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World Bank Approves China Western Poverty Reduction Project. Qinghai Component Delayed for Inspection Panel Review.

Washington Contacts: Peter Stephens (202) 458-2281, Fax (202) 614-0772; Caroline Anstey (202) 473-1800, Fax (202) 522-2632; Beijing Contact: Li Li 65543361 ext. 2030, Fax 65541686

To obtain project documents please contact the World Bank's Infoshop at tel: 202-458-5454, fax: 202-522-1500, email: pic@worldbank.org

WORLD BANK APPROVES CHINA WESTERN POVERTY REDUCTION PROJECT Qinghai component delayed for Inspection Panel review

WASHINGTON, June 24, 1999 The World Bank's Board of Executive Directors today approved a three-component, $160 million project designed to benefit almost 1.7 million of the poorest people in China, but, in an unusual move, agreed that no work be done and no funds be disbursed for the $40 million Qinghai component of the project until the Board decides on the results of any review by the independent Inspection Panel.

The outcome was supported by the Chinese government and a majority of Board members representing the Bank's 182 member governments. The Chinese government notified directors that it will facilitate visits to the project site by diplomats, government officials, members of parliaments and the media, before, during and after implementation of the component, "any time at their convenience. The visitors are welcome to have extensive contacts with the local people, unattended by Chinese officials," the statement said.

The Inspection Panel review, which was requested by two non-government organizations, will look at ways to strengthen and improve the project, and ensure that the Bank has complied with its own rules and operating procedures. The review will focus on the component in Qinghai Province, which has been criticized by environmental and Tibetan groups.

The Western Poverty Reduction Project focuses on Inner Mongolia Autonomous Region ($50m cost, benefiting 674,000 people), Gansu ($70m cost, benefiting 930,000 people) and Qinghai ($40m cost, benefiting 57,750 people who aremoving out, 110,000 people who are staying, and 4000 people in and around the ho st area). The project provides significant health, education, employment and farming benefits to people in remote and inaccessible villages. They now have incomes between about $25 and $60 a year.

The project would give households in the three areas the opportunity to increase their incomes and, in some of the most desperate cases, to move from dependence on food subsidies and government handouts to a level where food supplies are predictable and secure. It follows 31 other poverty-oriented projects in China. The Bank has lent $680 million of a total of $1.3 billion in such projects, for the benefit of 6.3 million people. The partnership between China and the World Bank has already had a measurable impact, and has helped to achieve significant results in China as a whole, with the number of people living in poverty being reduced from 280 million to 80 million in the past decade.

Table 1: IDA Credits and IBRD Loans


Cost ($million)

Credit ($million)

Loan ($million)


Beneficiaries (000)

Inner Mongolia


















Western Poverty






A History of Poverty Reduction

The World Bank and China have long shared the goal of alleviating chronic poverty in remote areas. In 1994 China launched a program to reduce poverty in 592 designated counties in inaccessible mountainous and semi-arid areas in the central and western parts of China. The 1994 program aims to raise the living standards of about 80 million people now living in abject poverty. This goal is affirmed in the latest Country Assistance Strategy prepared by China and the World Bank, and has been at the heart of World Bank-China relations for many years.

Consistent with this longstanding goal, the World Bank is contributing a total of $160 million to the $311 million Western Poverty Reduction Project $100 million in concessional funds from its International Development Association, and $60 million from the IBRD (International Bank for Reconstruction and Development). The money will help to support farmers by providing seeds, fertilizers, and forestry development; irrigation and land improvement; construction of basic roads ; provision of drinking water (some people have to walk up to four hours for water now); basic health and education services; and credit to non-state rural enterprises.

The World Bank President and Chairman of the Board of Executive Directors, Mr. James D. Wolfensohn, said "This has been a particularly grueling project for all of us, in view of the criticisms that have been leveled at the Bank with regard to the handling of environmental and minority issues in China. I am very happy that the government of China and the Bank have agreed that the Inspection Panel should be given a full opportunity to examine this controversial component.

"I believe that an independent review by the Inspection Panel allowing for full and complete exploration of all issues is the appropriate way to deal with this problem. The fact that this component of the project will not start, nor will any monies be drawn for it until the results are known, should allow critics and supporters alike the space and time for full and open consideration of all issues.

"I believe that we have a dedicated and extraordinarily competent staff. We must support and encourage their efforts at the same time that we must be responsive to the welcome comments and criticisms from civil society and others interested in our activities and the achievement of our shared objectives."

The Regional Vice President for East Asia and the Pacific, Mr. Jean-Michel Severino, said "the Western Poverty Reduction Project aims to help poor people have a better life. In Inner Mongolia and Gansu, we are able to do that by assisting them to grow more food and earn more income where they are. In Qinghai, that option does not exist, and the project will enable us to move a proportion of the many people who want to leave their present, unsustainable way of life, and start afresh on farms in what is now a barren desert area. We know of no alternative for these people, and to stay would mean continued malnourishment, even starvation."

Mr. Severino said "The project has been prepared with a view to ensuring that the lives of ethnic minorities in the areas will be better as a result of the project. The project provides special schools and health services for minorities, as well as a guarantee of continued autonomy for Tibetans and Mongols in Haixi prefecture. The project component in Qinghai already provide careful monitoring of environmental impacts at both the area people are leaving and the area to which they are moving."

The project is expected to take six years to complete. The Qinghai component, which involves the voluntary move of 57,750 farmers from heavily eroded hillsides in the east of the province, will begin with a small pilot phase if the government proceeds to implementation after the Inspection Panel review. The pilot phase will involve only about 200 households and will allow close monitoring to ensure that the environmental issues, irrigation systems and health and education services achieve their stated goals before any further investment is made in the project. The pilot phase will also allow an opportunity to establish a basis that the overall status of the ethnic groups is protected and preserved in the new shared surroundings.

Chinese Government's Assurances

The Chinese government, before the Board meeting, pledged its full support for the Inspection Panel review, and said it would use the pilot phase as a time to monitor and evaluate the entire project. "Resettled families are free to return to their original abode if they so choose, for whatsoever reason," the government said.

The government said that "we are in favor of transparency. Transparency brings to light facts and scorches rumors."

Further information on the project can be found at the World Bank's website at:

The World Bank Group: China Western Poverty Reduction Project

Further information on the Inspection Panel can be found at:

The World Bank Group: The Inspection Panel

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