the absorption of rural labor into urban areas and narrowing rural-urban inequality poses a political challenge for the Government.   Bank rural development assistance focuses on the key challenges summarized in the Government's "three rural issues": promoting rural development other than agriculture; increasing farmers’ incomes; and industrializing/commercializing agricultural production. In recent years, the Bank's rural portfolio in China has expanded from core themes of integrated rural development and poverty reduction projects to newer projects and emerging themes supporting market development, technology transfer, natural resource management, rural-urban integration and environmental sustainability. Bank support aims to improve the provision and effectiveness of rural public services and infrastructure investments, developing an enabling environment for the modernization of agriculture and rural economies, developing approaches and institutions for sound natural resource management and linking rural areas to urban markets.  The main sub-sectors of Bank investment projects in rural development are: agriculture and land management (food security, food safety, agricultural modernization); poverty reduction and provision of public services and infrastructure; management of water resources; and other natural resources management (forestry and watershed management). Bank investment projects draw upon analytical work and research findings, which in recent years has included rural public finance, public service provision and community driven development, climate change and adaptation, land policy reforms, farmer and water user associations, rural-urban linkages, forest policies and water management. 

Urban Development: Bank lending and analytic assistance has increasingly focused on China’s development of productive, livable, and well-managed cities.  Improved environmental infrastructure, urban management and financial sustainability are key features of this support.  The Shanghai Urban Environment Projects - which the Bank supports through the first, second, and third Adaptable Program Loans - are innovative programs that focus on metropolitan environmental management and infrastructure finance reforms.  Other innovative projects include the Guangdong Pearl River Delta first and second projects which are helping Guangzhou, Foshan, and Jiangmen cities improve their waste water and hazardous waste management facilities.  These projects will lead to a reduction in water pollution and an improvement in overall environmental and economic conditions.  The Bank has also recently approved urban environment operations for Hunan province, the Lake Tai region, and Ningbo municipality.  Beyond these projects, the Bank is preparing a rural urban integration project in Chongqing which focuses on reducing the inequality in the provision of basic services in remote counties of the Chongqing Municipality. This project is demonstrating the Bank's increased attention to cities and towns in the lagging regions of western China, aiming to improve their urban infrastructure and environment.  Additionally, the Chongqing Small Cities Infrastructure Improvement Project is helping to enhance water supply, flood protection and secondary roads in fast urbanizing areas outside of the core city, and the Sichuan urban development project is removing infrastructure bottlenecks in four second-tier cities in the province while strengthening urban planning and land management practices. More

Environment: In line with the Bank's strategic focus in China on facilitating environmentally sustainable development, the Bank has supported multiple initiatives with explicit or implicit environmental goals through a combination of loans, grants, and analytical and advisory assistance.  Three-quarters of all Bank assistance in China has positive environmental objectives.  For example:  the World Bank is China’s most important international partner in efforts to reduce energy-related air pollution and emissions, to support China’s national energy efficiency and renewable energy targets, and to access Clean Development Mechanisms climate change funds.  The World Bank is supporting many Chinese urban environment projects that focus on the construction of sewerage, drainage, and wastewater treatment plants; solid waste facilities; river and Lake Basin rehabilitation; and all forms of transport systems, from railroads and waterways to public transit.  It is also helping China address such challenges as land degradation, deforestation, water scarcity, and biodiversity conservation with technical and project assistance. And the Bank supports China in meeting its obligations under the Montreal Protocol to phase out ozone depleting substances, and supports China in meeting its objectives to reduce toxic pollutants under the Stockholm Convention. Finally, the Bank has been providing AAA and capacity building support in environment-poverty linkages, evaluation of environmental health risks, and environmental education.     

Transportation: The transport sector plays a critical role in development by promoting growth of a market economy and giving the poor improved access to both local and distant markets and services.  In China, the Bank has supported development of the National Trunk Highway System as one way to help support economically lagging regions with major markets on the coast.  The recently approved Inner Mongolia Transport and Trade Corridor Project will promote and sustain the development ofChina 's cross-border trade between China on one hand and Russia andMongoliaon the other by improving transport infrastructure and logistics. These improvements, in turn, will lower transport costs, increase income from external trade, and raise incomes in Inner Mongolia, the country's third-largest province and one of the poorest provinces of the western region. Bank loans for the Second National Railways Project and theHubei Shiman Highway Project address the infrastructure challenges of connecting eastern provinces to central and western Chinathrough the improvement of the Zhe-Gan line and the construction of the Hubei Shiman Expressway.

Education: The Bank has supported some 20 education projects in China since 1981, with a shift in strategic emphasis from urban-based higher education projects in the early years to a more recent emphasis on rural poverty-based basic education projects and vocational education projects. Higher Education Reform Project was successfully completed in 2005 and contributed in important ways to the quality improvement of science and engineering education in China. Ongoing projects include the Basic Education in Western Areas Project, in cooperation with the UK Department for International Development (DFID), is being implemented in Sichuan, Yunnan, Guangxi, Ningxia, and Gansu provinces.  The project aims to improve access and quality of compulsory education in western areas.  A new lending project focusing on vocational education and training (TVET) innovation and school level reforms is ongoing in 2 stages: Guangdong TVET was approved by the Bank's Board of Directors on June 2, 2009.  The Liaoning and Shandong province TVET is in preparation to be submitted to the Bank Board of Directors in spring 2010. Ongoing technical assistance and analytical work include supporting research and policy making on education provision for migrant children and early child development, evaluating government new policies on financing rural compulsory education, and a review of China’s education sector.

Health: The Bank partners with the Government of China to deliver quality health services to the poor and underserved, to strengthen public health programs, and to reform health care financing approach.  The Bank has supported over 15 health projects in China since 1984. The Bank’s support focuses on two strategic priorities: 1) health system strengthening and 2) disease prevention and health promotion.  Within this framework, projects have addressed a wide range of priority issue areas including: rural health services, regional health planning and development, medical education and rural health workforce, public health programs such as maternal & child health, response to infectious diseases such as Tuberculosis, HIV/AIDS, Schistosomiasis, SARS, Avian and Human Influenza and (more recently) management of emergent non-communicable diseases (NCD). 

The lending programs have provided financial input, leveraged grants funds, catalyzed international partnerships and have fostered innovation and impact. For Instance, the “Health VII” Project brought in health promotion for NCDs as well as new approaches to address newly emerging infectious disease such as HIV/AIDS.  The upgraded Expanded Program on Immunization (EPI) program has benefited tens of thousands of children. The Iodine Deficiency Disorder Control (IDDC) Project demonstrated how involvement of industry contributes to improved health through Iodization of salt.  Health V Project, for the first time, introduced DOTs for TB and the combined Chemotherapy for Schistosomiasis into China.

The ongoing Tuberculosis Control Project is the first in the Bank to apply the 'blending mechanism' for project financing. The project blends a $37 million DFID grant with a $104 million Bank loan and provides access to effective TB control services to nearly 700 million people in 16 Chinese provinces. Without these services, many families, especially the poorest ones, will not seek or receive effective treatment. China has 400 million people infected by TB, including five million with active disease. Each year 1.3 million people get active TB and 150,000 die. Since 1990, the Bank has helped China to expand effective TB control with remarkable results, with high coverage rates and a 35% reduction in prevalence in project area compared to 3% in the non-project areas. This project expects to detect at least 70% of new infectious (smear positive) cases and cure at least 85% in the project areas with free diagnosis for all and free treatment of at least the infectious cases. The project follows the well-recognized DOTS system of TB services along with more comprehensive social assessments and health promotion measures designed especially to reach the poorest and disadvantaged groups of families. The blending of DFID and World Bank resources helps to enable more affordable funding for this and other social sector programs aimed at helping poorer sections of society and, at the same time, simpler management responsibilities to the beneficiaries.  

Another important area for the lending project is to improve the access and quality of the health service as well as to strengthen health care systems. Health VIII project which completed in year 1997 was the first to adopt the comprehensive approach.  The new Rural Health project ( Health XI) will further advance Bank’s efforts in this area. The project will be implemented in 40 counties of eight provinces and will pilot and test innovative reforms in the areas of health financing, service delivery and public health on the ground. The project is designed and aimed to provide practical experience for the ongoing national health system reform.

The Bank has also been actively engaged in the policy dialogue and health system reform in China through analytical and advisory activities (AAA).  A recent example of such activities is the health sector analysis with a focus on rural health in China. The report “Reforming China's Rural Health System" was published in July 2009.  Current AAA work involves briefings, policy notes, and workshops on insurance, resource allocation policies, provider payment systems, hospital reforms, non-communicable diseases, and impact evaluation.

Social Protection: The Bank has been assisting China to develop and implement social protection reforms through a range of analytical advisory activities (AAA) and lending operations that support pilot experiments. Ongoing AAA work encompasses the areas of pension and social insurance, social assistance, and labor market.  In the area of labor market, an analytical program on rural to urban migration is focused on labor market situations of the migrants and social policies that affect migration outcomes.  In the area of pensions, the Bank has had a long engagement in policy analysis and evaluation, with a primary focus on urban public pension system.  One report has been produced assessing the welfare and arrangement for old age security for rural elderly, and proposing pension policy options for rural China. Another study is underway that aims at proposing a pension framework for all citizens. The Bank has also been engaged in the area of social assistance, analyzing the experience of urban and rural Dibao systems. Besides analytical tasks, a series of technical assistance programs supported by trust funds or TA loans are also ongoing, focusing on capacity building in actuarial analysis,  work injury prevention, recovery and insurance, promoting employment of women, protection of the vulnerable, migrant workers right protection, monitoring and evaluation of active labor market policies, etc.  Finally, a lending project focusing on skills development and employment support for rural migrant workers has been implemented at central and local level since late 2008.  The project aims to improve the access of rural workers to skills development opportunities by investing in training capacity, improving training approaches and curriculum, strengthening linkage with labor market, and promoting the development of training market.  It will reduce the cost of their job search through access to enhanced employment services, and remove the worst excesses of their transition through strengthened worker protections.

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Water Issues: Water issues are a high priority for the Government, particularly given implications on food security and rural income. Chinafaces serious water problems including regional water scarcities, flooding, and water pollution. A government-World Bank team collaborated on preparing a Water Resources Assistance Strategy for China, supplemented by an AusAid collaborated Agenda for a Water Sector Strategy for North China to assist in addressing critical water resource constraints limiting development. Reflecting increasing Government emphasis on better water resources management, including demand management, the Bank has complemented investment in water-related infrastructure with increasing attention to water policy, planning, management, and conservation issues. The Tarim Basin II Project helped establish, through legislation by the Xinjiang People's Congress, the Tarim Basin Water Resources Commission which performs water management at both Basin and farmer-household levels and makes more water available to downstream of the Tarim  River, contributing to the ecological environment including poplar trees and wild birds and animals. This is the first fully functional integrated river basin management system in Chinaand is recognized at the national level as a successful example. The Hai Basin Integrated Water and Environment Management Project, funded by a US$17.0 million GEF grant, is another good example. The surface and groundwater in the Hai  Basinare major sources of irrigation and drinking water for tens of millions of people who live in its basin. One of the world's most ecologically important waters, the Bohai Seareceives heavy land-based pollution largely coming from domestic, industrial, agricultural, and livestock sources from the Hai basin. In addition to water pollution, the basin's groundwater resources are in some cases polluted and being rapidly depleted. By supporting vertical (central, basin, provincial, county, water user) and horizontal (water department, environmental protection department) integration and introducing remote sensing techniques to monitor and control water consumption, the project aims to improve integrated water and environment planning and management and pollution control in the Hai Basin, promote institutionally-coordinated and effective local and basin-wide water and environment planning and management, enhance local capacity in water and environment Knowledge Management (KM) and implementation, and reduce groundwater overdraft in the Hai Basin and wastewater discharges from small cities along the rim of the Bohai Sea.

Energ：In keeping with China's changing needs, the emphasis of Bank's support has shifted from financing large energy projects to focusing on assisting in managing the resource scarcity and environmental chanllenges of the energy sector. The Bank's energy sector strategy and objectives in China are: (i) support the government efforts to aggressively implement energy efficiency policies and measures; (ii) assist the government to harness indigenous clean energy, particularly renewable energy; and (iii) mitigate the environmental impact of energy production and consumption, particuarly coal. The Bank's instruments to partnership with the government include: (i) sector work and technical assistance on key sector strategy and policy; (ii) selected lending to renewable energy development, energy efficiency and enviromental impact migitation such as SO2 removal at power plants and coal bed methane recovery at coal mines; (iii) Global Environment Facility's support to capacity building, technology improvement, legal and regulatory system building; and (iv) carbon financing to promote transactions under the CDM.

Financial Reform: In response to requests for advisory support, the Bank is providing technical assistance on key financial sector issues including access to finance (micro and small enterprise finance, rural finance, housing finance), overall financial sector reform and stability (financial sector development including improved monitoring of systemic risks), state-owned commercial bank restructuring, and capital market development. The Bank is supporting efforts to deepen capital markets to widen sources of infrastructure financing and working with a major policy bank to pilot commercially sustainable, non-subsidized micro- and small enterprise finance.  The Bank has also been assisting the Chinese authorities in establishing a catastrophe insurance system by providing policy advice on key institution building aspects and a basic study on data availability and the construction of a database.  In addition, the Bank has also been advocating the creation of an integrated catastrophe risk management framework, of which catastrophe insurance is an integral part.

Enterprise Reform and Private Sector Development: Enterprise Reform and Private Sector Development: The World Bank and the International Finance Corporation (IFC, the Bank Group's private-sector arm) are involved in China’s corporate sector reform and development agenda. The World Bank provides policy advice and technical assistance covering areas such as corporate governance, investment climate, management of state assets, enterprise-led innovation, and agglomeration.  In addition, through a series of analytical works and technical assistance, the World Bank is also playing an active role in supporting the development of service sector in China with a primary focus on public service reform in both urban and rural China. IFC is supporting SOE reform through investments for selected SOE privatization. It is also supporting private sector development through investments to support the growth of emerging domestic private companies and technical assistance to improve the enabling environment. The IFC-managed China Project Development Facility (CPDF) is supporting SME development and access to finance in Sichuan province.