Document of The World Bank FOR OFFICIAL USE ONLY Report No. 67566-CN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY PARTNERSHIP STRATEGY FOR THE PEOPLE'S REPUBLIC OF CHINA FOR THE PERIOD FY2013 - FY2016 October 11, 2012 International Bank for Reconstruction and Development China, Mongolia, and Korea Country Management Unit East Asia and Pacific Region International Finance Corporation East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Last Country Partnership Strategy: May 23, 2006 (Report No. 35435) CURRENCY EQUIVALENTS (as of September 1, 2012) Currency Unit = Renminbi (RMB) US$1.00 = 6.35 RMB ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities IEG Independent Evaluation Group ADB Asian Development Bank IFC International Finance Corporation ASEAN Association of Southeast Asian Nations IMF International Monetary Fund CBRC China Banking Regulatory Commission M&E Monitoring and Evaluation CDB China Development Bank MDGs Millennium Development Goals CDM Clean Development Mechanism MIC Middle-Income Country CHEEF China Energy Efficiency Financing MIGA Multilateral Investment Guarantee Agency Program (IBRD) MOF Ministry of Finance CHUEE China Utility-Based Energy Efficiency MP Montreal Protocol Finance Program (IFC) MSE Micro and Small Enterprise CNAO China National Audit Office MSME Micro, Small, and Medium Enterprise CO2 Carbon Dioxide NCDs Non-Communicable Diseases CPS Country Partnership Strategy NDRC National Development Reform Commission DRC Development Research Center of the State NGO Non-Governmental Organization Council NPS Non-Point Source (Pollution) EE Energy Efficiency NRM Natural Resource Management E&S Environmental and Social ODS Ozone-Depleting Substances ESCO Energy Service Company PFI Participating Financial Institution ESW Economic and Sector Work PMO Project Management Office EU European Union Pops Persistent Organic Pollutants FDI Foreign Direct Investment PPP Purchasing Power Parity FM Financial Management PPP Public-Private Partnership FSAP Financial Sector Assessment Program R&D Research and Development FY Fiscal Year RMB Renminbi (China's currency) FYP Five-Year Plan SME Small- and Medium-sized Enterprise GDP Gross Domestic Product SO2 Sulfur Dioxide GEF Global Environmental Facility SOE State-Owned Enterprise GHG Greenhouse Gas SSKE South-South Knowledge Exchange GNI Gross National Income TA Technical Assistance HCFC Hydrochlorofluorocarbons UN United Nations IBRD International Bank for Reconstruction and UNICEF United Nations Children's Fund Development us United States ICR Implementation Completion Report WBI World Bank Institute IDA International Development Association WHO World Health Organization IDF Institutional Development Fund IBRD IFC MIGA Vice President Pamela Cox Karin Finkeilston Izumi Kobayashi Director Klaus RoMlland Sergio Pimenta Kevin Lu Task Team Leader Kathryn Funk Hyun-Chan Cho /Paul Barbour Rafael V. Dominguez COUNTRY PARTNERSHIP STRATEGY FOR THE PEOPLE'S REPUBLIC OF CHINA Table of Contents Executive Summary ..................................................... i I. Country Context and Challenges .................. ......................1 A. Economic and Social Developments.................................... B. China's Medium-Term Challenges and Strategy ...............................5 II. The World Bank Group Track Record and Lessons Learned ....................9 III. The World Bank Group Strategy ........................................... 13 A. Framework for World Bank Group Engagement in China ................... 13 B. Reenergizing the Drivers of Growth-Demand Driven Knowledge Services........18 C. Strategic Theme One: Supporting Greener Growth ........... ............. 18 D. Strategic Theme Two: Promoting More Inclusive Development ..... .........25 E. Cross-Cutting Theme: Advancing Mutually Beneficial Relations with the World.....29 F. Delivering the World Bank Group Program. ........................ .....32 IV. Managing Risks ........................................ ...........34 Boxes Box 1: Poverty and Inequality in China ..........................................2 Box 2: China 2030......................................................8 Box 3: Highlights of World Bank Group Assistance to China, 2005-2011 ...... ....... 10 Box 4: FY 2012 China Country Survey ....................................... Box 5: Good Practices for a Gender-Sensitive Portfolio in China .................... 12 Box 6: How IBRD Lending Works in China: Projects as Platforms for Knowledge Sharing 14 Box 7: World Bank Group Support for Increasing Energy Efficiency in China .... ......20 Box 8: Climate Change Mitigation and Adaptation in China. .................. .....24 Tables Table 1: Key Targets in the 11th and 12th Five-Year Plans..........................4 Table 2: Indicative Themes of Analytical and Advisory Activities ................... 16 Annexes Annex 1: China Country Partnership Strategy Results Matrix.......................35 Annex 2: Gender and Development in China ............................. .....44 Annex 3: Country Partnership Strategy Completion Report................... .....46 Annex 4: Country Partnership Strategy Consultations ..................................88 Annex 5: Standard Country Assistance Strategy Annexes .......... ...............89 Map of China: IBRD No. 33387 Acknowledgments This Country Partnership Strategy is a product of the entire World Bank Group China Country Team. Team Leaders were Kathryn Funk (IBRD) and Hyun-Chan Cho/Rafael Dominguez (IFC). The core CPS team comprised Carter Brandon, Gailius Draugelis, Chorching Goh, Victoria Gyllerup, Ardo Hansson, Ede jjasz-Vasquez, Yingnan Jia, Paul Kriss, Mark Lundell, Philip O'Keefe, Paul Procee, John Scales, Elaine Sun, Jun Wang, and Min Zhao. Other key country team members who provided valuable advice and inputs and/or participated in consultations include the following: Tijen Arn, Kofi Awanyo, Wendao Cao, Jianqing Chen, Xin Chen, Yanni Chen (IFC), Sing Cho, Luc Christiaensen, Ying Fan, Ke Fang, Patricia Fernandes, David I, Rabih Karaky, Phil Karp, Bich Hanh Le (IFC), Li Li, Xiaoyan Liang, Xiaofan Liu, Guangqin Luo,Liping Jiang, Patrick Labaste, Jin Liu, Zhi Liu, Catherine Martin (IFC), Nick Marwell, Andrew Mason, Miki Matsuura, Lasse Melgaard, Joyce Msuya, Gerald Ollivier, Ximing Peng, Alan Piazza, Binyam Reja, Ulrich Schmitt, Tuo Shi, Yanqin Song, Chongwu Sun, Rob Taliercio, Alexei Volkov (IFC), Dewen Wang, Ying Wang, Xiaodong Wang, Mara Warwick, Elizabeth M. White (IFC), Liping Xiao, Jian Xie, Shuo Zhang, Ximing Zhang, Dong Yi, Rong Zhang (IFC), Wenlai Zhang, Yabei Zhang, Luan Zhao, Min Zhao. Tianshu Chen provided indispensable assistance with translation and interpretation. Executive Summary China's economic and social development over the past three decades has been remarkable. GDP growth averaging about 10 percent a year has lifted more than 600 million people out of poverty. All Millennium Development Goals have been reached or are within reach. With a population of 1.3 billion, China recently became the second largest economy. Yet China remains a developing country and its market reforms are incomplete. In 2011, China's gross national income per capita of $4,930 ranked 114th in the world; and over 170 million people live below the $1.25-a-day international poverty line. China is home to the second largest number of poor in the world. As recognized by China's 11th Five-Year Plan (FYP, 2005-20 10), the country's pattern of growth, which has relied on industry and investment, has led to growing economic, environmental, and social imbalances. Moreover, the country's traditional sources of growth are likely to weaken. China's main challenge in the medium term is to navigate the uncertain global economic environment while putting the economy on a more sustainable growth path. This involves reinvigorating the underlying drivers of growth, shifting to a more consumer- based economy, addressing pollution and natural resource depletion, and reversing inequalities of income and opportunity. China's 12th FYP (2011-2015) forcefully addresses these issues. It highlights the development of services and measures to address environmental and social imbalances, setting targets to reduce pollution, to increase energy efficiency, to improve access to education and healthcare, and to expand social protection. Its annual growth target of 7 percent signals the intention to focus on quality of life, rather than pace of growth. The World Bank Group's Country Partnership Strategy (CPS) for FY13-FY16 is aligned with China's 12th FYP. It is also informed by the joint study, China 2030, prepared by the World Bank and the Development Research Center of the State Council. To support China's goal of a harmonious society, the Bank Group will focus on three main areas of engagement: * Supporting greener growth, by helping China shift to a more sustainable energy path; enhancing urban environmental services; promoting low-carbon urban transport; promoting sustainable agriculture practices; piloting sustainable natural resource management approaches; demonstrating pollution management; and strengthening mechanisms for managing climate change. * Promoting more inclusive development, by increasing access to quality health services and social protection; strengthening skills development programs, including for migrant workers; enhancing opportunities in rural areas and small towns; and improving transport connectivity for more balanced regional development. * Advancing mutually beneficial relations with the world, by supporting China's South-South cooperation and China's role as a global stakeholder. The Bank Group's most valuable contribution in China remains its role in bringing and applying ideas, innovation, and knowledge. The CPS emphasizes knowledge sharing and 1 cooperation through advice and analytical products and through public and private sector investments at the provincial level that introduce and demonstrate new approaches. Non- lending services are expected to grow in importance over the CPS period, building on China 2030. IBRD lending over the CPS period is expected to remain stable at about US$1.5 billion for 10-13 projects per year. IFC's investments are expected to remain strong at US$500- 1,000 million for about 25 projects per year. MIGA retains significant room for further exposure in China and will use this available space to pursue projects aligned with its global strategy. The World Bank Group - IBRD, IFC, and MIGA - will continue to collaborate to maximize their impact. Risks to the Bank Group's development effectiveness in China are deemed moderate, given China's good capacity, strong ownership of the Bank Group program, and track record of high performance. 11 COUNTRY PARTNERSHIP STRATEGY FOR THE PEOPLE'S REPUBLIC OF CHINA 1. Over the past 32 years, China and the World Bank Group have forged a strong two- way and evolving partnership. In the early years, the World Bank brought international experience to help design economic reforms, improve project management, and address key bottlenecks to growth. More recently, the Bank Group has helped address environmental challenges and other development priorities. The Bank Group strategy will continue to evolve as China faces new challenges in its transition from middle- to high-income status. 2. This Country Partnership Strategy (CPS) for fiscal years (FYs) 2013-2016 is aligned with the challenges and priorities outlined in China's 12th Five-Year Plan. The CPS is also informed by the recent joint study-China 2030: Building a Modern, Harmonious, and Creative Society (China 2030) prepared by the World Bank and the Development Research Center of the State Council.' Consistent with China's priorities, the CPS focuses on three main themes: green growth; inclusive development; and mutually beneficial relations with the world. Bank Group support to China is designed to play a catalytic role through innovation and demonstration. In addition, the Bank's Group's engagement with China contributes to the Bank's global knowledge and helps China share its development experiences with the rest of the world. I. COUNTRY CONTEXT AND CHALLENGES A. Economic and Social Developments Developments over Three Decades 3. Since initiating market reforms in 1979, China's economic performance has been remarkable. Gross domestic product (GDP) growth has averaged about 10 percent a year; and per capita gross national income (GNI) reached $4,930 in 2011 (in current dollars), categorizing China as an upper-middle-income country.2 Importantly, more than 600 million people were lifted out of poverty as China's poverty rate fell from 84 percent in 1981 to 13 percent in 2008.3 China's rapid growth has made it a significant presence on the global stage-it is the world's largest exporter and the second largest importer and it emerged in 2011 as the world's second largest economy. 4. Two historic transformations-market reform and urbanization-have driven China's economic expansion. In a gradual and experimental way, China has shifted from a closed, centralized, and command-based economy to a more open and market-based one. Rapid urbanization-the largest peacetime movement of people in history has transformed China from a rural, agricultural economy into an increasingly urban and economically diversified one. Thirty years ago, 80 percent of China's population lived in rural areas and agriculture accounted for about one- third of GDP. Today, just over half the population lives in urban areas, while agriculture makes up around one-tenth of GDP. 1 World Bank and Development Research Center of the State Council (2012): Conference version at www.worldbank.org/cn, final version forthcoming. 2 World Development Indicators database. In 2005 purchasing power parity (PPP) terms, China's 2011 per capita GNI was $8,430. As measured by the percentage of people living on the equivalent of US$1.25 of less per day in 2005 PPP terms. 5. China's social development has been equally impressive. All Millennium Development Goals have been reached or are within reach. China has achieved nearly universal coverage and gender parity in basic education and has rapidly expanded enrollment in senior high school and tertiary education institutions. In addition, the state enterprise-based "iron rice bowl" social protection system has been transformed into a market-compatible system with rapidly expanding coverage. China has rebuilt its health delivery network, sharply reduced the burden of infectious disease, and expanded coverage of health insurance to almost all rural and urban citizens. From 1998 to 2007, maternal mortality declined from 110 to 38 per 100,000 live births. 6. Its remarkable economic success notwithstanding, China remains a developing country. It ranked 114th in the world in 2011 in terms of GNI per capita.4 Over 170 million Chinese continue to live below the $1.25-a-day per capita international poverty line (in 2005 PPP terms)-the second largest number of poor in the world after India. Continuing to combat poverty and reducing income inequality remain important challenges in China (see Box 1). Box 1: Poverty and Inequality in China China's remarkable growth has been accompanied by a parallel reduction in poverty and improvement in human development indicators. More than 600 million people have moved out of poverty over the past 30 years: the number of people living on the equivalent of US$1.25 or less (in 2005 PPP terms) was reduced from 835 million in 1981 to 173 million in 2008-still a large number. Many more are "near poor"-just above the poverty line and vulnerable to shocks that could cause them to fall back into poverty. Extreme poverty, in the sense of not being able to meet the most elementary food and clothing needs, has been almost eliminated in China. The Chinese government has accorded high priority to poverty reduction, implementing a series of clearly articulated rural poverty alleviation strategies. The most recent is the Outline for Development-Oriented Poverty Reduction for China's Rural Areas (2011-2020). In November 2011, the government adjusted the official rural poverty line to be more in line with international standards, qualifying 100 million more people for a variety of benefits that will bring more resources to poor regions. The characteristics of poverty have changed, making poverty reduction increasingly difficult. The remaining poor are more dispersed. Poverty is mainly a rural phenomenon and most severe in China's western regions, in upland villages, among ethnic minorities, and in households with low levels of educational attainment. Relative to the general population, the elderly and children are more likely to be poor, reflecting the high numbers of children in poor households. There are growing concerns about social exclusion of migrant workers, who lack an urban resident status and have limited access to basic social services. China has high inequality of income, consumption, assets, and opportunity. Disparities have increased between rural and urban areas and also within rural and urban areas. Although the rise in income inequality may have slowed or paused, thanks in part to increased transfers of public resources to poor rural areas, other dimensions of inequality-such as asset ownership, particularly housing-have continued to rise. Inequalities in incomes are mirrored and exacerbated by large disparities in opportunities to access quality social services and social protection. Using income and poverty as a lens, China can be viewed as three distinct regions. The first is the eastern coastal region, home to 45 percent of the population, which has enjoyed rapid growth and poverty reduction owing to its geographical location and early introduction of reforms. By contrast, the central and western regions, home to 55 percent of the population, have lagged behind. If these two lagging regions formed a separate economy, its GNI per capita would be about half that of the coastal region. 4 World Development Indicators, The World Bank. 2 7. There is growing recognition of the need to change the country's growth pattern. While serving China well in many respects, rapid growth and accompanying structural change have contributed to economic, environmental, and social imbalances. Spurred by high savings, cheap finance, and export-oriented policies, China's growth has been capital intensive, industry led, energy and resource intensive, and environmentally damaging. The priority accorded to industry has stunted services development, while the emphasis on physical capital has constrained investment in the quality of human capital, increasing inequality. Notwithstanding massive internal migration from farms to cities, policies such as "hukou" (the household registration system) have constrained the welfare benefits of labor mobility.5 The share of wages in national income has fallen steadily; the share of capital has climbed. Progress under the 11th Five-Year Plan (2006-2010) and Recent Developments 8. Recognizing shortcomings in the pattern of growth, the 11th Five-Year Plan (FYP) emphasized environmental and social objectives. It sought to make domestic demand the main driver of growth, with services as the leading sector. The 1 1th FYP's objective was to better balance economic growth with greater equality of opportunity and to improve basic services (especially health, education, and social protection), resource conservation, energy efficiency, and environmental protection. To meet these objectives, the 1 1th FYP set out 15 main tasks and strategic priorities supported by quantitative indicators (see selected targets and results in Table 1). 9. Despite the global financial crisis, growth during the 11th FYP period remained strong. It averaged 11.2 percent, far exceeding the target of 7.5 percent. Macroeconomic management was broadly effective, keeping inflation at an average of 2.9 percent, the budget (broadly) balanced, and public debt low. China implemented a large stimulus package in 2009-10 to cushion the effects of the global economic crisis, expand social infrastructure, and stimulate green investments. Although the stimulus would later contribute to overheating and heightened macroeconomic risks, including goods and asset price inflation, indicators suggest that the authorities have so far been successful in engineering a "soft landing" (see para. 11). 10. Considerable progress was also made toward improving social protection and education and health services, particularly in rural areas. The government demonstrated its intent to push ahead with structural reforms by increasing renmimbi (RMB) exchange rate flexibility, introducing a fuel tax, collecting dividends from state-owned enterprises, expanding social security coverage, and increasing public investment in agriculture and rural areas. But the onset of the global financial crisis and the focus on maintaining rapid growth in the midst of a global slowdown meant that other reforms were given less priority. As a result, progress in rebalancing the economy was mixed. On the one hand, the external trade surplus declined and the rise in income inequality appears to have slowed. On the other, less progress was made in shifting the economic structure away from industry and toward services, increasing energy efficiency, and improving key environmental indicators. 11. China's economy has slowed since 2010 due to the phasing out of the 2009-10 stimulus policies and a weaker global economic environment. Growth slowed from 10.4 percent in 2010 to 9.3 percent in 2011. While consumption has remained strong due to rapidly rising wages and solid labor market fundamentals, weak external demand and slowing investment have exerted a drag on 5 Hukou is China's household registration system, which divides the population into rural (agricultural) and urban (non-agricultural) residents and is used to determine many social entitlements. The hukou status of parents is generally transferred to children. 3 growth. The previously booming property sector has also turned, with the majority of China's larger cities reporting modest price reductions and sharply lower sales volumes. 12. 2012 will likely see a further deceleration in growth to around 7.7 percent. This is in part because global growth will remain anemic and the real effective exchange rate may continue to appreciate marginally; both factors will slow export growth and have an impact on investment. Risks mainly reflect external factors, such as uncertainties in the eurozone, as well as domestic risks associated with the residential property sector. Fortunately, China enjoys sufficient fiscal space to permit a vigorous fiscal response should the global economy slow suddenly. This time, more of the stimulus should be channeled through the fiscal rather than the monetary system and be directed at furthering structural reforms in support of sustainable and inclusive growth over the medium term. Table 1: Key Targets in the 11th and 12th Five-Year Plans 11th FYP 12th FYP Target Actual Target Type of 2010 2010 2015 Target" Economic Growth and Structure GDP growth rate (%, yearly) 7.5 11.2 7.0 A Share of services in GDP (%) 43.5 43.2 31 47.2 A Urbanization rate (%) 47.0 49.93 53.9 A Science and Education Nine-year compulsory education retention rate (%) -- 89.7 93.0 0 Senior secondary school gross enrollment rate (%) -- 82.5 87.0 A Ratio of research and development expenditures to GDP (%) 2.0 1.75 2.2 A Innovation patents per 10,000 population 1.7 3.3 A Resources and Environment Reduction of water use per unit of industrial value added (%)2 -- 36.7 30.0 0 Efficiency coefficient of irrigation water 0.50 0.50 0.53 A Reduction in energy use per unit of GDP (%)2/ z20.0 19.1 16.0 0 Share of non-fossil energy in total energy consumption (%) -- 8.3 11.4 0 Reduction in CO2 emissions per unit of GDP (%)2 -- -- 17.0 0 Reduction in emissions of major environmental pollutants -- -- Sulphur dioxide - SO2 (0)2/ 10.0 14.29 8.0 0 Chemical oxygen demand (%)2/ 10.0 12.45 8.0 0 Ammonia nitrogen (%)2 -- -- 10 0 Nitrogen oxides - NOx (%)2 -- -- 10 0 Total forest cover (%) 20.0 20.36 21.66 0 Public Services and Quality ofLife Registered urban unemployment rate (%) 5.0 4.1 <5 A Increase in urban employment in five years (million) 45.0 57.71 45.0 A Urban residents covered by basic pension insurance (million) 223 257 357 0 Increase in population covered by basic health insurance (%) -- -- 3.0 0 Low-income housing units built (million) -- -- 36.0 0 Total population (billion) <1.36 1.341 <1.39 0 Average life expectancy -- 73.5 74.5 A Sources: China's authorities, National Bureau of Statistics, and staff estimates. 1/ A = Anticipated; 0 = Obligatory 2/ Accumulated reduction in five years. 3/ Updated to reflect the latest statistics; 2015 targets revised by applying growth targets to latest statistics. 4 B. China's Medium-Term Challenges and Strategy Challenges 13. The Chinese economy faces constraints to sustained growth. First, China must navigate the next five years, which will be risky as the global economy enters a new and volatile phase and works its way through the after-effects of the global financial crisis. The policy challenge is to ensure that the economy slows in a gradual fashion. In the longer term, China's traditional sources of growth are likely to weaken. Most of the growth contribution from shifting resources from agriculture to industry has already occurred. Also, going forward, the continued accumulation of capital will inevitably contribute less to growth as the capital-labor ratio rises. Moreover, the labor force itself is expected to decline. The population will age rapidly and the dependency ratio will rise, reducing household savings. Aging will have profound economic and social implications that will affect growth and the pattern of domestic consumption. Finally, total factor productivity growth a measure of improvements in economic efficiency and technological progress has also declined over time, in part because the economy has exhausted the immediate gains from first-generation policy reforms and from absorbing imported technologies that were relatively easy to access and use. 14. Given the anticipated structural slowdown, China needs to reinvigorate the underlying drivers of growth to sustain growth over the medium term. China's private sector is playing an increasingly important role in the economy-in 2010, private enterprises contributed an estimated 73 percent of gross industrial output and employed about 81 percent of the industrial labor force.6 However, state-owned enterprises still dominate key sectors of the economy. Breaking up monopolies and pursuing policies that support competition and business development will be needed to build a more vibrant private sector capable of sustaining broad and inclusive growth. China will also need a flexible and dynamic labor market, a sound and more commercially oriented financial system, and land policies to support more efficient land use. Continuing and deepening China's fiscal reforms will be important for establishing a fiscal system capable of delivering increasing public goods and services, including meeting new environmental and social challenges. 15. Addressing the country's environmental deficit is an ongoing challenge. China is now the world's largest energy consumer and green house gas emitter. Rapid growth has also led to natural resource depletion and environmental pollution, the costs of which have approached 10 percent of GDP.7 Air pollution has had severe public health impacts, especially given the growing numbers of urban residents. More than half of China's water is polluted, over 300 million people use contaminated water supplies, a third of China's waterways are below the government's own safety standards, and about a fifth of China's farmland has been contaminated with heavy metals.8 China's future development and food security depends on reducing the environmental impact of its economy, improving the sustainability of its land and water use, and reducing its future impact on the global environment. The challenge going forward will be to convert these pressures into new sources of growth by adopting a green growth model that taps into new global markets in green technologies while it solves many of China's pressing environmental concerns. 16. The risk of lower growth rates is exacerbated by China's high inequality in income, consumption, and access to high-quality public services. Notwithstanding massive internal migration from farms to cities, barriers to labor mobility-the household registration (or "hukou") 6 China Statistical Yearbook, 2011. 7 World Bank calculations, 2008 data. Ministry of Environmental Protection, People's Republic of China. 2011 China State of the Environment Report. 5 system, the lack of portability of pension plans, weak labor market institutions, and inadequate job market information have trapped tens of millions of farm families in low-paying, low-productivity work. This, combined with factor and resource price policies that favored enterprise profits and implicitly taxed household incomes, meant that the share of wages in national income fell steadily in the first decade of this century and the share of capital climbed. Furthermore, the emphasis on investment concentrated in urban areas has its counterpart in a lower share of investment in rural areas-especially in health and education. The "opportunity gap" between urban and rural areas has grown. Social tensions have ratcheted up, resulting in a growing number of public protests. Unresolved, this could pose a threat to growth and stability in coming decades. 17. Strengthening economic and environmental governance and rule of law is a cross- cutting challenge. According to surveys in China, the public's trust in public services and the judicial system is low, creating the potential for social frustration and underscoring the importance of building an impartial and effective legal and justice system and improving equality of opportunity and accessibility to high-quality social services. An essential element of reforms in these areas will be greater consultation and participation of the public in decision making and oversight of service delivery (including by the justice system), increased transparency in the operations of these branches of government, and greater accountability to stakeholders and citizens. China's 12th Five-Year Plan 18. China's 12th FYP (2011-2015) seeks to address the medium-term challenges outlined above by continuing the thrust pioneered in the 11th FYP. It highlights the development of services and measures to address social, environmental, and external imbalances. It focuses on improving the quality of life, rather than just the pace of growth, pays attention to balanced development, and gives greater prominence to urbanization in inland regions and smaller cities. Its growth target of 7 percent is set low on purpose to signal that the objective is the quality of growth not growth alone. (Selected 12th FYP targets are shown in Table 1.) 19. The 12th FYP stresses improvements in economic efficiency to underpin growth sustainability. It calls for moving up the value chain in manufacturing while enhancing innovation and promoting the development of seven new strategic industries, three of which are related to the environment and energy efficiency-"energy efficiency and environment," ''new energy," and "new energy vehicles." It sets a target for research and development spending to reach 2.2 percent of GDP; emphasizes strengthening the creation, use, protection, and management of intellectual property rights; focuses on updating research funding and venture capital; and pushes for greater commercialization of research undertaken at government-sponsored universities and research institutions. The 12th FYP also stresses the need for higher education reform in science and technology, and aims to increase the high school enrollment rate to 87 percent by 2015. 20. Like its predecessor, the 12th FYP emphasizes energy conservation and environmental protection. It calls for non-fossil fuels to reach 11.4 percent of primary energy consumption (up from 8.3 percent), energy use per unit of GDP to decline by 16 percent, carbon dioxide emissions per unit of GDP to fall by 17 percent, major pollutants to decrease by between 8 and 10 percent, and forest cover to rise to 21.66 percent, in line with China's Copenhagen commitment on forests. The 12th FYP emphasizes climate change and details China's commitment to international cooperation and the UN-led climate negotiation process. 21. The 12th FYP also urges inclusive and equitable development as core elements for promoting a "harmonious society." To make sure all people benefit from development, the government aims to improve access to high-quality public goods and services and expand the social 6 protection network to cover all people, urban and rural. The population covered by pension schemes is targeted to increase by 100 million, the coverage rate of health care insurance is to be increased by 3 percentage points from an already very high level, and the level of financial protection from health shocks is expected to be raised. These advances will be important as societal aging gathers pace during the FYP period. The government has set a target to provide 36 million urban public apartments by 2015. Some 45 million urban jobs are expected to be created, and the urban unemployment rate is expected to remain below 5 percent. The 12th FYP also anticipates that the disposable income of households will grow faster than GDP, thus raising the share of labor income in GDP after a period of decline and stagnation in the 2000s. 22. The 12th FYP's focus on inclusive development emphasizes the protection of women's legal rights and the importance of ensuring women's access to basic services. It further highlights the need to improve women's ability to contribute to economic development by promoting female employment and entrepreneurship. (See Annex 2 for additional information on gender and development in China.) 23. The government also plans to deepen administrative reform and strengthen efforts to combat corruption. To improve provision of basic public services, the 12th FYP seeks to strengthen accountability and public financial management and better define central and local government roles and responsibilities. In addition to administrative reforms, the government aims to increase the effectiveness of anti-corruption systems, including by improving transparency, reporting, and enforcement. China 2030 24. Building on the 12th FYP, a recent report written jointly by the World Bank and China's Development Research Center of the State Council (DRC) charts possible directions for China's reforms to 2030. The report, China 2030, notes that China's successful development strategy over the past three decades has made it an upper-middle-income economy today. But it points out that the opportunities and challenges in the next two decades will be unlike those encountered in the past. As a result, the growth model that helped it succeed in the past is unlikely to work as successfully in the future. 25. The joint team focused on how China could become a modern, harmonious, and creative society. Anticipating global megatrends and examining China's opportunities, challenges, and capabilities over the coming 20 years, the team proposed six strategic directions (see Box 2). At its core, China 2030 proposes changing the role of government and its relationship to markets, the private sector, and society at large. More importantly, it focuses on the "how," not just the "what," and provides a broader context within which to set the Bank's program in China. 7 Box 2: China 2030 In September 2010, China and the World Bank Group celebrated 30 years of close collaboration. Over the course of those 30 years, China transitioned from a low-income country to an upper-middle-income country. To commemorate this partnership, Chinese leaders endorsed a World Bank proposal to work jointly to identify and analyze the challenges facing China as it moves from middle- to high-income status over the next 20 years. The report identifies six strategic directions: (i) Strengthen the foundations for a market-based economy-by redefining the role of government, developing the private sector, promoting competition in output markets, and deepening reforms in the land, labor, and financial markets. While providing relatively fewer "tangible" public goods and services directly, the government will need to provide more "intangible" public goods and services like systems, rules, and policies that increase production efficiency, promote competition, facilitate specialization, enhance the efficiency of resource allocation, protect the environment, and reduce risks and uncertainties. (ii) Accelerate the pace of innovation-by creating an open innovation system in which competitive pressures encourage Chinese firms to engage in product and process innovation not only through their own research and development (R&D) but also by participating in global research and development networks. Although China's R&D investment as a share of GDP is high by international standards for a country at its per capita income level, much needs to be done to ensure that this investment yields commercially viable innovations that will help Chinese firms move up the value chain and compete effectively in the same product space as advanced economies. The emphasis will need to be on: increasing the technical and cognitive skills of university graduates and building a few world-class research universities with strong links to industry; fostering "innovative cities" that bring together high-quality talent, knowledge networks, dynamic firms, and learning institutions, and allow them to interact without restriction; and increasing the availability of patient risk capital for private start-up firms. (iii) "Go green"-greener development and increasing efficiency of resource use will not only improve the level of well-being, it could potentially drive rapid, sustained growth as well. China does not want to replicate the experience of advanced countries that became rich first and cleaned up later. Instead, China intends to grow green by following a pattern of economic growth that boosts environmental protection and technological progress, a strategy that could become an example to other developing countries and perhaps even advanced economies. Achieving this will require a combination of incentives, regulations, standards, public investments - all of which together will encourage new investments in low-pollution, and energy- and resource-efficient industries and build international competitiveness in a global sunrise industry. (iv) Expand opportunities for all-to access decent jobs, finance, social services, and portable social security to reverse inequality, help households manage employment- and age-related risks, and enhance the household welfare benefits of labor mobility. To achieve this will require: more and better quality public services to underserved rural and migrant populations-from early childhood to tertiary education, from primary health care to health for the aged; improving the efficiency and quality of core health and education services to strengthen their contribution to economic transformation, ensure their sustainability, and enhance equality of opportunity; restructuring the social security system to improve portability of social security instruments; and participation by all segments of society-public and private, government and non-government, households and enterprises-to share responsibilities in financing, delivering, and monitoring social services. Reforms in social services and social security will need to be facilitated by phased reforms of the hukou system to reduce disparities in social entitlements for migrants. (v) Strengthen the fiscal system-by increasing the efficiency of the tax structure, improving government financial management, and ensuring that local governments have adequate financing to meet heavy and rising expenditure responsibilities. A key element of future fiscal strategy will be to keep the expenditure envelope under control while reorienting expenditure composition toward new social and environmental challenges. (vi) Seek mutually beneficial relations with the world-by becoming a proactive stakeholder in the global economy, actively using multilateral frameworks, and shaping the global governance agenda of international trade, global financial stability, climate change, food security, and the international aid architecture, among others. 8 II. THE WORLD BANK GROUP TRACK RECORD AND LESSONS LEARNED 26. The 2006 CPS, coterminous with the 11th FYP, aimed to support China's efforts to shift its growth pattern. It emphasized the World Bank Group's role as a knowledge institution-many Bank Group-financed projects introduced innovations or piloted new approaches, and the Bank Group facilitated China's South-South cooperation (see Box 3: Highlights of World Bank Group Assistance to China). 27. The CPS Completion Report rated World Bank Group program performance as satisfactory. The 2006 CPS organized World Bank Group (WBG) assistance around five thematic pillars: (i) Integrating China into the world economy; (ii) Reducing poverty, inequality, and social exclusion; (iii) Managing resource scarcity and environmental challenges; (iv) Financing sustained and efficient growth; and (v) Improving public and market institutions. Out of 35 outcomes in the 2006 CPS results framework, 33 were partially or fully achieved. (See Annex 3 for the full CPS Completion Report.) 28. Portfolio performance is among the best of large IBRD borrowers. China is among the top three countries in terms of number of active IBRD projects and net IBRD commitments: as of September 2012, there were 74 IBRD-financed operations with a net commitment amount of US$10 billion. IBRD investment from FY07 to FY12 amounted to US$9.9 billion for 75 investment operations, averaging about $1.65 billion per year; and about 96 percent of FY07-FY12 projects were rated satisfactory or above. (See Annex 5 for selected indicators of portfolio performance.) In addition to delivering results at the provincial and local levels, many IBRD-financed projects have demonstrated approaches that can be scaled up elsewhere. According to a recent client survey, piloting innovations is viewed as one of the Bank's greatest values to China (see Box 4). 29. Trust fund resources have played an important role in leveraging IBRD impact, especially for environmental objectives. As of the end of FY12, the trust fund portfolio comprised 94 grants with total commitments of US$1.8 billion. Carbon finance operations accounted for more than 64 percent of commitments, and a large ozone depleting substance project (under the Montreal Protocol) and 18 GEF-financed projects accounted for another 33 percent of commitments. 30. The Bank's analytical and advisory activities (AAA) have responded to client needs, underpinned investments, and set the course for the Bank's future engagement. Provincial-level AAA, such as on rural-urban integration in Chongqing and Guangdong, generated high interest at both provincial and national levels and influenced the lending pipeline. Policy dialogue and analytical work at the national level influenced renewable energy policy, national recycling legislation, and strategies for education, health, water resource management, and adapting agriculture to climate change. The Bank supported China's South-South cooperation, especially with Africa, through workshops and training. The Bank helped evaluate progress under the 11th FYP and provided inputs to the 12th FYP; and the Bank's Economic Updates have international readership. China 2030, undertaken from 2010 to 2012, lays the framework for analytical engagement over the coming years. 31. The IFC focused on climate change, balanced and inclusive rural-urban growth, and sustainable South-South development. IFC's work on climate change aimed to demonstrate market-based approaches to reduce the economy's energy intensity and increase efficient use of water resources. To help balance rural-urban growth and reduce the gap between urban and frontier/rural areas, IFC undertook investments and advisory work in micro, small, and medium enterprise (MSME) finance, agribusiness, infrastructure, and food safety. IFC's support for South- South cooperation included helping Chinese companies contribute sustainably to global economic development, particularly in Africa, through enhancing the social, environmental and economic 9 impact of Chinese engagement and helping to mobilize Chinese resources. In the last six years, from FY07 through FY12, IFC's investment commitments in China totaled US$3.6 billion (including over US$850 in mobilization) in 116 projects. In FY12 alone, IFC committed 19 projects worth US$637 million, of which US$577 million for IFC's own account. Around two-thirds of FY12 investments were in frontier regions of China, while almost half were supporting MSMEs and over one-third had a positive impact on climate change. As of June 30, 2012, IFC's committed exposure in China had reached US$2.4 billion, comprising over 100 client companies, with outstanding exposure at US$1.8 billion. Box 3: Highlights of World Bank Group Assistance to China, 2005-2012 Piloting policies that address the causes of inequality: Analytical work and innovative pilots at the provincial level have helped improve access to high-quality and affordable healthcare, and have also supported the roll-out and integration of two new national health insurance programs. Analytical work and policy dialogue have informed medium- and long-term strategies for educational reform, and projects have improved the quality of education in western China and the quality of technical and vocational training, including for migrant workers. Strengthening safety nets and social security: The Bank has continued its support for China's ongoing pension reforms through a major report on the long-run pension system and complementary AAA on rural elderly welfare. Engagement on the national dibao (minimum living allowance) social assistance system has also supported China's efforts to support its most vulnerable citizens. AAA on labor markets and migration has increased the understanding of labor market dynamics and informed policies to enhance the efficiency and equity of labor policies. Catalyzing an integrated approach to water and environmental management. IBRD/GEF-financed investment operations helped demonstrate integrated water and environmental management approaches that are being scaled up within China and incorporated into national policy. These approaches are of global significance and have attracted the attention of other water-scarce countries, creating opportunities for South-South learning. JFC has committed several water sector projects, and MIGA has supported innovative public-private partnership arrangements for urban water, wastewater, and solid waste management. Increasing energy efficiency and renewable energy: The Bank financed China's first three energy service companies (ESCOs), which help industries reduce energy consumption and improve efficiency. China now has one of the largest ESCO markets in the world. JFC's China Utility-Based Energy Efficiency Finance Program facilitated $1.4 billion in loans, eliminating 17.8 million tons of greenhouse gas emissions annually. GEF-supported projects have also demonstrated model urban heat supply systems and consumption-based billing policies and piloted green building developments. The China Renewable Energy Scale up Program Phase I financed studies whose recommendations were adopted into policy and law, enabling China's impressive scale-up of renewable energy. Supporting China's international environmental commitments: The Bank has helped advance China's global environmental agenda, including phasing out persistent organic pollutants. Bank analytic work has helped underpin China's greenhouse gas mitigation efforts and 12th FYP climate change objectives. The Bank helped establish the Clean Development Mechanism (CDM) in China and has been an important intermediary as the market has grown; IFC is exploring a co-investment partnership with the CDM. Deepening financial markets: Bank Group support has helped introduce commercially sustainable micro and small business financing, promoted further rural financial reforms through policy dialogue and TA, and assisted in the continued strengthening of financial infrastructure (e.g., credit information and reporting). JFC helped introduce a nation-wide credit reporting system. JFC's Secured Transactions Reform Program in China has helped farmers and small businesses access more than US$3 trillion in financing by supporting the use of movable assets as collateral. IBRD and JFC have also played a catalytic role in opening up the capital market and promoting local currency financing through issuing Panda Bonds and Dim Sum Bonds. Facilitating South-South knowledge exchange: The Bank Group organized events to share China's development experience with other countries, especially in Africa, on a range of topics-special economic zones, agriculture and poverty reduction, health, vocational training, watershed and land management, carbon finance, and transportation. Responding to an emergency: Both IBRD and JFC responded quickly following the devastating May 2008 8.0 magnitude earthquake in Sichuan province, which left about 100,000 people dead or missing and over 10 million people homeless. 10 32. MIGA guarantees and technical assistance focused on infrastructure, national and regional investment promotion, and South-South investment. MIGA supported foreign direct investment (FDI) into China principally in the urban water, wastewater, and solid waste treatment sector, including projects in the western part of China. Its current portfolio consists of five projects totaling US$96 million in guarantee coverage. Given the improving investment climate, MIGA has had three recent contract cancellations. MIGA has undertaken joint initiatives with IFC Advisory Services to help the Ministry of Commerce and Sichuan province through its investment promotion programs and benchmarking studies. MIGA has been active in cooperating with its partners and with Chinese banks and companies to support Chinese outward investment. Lessons Learned 33. The FY13-16 CPS takes into consideration lessons identified in the CPS Completion Report and during CPS consultations (see Annex 4). Key lessons include: (i) Focusing on innovation and pilots at provincial and subprovincial levels is a good way to leverage World Bank financing given China's development model. Since the 1980s, China had deployed a pragmatic, learning-by-doing approach to development-reforms are tested at the village or provincial level and then scaled up. Provincial authorities are encouraged to experiment. Box 4: FY 2012 China Country Survey From December 2011 through March 2012, about 500 stakeholders of the World Bank Group throughout China were invited to provide their opinions on the Bank Group's support to the country. About 200 stakeholders (40 percent) responded to the survey, which is about the same response rate as the previous country survey in FY 2006. The largest number of respondents came from local government and local project management offices (36 percent), followed by ministries (19 percent). Other respondents included academia and representatives of media, NGOs, and financial institutions. Survey Results * Priorities for Bank Resources. Respondents across most stakeholder groups and geographic locations indicated that the Bank should focus most of its resources on environmental improvement and poverty reduction. Approximately a third of respondents reported that it would be most valuable for the Bank to focus its research and knowledge on environmental and natural resource management issues, with 20 percent identifying social protection. * Perceived Value of the Bank's Work. Respondents indicated that the Bank's greatest value to China was in bringing new concepts and innovation, transferring international best practices, and piloting innovations to be scaled up. In contrast, FY 2006 respondents rated financial resources as the most highly valued attribute of the Bank. * Effectiveness of the Bank. Views on the Bank's overall effectiveness remain high (7.8 on a 10 point scale with 1 being not very effective and 10 being very effective). Respondents from provinces outside of Beijing gave higher ratings for the Bank's overall effectiveness in China than respondents from Beijing. Since the FY 2006 survey, ratings have increased in a number of areas, including alignment of the Bank's work with country priorities, staff accessibility, the way the Bank promotes inclusion with non-governmental groups, capacity building, and sharing knowledge about international best practices (identified as one of the Bank's greatest values). More than half of respondents identified slow and complex processes as the Bank's greatest weakness. * The Future Role of the World Bank in China. Respondents indicated that the Bank should play a significant role in China's development in the next five years (8.2 on a 10-point scale, with 1 being not a significant role and 10 being very significant role). When asked how the Bank should make itself of greater value in the future, nearly 40 percent of respondents said the Bank must improve the quality of its experts as related to China's specific challenges. About 30 percent of respondents said the Bank must offer innovative knowledge products. 11 (ii) Given the increasing importance of knowledge cooperation, strengthen planning and coordination of non-lending activities. AAA is too fragmented. Agreement with the government on a multi-year AAA program that builds on China 2030 could increase partnership and impact, provided there is flexibility to meet Just-in-time requests. (iii)Strengthen dissemination. Given the Bank's focus on pilots and demonstrations, documenting results and disseminating lessons are key to successful replication and scale up. Most projects include monitoring and evaluation components and impact assessments. However, there is room for improvement to better disseminate the results and maximize the policy impact of innovative and demonstration projects and AAA findings. Recent efforts to strengthen dissemination-such as the use of China's extensive distance learning network and the development of "knowledge platforms" (see para. 41)-should be continued. (iv) Continue efforts to improve efficiency and streamline processes. Counterparts continue to identify cumbersome and lengthy processes as the Bank's main weakness (see Box 4 and Annex 4). Although project preparation times have decreased, the Bank should continue to seek ways to further shorten and facilitate project preparation and implementation. (v) Strengthen efforts to mainstream gender in the lending and analytical work program. Although the composition of the portfolio, which is dominated by infrastructure projects, makes gender inclusion more difficult, recent efforts to gender-inform projects should be sustained and applied more systematically (see Box 5). (vi) Simplify the results framework and ensure realism. As typical of earlier results-based country strategies, the 2006 CPS results framework was overly complex and ambitious, with 35 outcomes. Going forward, the new CPS should present a selective results framework linked more realistically to what the Bank Group can influence. Box 5: Good Practices for a Gender-Sensitive Portfolio in China A 2010 review of gender-mainstreaming in the IBRD-financed portfolio found that the level of gender-informed IBRD-financed projects in China is relatively low, reflecting the dominance of infrastructure in the portfolio. However, the review identified several good practices that have potential to be scaled up: * Consult with both men and women during project preparation to strengthen project design and improve outcomes. Consultations with women during preparation of the Rural Health Project helped ensure that the project design addressed barriers faced by women in accessing health services. Consultations with men and women during preparation of several transport projects-the Liaoning Medium Cities Project, the Hubei Yiba Highway Project, the Taiyun Urban Transport Project, and the Wuhan Urban Transport Project- resulted in an increased focus on public lighting and road safety. * Undertake social analysis to identify gender imbalances that emerge during implementation. When social analysis found that women were disproportionately affected by involuntary resettlement during construction financed by the Hubei Yiba Highway Project, the Ningxia Highway Project, and the Wuhan Urban Transport Project, new project activities were added targeting employment and livelihood opportunities for women. Similarly, a new component was added to the Agriculture Technology Transfer Project when a social assessment revealed a need to better support female farmers. * Use gender-sensitive beneficiary participation during project implementation to increase benefits for both men and women. Several rural development projects, including the Poor Rural Communities Development Project, the Sustainable Development in Poor Rural Areas Project, the Pro-Poor Water Reform Project, and the Western Provinces Rural Water Supply, Sanitation and Hygiene Promotion Project, used a variety of tools to ensure that community planning processes captured both men's and women's priorities, which often differed. The projects also set targets for women's participation in decision-making bodies, such as project implementation committees or water user associations. 12 III. THE WORLD BANK GROUP STRATEGY 34. The Bank Group's FY2013-2016 CPS is aligned with the priorities of China's 12th-Five Year Plan (2011-2015), which emphasizes quality of growth. It is also informed by the findings of China 2030. A. Framework for World Bank Group Engagement in China 35. Knowledge sharing and cooperation are at the core of the Bank Group's strategy. The Bank will transfer knowledge through investments at the provincial level that introduce new approaches and through AAA at both provincial and national levels, while exploiting synergies between investments and AAA. IFC will support advisory services and investments at provincial and and national levels. Given China's emerging needs as an upper-middle-income country and building on China 2030, knowledge cooperation between China and the World Bank Group is expected to strengthen during the CPS period. 36. CPS areas of engagement align with the main themes of the 12th FYP. To support China's goal of a harmonious society, the Bank Group will focus its financial resources, complemented by AAA, on two strategic themes: supporting greener growth and promoting more inclusive development. The Bank Group will also support the cross-cutting theme: advancing mutually beneficial relations with the world. In addition, the Bank will provide client-driven knowledge services that help underpin reforms needed to reenergize the drivers of growth. CPS areas of engagement are shown in Figure 1. Figure 1: China CPS Themes and Outcomes China as a Modern, Creative, and Harmonious Society Reenergizing the Drivers of Growth (Client-driven knowledge services) Strategic Theme 1: Strategic Theme 2: Supporting Greener Growth Promoting More Inclusive Outcomes: OutcomesD 1.1 Shifting to a sustainable energy path 2.1 Increasing access to quality health services 1.2 Enhancing urban environmental services and social protection programs 1.3 Promoting low-carbon urban transport 2.2 Strengthening skills development programs 1.4 Promoting sustainable agriculture practices 2.3 Enhancing opportunities in rural areas and 1.5 Demonstrating sustainable NRM approaches small towns 1.6 Demonstrating pollution management 2.4 Improving transport connectivity for more 1.7 Strengthening mechanisms for managing balanced regional development climate change Cross- Outcog hmes: Advancing Mutually Beneficial Relations p 23 I p oi t n o c t yf 13 37. The Bank Group will have an impact through demonstration projects, stand-alone knowledge services, and the synergies between them. The Bank Group's program will focus on 11 outcomes, as shown in Figure 1. Given that Bank support is modest in comparison to China's own resources, the Bank Group's program is designed to have an impact beyond its size by introducing innovations and demonstrating new approaches that can be scaled up and through policy dialogue and analytical inputs. The CPS Results Matrix (Annex 1) lays out the logical relationship between Bank Group interventions (ongoing and planned), outputs, and outcomes, including milestones and indicators to measure progress. 38. Government counterparts have stressed the importance of several principles of engagement: Emphasize knowledge and innovation through both lending and non-lending activities. The Bank Group's most valuable contribution in China remains its role in bringing and applying ideas, innovation, and knowledge. In addition to stand-alone knowledge products, China continues to value knowledge services embedded in lending, using projects as platforms for innovation and knowledge sharing (see Box 6). Lending will be complemented and leveraged with policy dialogue and analytical work. Joint or client-driven AAA will be undertaken in areas where the Bank does not lend or where lending is limited. Box 6: How IBRD Lending Works in China: Projects as Platforms for Knowledge Sharing The Bank's program in China has several special characteristics: * IBRD lending is demand driven from the provincial level and vetted against national priorities. Each year, China's Ministry of Finance (MOF) and the National Development and Reform Commission (NDRC) solicit project proposals from China's provinces. MOF and NDRC then vet the proposals, taking into consideration quality, sectors, location, timing, and especially potential for innovation and demonstration. Each spring, MOF, NDRC, and the World Bank agree on a three-year rolling lending program. This process results in a stable lending program aligned with the country's development priorities. * The Bank works directly with China's subnational governments. With a few exceptions, such as railway projects, IBRD-financed projects are implemented by provinces and municipalities, which are responsible for loan repayment. The demand from subnational governments for IBRD lending exceeds the lending envelope. * The Chinese government values projects for the knowhow they bring. As emphasized during CPS consultations, Chinese counterparts appreciate the technical innovation and hands-on learning from working with Bank teams during project design and implementation. Small and medium-sized cities, which do not have much international exposure, benefit in particular from good project management practices--procurement, financial management, and social and environmental safeguard standards supported by Bank-financed projects. * The Bank, in partnership with MOF and NDRC, organizes an annual Innovation Workshop to share international experiences relevant to China. Government officials from agencies and provinces throughout China participate in the two-day event, which provides a forum to discuss new ideas that influence the lending pipeline. The June 2012 Innovation Workshop focused on small towns development and social development. * In addition, Chinese officials appreciate Bank-financed projects for fostering inter-agency cooperation. Solving increasingly complex development challenges at the provincial and municipal levels requires cooperation among multiple agencies that typically work in silos. Bank-financed projects provide a framework for inter-agency cooperation that would not exist otherwise. * There is synergy between projects and AAA. In some cases, AAA has led to lending-such as the analytical work on inequality in Guangdong, which led to the Guangdong Urban-Rural Social Security Integration and Migrant Training Project (FY13). In other cases, lending has led to AAA; for example, the Bank's engagement in the railway and urban transport sectors has led to analytical work on railway governance (Transport Paper Series) and sustainable low-carbon city development. Lending helps establish trust and credibility conducive to effective AAA. 14 * Shift investments to interior and western provinces. IBRD, IFC, and MIGA programs will continue to shift to lagging central and western regions and the northeast, the former industrial base, a trend that will continue under the FY13-16 CPS. Some projects and AAA will continue to take place in coastal regions because they are best suited for piloting particularly innovative or complex reforms and investments. * Maintain flexibility given China's quickly evolving needs. The Bank Group's support for China has evolved extensively over time as China's needs have changed. It will be important for the Bank Group to remain nimble as China's needs continue to evolve. Knowledge Services 39. The Bank Group will continue to provide substantial non-lending support. AAA will comprise standard due diligence work to inform the Bank's work program, IFC advisory services (AS), WBI activities, support for South-South knowledge exchange (SSKE), and demand-driven knowledge services, including just-in-time policy notes. * The Bank's standard due diligence will include economic and social monitoring (including the flagship China Economic Update), biannual updates of the country gender action plan, and analytical work that generates the sector knowledge required for innovative investment proj ects. * IFC advisory services will focus on access to finance, climate change, and water management, as well as on promoting better standards and sharing of experiences in South- South cooperation between China and developing countries. In addition, IFC's appraisal of potential investments will continue to assess the economic, financial, environmental, and social sustainability of projects and look for opportunities to enhance inclusion and development impact. * WBI activities will complement the two strategic themes of the CPS through capacity development and learning activities as well as supporting mutual experience and knowledge sharing between China and the rest of the world. Key thematic areas of focus will include capacity development around health, climate change, and urban planning and development. * Bank support for SSKE is expected to increase. The Bank will leverage its sectoral knowledge from operations and analytical work to help facilitate SSKE. * Demand-driven knowledge services will be carried out with Chinese partners or at their request. Analytical work will be grouped into broader thematic engagement areas defined jointly with clients. The Bank and DRC are developing a joint research program, building on China 2030 and deploying the same model of joint collaboration. Indicative AAA themes are shown in Table 2. (See Annex 5 for a list of recently completed AAA, ongoing AAA, and AAA planned for FY14.) 40. Given the increasing importance of knowledge services, the Bank and the government are establishing a system to better plan and coordinate AAA. The Bank and the government will agree annually on a multi-year AAA program designed to maximize relevance and impact while leaving room for flexibility and just-in-time requests. IFC will also hold an annual consultation process with the government to agree on advisory priorities for China. 15 41. The Bank will strengthen dissemination of AAA and project findings. A new transport sector knowledge platform provides a model for disseminating project experiences. In addition, the Bank and government will work together to develop workshops and brochures on key topics to enhance dissemination of innovative approaches. The Bank will continue to use China's distance learning network, with more than 50 sites, to deliver distance learning courses based on AAA. Table 2: Indicative Themes of Analytical and Advisory Activities CPS Area of Engagement AAA Themes Reenergizing the Drivers of Growth * Macro-fiscal policy, institutions, and management (national and subnational) * Structural reforms, including financial sector, labor and product market, and enterprise reforms * Product and process innovation Strategic Theme 1: * Energy security through renewable energy and energy Supporting Greener Growth efficiency * Urban design in transport, construction, and water supply and sanitation with strong potential environmental benefits * Economics of climate change adaptation in water and agriculture * Eco-compensation schemes for natural resource management * Land policy dialogue on tenure, markets, registration and municipal development * Public-private partnerships for remediation and redevelopment of urban brownfields * Pollution control standards, non point source water pollution, and air quality * Climate change - CDM experiences and development of national carbon markets; climate risk management and adaptation Strategic Theme 2: * Poverty monitoring and analysis Promoting More Inclusive Development * Health reform, with a focus on hospital reform and coordination of care across delivery tiers * Social protection and labor market, including policies and delivery systems to promote rural-urban integration * Skills and early child development, with a focus on service quality, labor-market relevance and equity of access * Aging and development of aged care services * Transport: railway reform Cross-Cutting Theme: * South-South knowledge exchange Advancing Mutually Beneficial Relations * Global economic governance with the World 16 Financial Resources - Knowledge through Investments 42. IBRD. Over the CPS period, IBRD lending is expected to remain stable at about US$1.5 billion for 10-13 projects per year.9 A three-year rolling lending pipeline is agreed to and updated annually between the World Bank, the Ministry of Finance (MOF), and the National Development and Reform Commission (NDRC). During the most recent lending program discussion in April 2012, the World Bank, MOF, and NDRC agreed on a lending pipeline of US$5.495 billion for 44 operations during FY13-15, including stand-by operations (see Annex 5). The lending program will be adjusted as needed and formally reviewed on an annual basis. In 2014 or earlier if needed, the Bank will prepare a CPS Progress Report, which will include the agreed-upon lending program for FY15-16. 43. IFC and MIGA. IFC's strategic priority areas in China-climate change, balanced and inclusive rural and urban growth, and sustainable South-South development-are well aligned with the CPS themes. IFC investments are expected to remain strong at US$500-1,000 million for about 25 projects per year for its own account; and IFC expects to mobilize an additional US$200-300 million per year. An estimated US$100-200 million per year will support South-South development. MIGA retains significant room for further exposure in China and will use this available space to pursue projects aligned with its global strategy, including complex infrastructure projects and South- South transactions. 44. Trust funds and carbon finance. Trust funds and carbon finance remain significant in size (US$1.8 billion in commitments as of end-June 2012) and integral to the Bank's operations in China, especially in the environmental sector, although cofinancing trust funds from bilateral donors have declined over the last five years. More than 90 percent of China's trust fund portfolio comprises the Global Environmental Facility (GEF), the Montreal Protocol (MP) (for ozone-depleting substances), and carbon finance. Although China is developing few new climate finance projects under the Clean Development Mechanism due to a lack of international buyers, the Bank will continue to support carbon finance through the development of domestic markets (see Outcome 1.7). During the FY13- 16 CPS, the Bank will continue to support China under the GEF and MP: * Global Environmental Facility. GEF engagement in China covers all thematic areas of GEF-climate change, biodiversity, persistent organic pollutants (POPs), and international waters. About two-thirds of GEF commitments in China address climate change, reflecting its importance for China and the world. The Bank helped China secure about $115 million under GEF-IV (FY07-10), and commitments under GEF-V (FY 1-FY14) are expected to total about US$125-135 million with an increasing share going to climate change and POPs projects. GEF will also continue to support IFC's China Utility-Based Energy Efficiency Finance Program. (See Annex 5 for ongoing and pipeline GEF projects.) * Montreal Protocol program. China has by far the largest MP program in the world, reflecting China's status as the largest producer, consumer, and exporter of ozone depleting substances. Under the previous CPS, the first phase of MP funding (about US$440 million) phased out hydrofluorocarbons (HFCs) in China in 2010. During the FY13-16 CPS, MP 9 The proposed lending envelope of about US$1.5 billion per year is sustainable in the medium term, keeping the IBRD exposure below the US$16.5 billion limit for China set within the context of the Single Borrower Limit Framework, assuming modest (+/- 10%) fluctuations in disbursements and exchange rates. Given the sensitivity of exposure projections to these assumptions, IBRD continues to monitor exposure developments. 17 program funds, which may total about $225 million, will focus on phasing-out the next generation of hydrochlorofluorocarbons (HCFCs). B. Reenergizing the Drivers of Growth-Demand Driven Knowledge Services 45. As the growth benefits of urbanization and industrialization wane, China's longer-term challenge is to reenergize and reorient the drivers of growth. These efforts will require a focus on sustaining productivity growth by recognizing the ongoing shift from low-cost production to higher value products based on innovation. In turn, this will require reforms that exert competitive pressure on firms to enhance the pace of innovation both through their own research and development as well as by engaging in global networks. Such competition will come from completing reforms in product markets as well as in land, labor, and financial markets. These reforms will need to be complemented by changes in the fiscal system at the national and sub-national levels. The World Bank Group can support this structural reform agenda in several ways including by: * Supporting fiscal reforms through advisory and analytical work on reforming sub-national inter-governmental fiscal relations, building up a mid-term fiscal framework at both national and sub-national levels, improving fiscal transparency and debt management, and introducing accrual based public finance accounting and performance budgeting. * Assisting with reforms of the state-owned enterprise sector through a mix of advisory services and technical assistance. * Helping to broaden land, labor and financial market reforms through advisory and analytical work in selected areas. Building on its knowledge accumulated through previous engagement, the Bank will continue to support financial sector reform, ranging from financial stability and crisis preparedness, financial inclusion, and reforming and developing non-bank financial institutions. * Advising on ways to increase the pace of innovation both at the firm level as well as on the enabling environment. C. Strategic Theme One: Supporting Greener Growth 46. China faces some of the world's most difficult environmental challenges due to its energy-intensive and resource-intensive growth pattern and binding natural resource constraints. China has 22 percent of the world's population, but only 6.4 percent of the world's land area, 7.2 percent of the world's farmland, and 5.8 percent of the world's annual water resources. The value of environmental depletion and degradation (i.e., environmental externalities) in China's economy are among the highest of any country. Given the magnitude of China's environmental impacts, global environmental problems cannot be solved without China's engagement. 47. Green development can address China's environmental degradation and resource depletion and also become a new driver for growth. As shown in China 2030, the reforms underlying green growth can reverse current environmental trends that are both domestically and globally unsustainable. Green growth combines removing future threats to growth in the form of resource and pollution constraints with raising the overall rate of growth by increasing efficiency and accelerating the shift of capital and labor towards sectors with higher total factor productivity growth. 48. The Bank Group has steadily expanded its focus on environmental sustainability across its work program. Over 70 percent of the IBRD/GEF portfolio in China has environmental objectives; and IFC and MIGA continue to help clients identify and address environmental considerations in their operations and primary supply chains. Over 30 percent of IFC's investment commitments in China are climate positive, while all IFC investment operations require clients to 18 adhere to environmental standards, including resource efficiency and pollution abatement. The WBG's "green growth" portfolio can be mapped to seven different CPS outcomes spanning six different sectors-energy, urban, transport, agriculture, natural resources, and environment-as well as climate change. Outcome 1.1: Shifting to a Sustainable Energy Path 49. China's energy sector faces three main challenges: energy security, environmental sustainability, and sector efficiency. China is dependent on fossil fuels, with coal accounting for about 70 percent of primary energy consumption. As a result, 85 percent of CO2 emissions come from energy. Although China has the world's largest renewable energy capacity, only 8.8 percent of energy comes from renewable sources. Shifting to a greener energy supply will benefit China and the world. To do so, China needs to scale up renewable energy in a cost effective manner, and leapfrog to the next generation of green energy technologies. The 11th FYP set a target to reduce energy intensity by 20 percent, which was nearly attained (19.1 percent reduction). The 12th FYP aims to reduce energy intensity by a further 16 percent. It sets a target, for the first time, to reduce carbon intensity by 17 percent, intended to contribute to an overarching goal of reducing carbon intensity in the economy by 40 to 45 percent from 2005 to 2020. Since the late 1990s, the World Bank Group has focused on renewable energy and on energy efficiency, where IBRD and IFC programs are complementary (see Box 7). The Bank Group will continue to support China's efforts to build a secure, sustainable, and cost-efficient energy sector by: * Enabling efficient and sustainable scale-up of commercial renewable energy development through investments and advisory services that address how to reduce incremental costs, improve efficiency, and promote smooth grid integration into the power systems. * Accelerating energy conservation and investment in energy efficiency through investment and advisory services at national and local levels that enhance the quality of administrative measures and encourage greater reliance on the market to deliver energy efficiency. * Piloting innovative investments and policies supporting sustainable energy solutions for low carbon city development and promoting adoption of cleaner and more efficient household energy solutions, including in rural areas where solid fuels are widely used. * Helping China extend its Green Building Policy through complementary support from both IBRD and IFC. Buildings are a large and growing contributor to emissions; and 50 percent of the world's new buildings are expected to be built in China by 2030. * Supporting development and implementation of clean energy policies that encourage development and deployment of innovative technologies, such as carbon capture and sequestration and smart grids, and encourage greater use of gas. * Using IFC investment and advisory services to demonstrate market-based approaches to reducing energy intensity and environmental impact through use of renewable energy, energy efficient equipment, and natural gas by commercial and industrial users. 19 Box 7: World Bank Group Support for Increasing Energy Efficiency in China Achieving China's ambitious goal of reducing energy intensity requires significant investments as well as TA and capacity building for both the public and private sector. To optimize support, IBRD and JFC work together to leverage and complement each other's programs and instruments. Complementary TA. IBRD's TA focuses on strengthening government policies and building capacity at national and provincial levels. For example, the IBRD-financed China Energy Efficiency Financing (CHEEF) program included a component to help develop NDRC's energy efficiency program. Also, the GEF-financed China Provincial Energy Efficiency Scale-Up Project provides TA for provincial energy efficiency programs. JFC focuses its TA on market players. For example, JFC's China Energy Efficiency Finance (CHUEE) program conducted market studies and provided training and marketing support to its energy efficiency partners, such as commercial banks, energy service companies, and energy efficiency equipment suppliers. Complementary activities to help scale up energy efficiency (EE) lending in the banking sector. Under IBRD's CHEEF program, the government lends to participating financial institutions, who on-lend to industrial enterprises and energy service companies for EE investments. This credit line arrangement allows banks to familiarize themselves with and eventually mainstream EE lending. JFC's CHUEE program provides credit risk guarantees to partner banks for EE project lending. By lowering the risk of lending, the program encourages banks to develop new EE financing products. IBRD's CHEEF program focuses on medium- and large-sized industrial enterprises, while JFC's CHUEE program focuses on the SME market. IBRD and IFC are working together to address new challenges. IBRD and JFC are designing a Green Buildings program that will exploit each institution's comparative advantage. IBRD can help improve the regulatory environment and support local governments in developing pilot projects; while JFC can provide private sector-based tools to examine the business opportunities and share in the project risks. Outcome 1.2: Enhancing Urban Environmental Services 50. China's cities are growing at a rate and scale never seen before in human history. About 380 million people have moved from rural to urban areas over the last two decades; and more than 200 million people more are expected to migrate by 2025. While urbanization will drive growth and raise living standards, it also brings tremendous environmental and service delivery challenges. Smaller cities in particular are struggling to keep pace with demand, especially for sewerage and waste disposal services. China's city governments are interested in drawing on the experience of other countries and adopting innovative service delivery technologies that mitigate pollution and conserve energy and natural resources. The World Bank's urban portfolio provides models of good urban practices throughout China. Going forward, a key challenge for the World Bank will be to increasingly work with smaller cities, which have lower capacity and fewer resources, but which are important for inducing a more equitable and balanced growth process. The World Bank can continue to help during the CPS period by: * Expanding safe water supply in more than 50 small towns and cities, while improving quality and efficiency. * Improving sanitation, solid waste and other basic urban services in selected second-tier cities, while reducing pollution. WBI will help develop related urban-specific capacity development and knowledge sharing platforms. * Supporting private-sector investments in water and sanitation projects, through IFC investments and MIGA guarantees. IFC is focusing on improving municipal and industrial water efficiency and water quality, working with water-intensive sectors and firms, especially in water-scarce areas of the country. * Addressing environmental management, including piloting the cutting edge technologies to address environmental challenges in large cities and helping to establish "eco cities" that will be models for cities in China and the world. 20 * Demonstrating ways to integrate cultural heritage conservation and sustainable local economic development, emphasizing that "conserving the past is a foundation for the future." * Helping cities build resilience to natural disasters, especially floods; and "building back better" in the wake of the devastating Wenchuan earthquake in May 2008. Outcome 1.3 Promoting Low-Carbon Urban Transport 51. Rapid motorization of China's cities is creating challenges from the local to global levels. These include: traffic congestion, road accidents, air pollution, farmland conversion, high fuel consumption, and greenhouse gas emissions. Recognizing the need to improve urban transport sustainability in order to address these challenges and reach the national CO2 target, the 12th FYP gives priority to urban public transport development. The World Bank is supporting urban transport improvements in about 30 of China's 700 cities, creating a critical mass of model projects. In large cities, there is demand for innovations and best international practice to meet their unprecedented urban transport problems. In many smaller cities, where there is weak institutional capacity, the Bank can help strengthen urban transport planning, financing, and management to set the stage for sustainable, low-carbon urban transport development. The World Bank Group can continue to support China in promoting low-carbon urban transport by: * Accelerating the shift to public transport and improving transport efficiency through city-specific transport investments, giving priority to large cities in the central and western regions. Projects will be complemented by TA in critical areas, such as integrated transport and land use planning. * Piloting institutional and technological innovations that have potential for scale up in cities throughout China, such as public transport integration, transit-oriented development, travel demand management, and sustainable municipal financing mechanisms. * Helping to establish a national policy framework that promotes efficient and low- carbon urban transport, drawing on the experience of demonstration projects in pilot cities. * Helping to promote urban transport safety, by demonstrating road safety and traffic management measures. * Establishing a knowledge platform to disseminate best practices, including an e-learning module, through AAA and WBI support. Outcome 1.4: Promoting Sustainable Agriculture Practices 52. China's agricultural reforms have been successful in producing an inexpensive and abundant food supply, but the country faces new supply constraints and demand dynamics. Supply is struggling to keep up with demand, as evidenced by two bouts of double digit food price inflation over the past three years. Supply constraints include water scarcity, longstanding and intensifying competition for land, and environmental pressures from livestock waste and overuse of chemical pesticides and fertilizers. These are compounded by rising rural wages and climate variability. On the demand side, a dietary shift to a more protein rich diet (meat, dairy) is increasing demand for feed cereals. Together, these supply and demand dynamics have resulted in a steady increase of feed cereal imports, challenging China's ambitions of 95 percent grain self sufficiency. Concerns about food safety further hamper potential for expanding production of high value crops both for domestic and international markets. As articulated in the 12th FYP, maintaining sustainable food self-sufficiency, raising farmers' incomes, and constructing the "New Socialist Countryside" are top government priorities. The World Bank Group can help by: 21 * Demonstrating sustainable agricultural and livestock practices that improve farm productivity and generate local and global environmental benefits, including better ways to integrate biogas in farming and cooking, improved livestock waste management, and piloting a carbon credit trading process for household-based greenhouse gas emissions. * Helping to expand agricultural production by improving the productivity of water through support to water conserving technologies, irrigation systems, water user associations and water markets. These integrated interventions being piloted in China have been recognized as globally innovative and are being scaled up. * Developing and testing innovative models for agriculture technology transfer and application, in order to increase farm income, especially for poor farmers, in high-value agriculture markets, with a potential for scaling up. * Testing new approaches to ensuring agricultural product quality and safety by piloting a certification process at the provincial level, with the potential to transfer lessons to other regions and segments of the food supply chain. * Expanding China's ability to adapt to climate change in the agricultural sector through research and demonstration of sustainable and climate-resilient agricultural production and risk management systems. * Using IFC investments in agribusiness to improve productivity through better environmental practices, such as biomass treatment of animal waste, more efficient use of land and water resources, and improved waste water treatment. Outcome 1.5: Demonstrating Sustainable Natural Resource Management Approaches 53. China's rapid economic growth has put pressure on its scarce natural resources. Water scarcity is worsening due to overexploitation and water pollution. Chinese policy makers and society are now giving sustainable natural resource management high priority; and income and living standards have reached a level where China can afford and is also willing to shift some of its policies. The shift to sustainable natural resource management began in the 10th FYP, was clearly articulated in the 1 1th FYP, and is emphasized further in the 12th FYP. While China's policies have changed from traditional natural resource management to ecological management, implementation of ecological management is lagging. The World Bank Group can support China in this area by: * Demonstrating ways to better manage ecosystems and conserve biodiversity. Given China's widely degraded ecosystems, improved management includes promoting ecological forestry approaches that maximize ecosystem health, soil and water conservation, carbon sequestration, and climate resilience; exploring market-based schemes to promote conservation investments in fragile ecosystems such as grasslands and watersheds; and using concessional funding to promote globally important biodiversity. * Implementing approaches of integrated water resources management at the river basin level, addressing multiple uses: water scarcity, flooding, pollution, water demands, economic instruments, and institutional aspects; and building on the recent China Country Water Resources Partnership Strategy prepared jointly by the World Bank and the Chinese government. * Demonstrating innovative ways to manage wetlands and lakes, including through the increased use of wetlands to filter urban and industrial run-off before excess nutrients cause eutrophication in lakes, rivers, and bays (including the Bohai and South China Seas). * Supporting natural resource property rights and markets in ways that encourage sustainable use, such as clarifying land use rights in rural and per-urban land use markets, forest tenure rights, and water rights. 22 * Demonstrating, including through support from IFC and MIGA, that resource efficiency makes good business sense, by supporting innovative investment projects, developing demonstration case studies and knowledge products, and raising awareness among banks and industrial users. Outcome 1.6: Demonstrating Pollution Management Measures 54. China has severe pollution problems that have high economic and public health impacts. The cost of air pollution is estimated at 6.5 percent of GDP, the cost of water pollution at 2.1 percent of GDP, and soil degradation at 1.1 percent.10 According to World Health Organization (WHO) estimates, in 2008 there were 470,000 premature deaths due to ambient air pollution and an even higher number, 549,000 deaths, due to indoor air pollution. Although air pollution levels have been improving in recent years, the cost of illnesses from pollution has climbed as the population ages and the urban populations grows. China has made great strides in controlling urban and industrial water pollution. Non-point source pollution-from small towns, SMEs, and the rural sector-is now China's greatest water pollution challenge. The government is committed to reverse these trends. The World Bank Group can support China in a range of areas, including: * Supporting efforts to reduce urban air pollution, working at both the national level (providing TA related to standards, monitoring, and regional strategies) and the municipal level (supporting detailed action plans and investments designed to reduce pollution from the worst sources). * Supporting efforts to reduce hazardous waste, by continuing to support the reduction of persistent organic pollutants (POPs)-the byproducts of industrial production and the world's most toxic chemicals-from the regulatory level to emissions control and urban site cleanup. * Accelerating the phase-out of ozone-depleting substances (ODS), by remaining a strong partner in achieving the accelerated phase-out of the HCFC family of chemicals (China is the world's largest producer, consumer, and exporter of chemicals associated with ODS). * Supporting the reduction of non-point source (NPS) pollution across rural China. In addition to the strategies related to water pollution addressed in Outcomes 1.2 (urban), 1.4 (agriculture), and 1.5 (wetlands and lakes), the Bank can support efforts to minimize NPS pollution through regulatory and technical approaches. * Continuing to support China's efforts to improve environmental governance, including through public disclosure of environmental information. * Working with IFC's private sector clients on pollution abatement by assessing the risk and potential impacts of their operations, recommending actions to mitigate them, and tracking performance through regular Performance Standards monitoring. IFC will continue to support clean technologies and companies engaged in pollution measurement and management. Outcome 1.7: Strengthening Institutional and Financial Mechanisms for Climate Change 55. Climate change is a cross-cutting issue embedded in much of Bank Group support to China. About half of the World Bank project pipeline will have climate benefits, including in the energy, urban, transport, waste management, agriculture, and forestry sectors (see Box 8). In addition, the Bank Group will provide targeted support to help China strengthen institutional, policy, and financial mechanisms to address the climate challenge, including: 10 World Bank calculations (2008 data). 23 Box 8: Climate Change Mitigation and Adaptation in China Climate change mitigation in China is urgent for both China and the world. China's rapidly growing coal- dependent economy has made it the world's largest emitter of CO2- Climate change adaption is also an important issue for China. With its long coastline and vast expenses of arid and semi-arid land, China is vulnerable to the adverse impact of climate change, which could intensify water shortages in northern China, increase the incidence of extreme temperature events and consequent flooding and droughts, and reduce the yields of major crops. The Chinese government is taking steps to address climate change. China is embarking on an ambitious national climate change action plan, which includes national and provincial caps on energy and carbon intensity and piloting of domestic emissions trading systems for CO2 in several provinces and large cities. China is likely to adopt absolute caps on coal use and/or carbon emissions in the next few years. In addition, it is increasingly serious about both low carbon ("green") development at the policy and investment levels, and climate adaptation, primarily in the water and agricultural sectors. Finally, China is highly motivated to raise its profile as a proactive and innovative partner to developing countries in achieving carbon mitigation, and is increasingly doing so through demonstration projects and expanded South-South cooperation. China has the World Bank's largest climate change investment program. It provides cross-cutting support for climate change mitigation and adaption, and the portfolio's emphasis on climate change continues to strengthen. About half of IBRD/GEF projects financed during this CPS are expected to have positive climate change aspects. World Bank Group support includes: * IBRD: The IBRD portfolio supports climate change mitigation in energy, transport, agriculture, and forestry-the Bank's largest IBRD-financed climate change portfolio. * Carbon Finance: Under the Clean Development Mechanism (CDM), carbon finance commitments in China over the past five years totaled $1.25 billion, by far the largest CDM program in the Bank. CDM projects are distributed across a range of carbon emission reducing sectors-renewable energy (32 percent), energy efficiency (32 percent), landfill and coalbed methane (16 percent); industrial gases (10 percent), and reforestation (10 percent). Although international purchases of China's certified emissions reductions have declined, the World Bank will continue to support China in developing new carbon finance mechanisms for possible future projects, including in the energy and agriculture sectors. * GEF: GEF provides a successful platform to test innovations at both the national and sub-national levels. Over 60 percent of the Bank's GEF commitments in China address climate change. These operations are fully blended with IBRD loans, helping to promote innovation, policy dialogue, and capacity building. * Analytical support: The World Bank is providing TA in several areas. The Bank is helping to model a major rebalancing of the economy towards green growth, including a fiscally neutral introduction of carbon taxes generating 5 percent or more of all public revenues. Also, through the Program for Market Readiness, the Bank is supporting the creation of domestic trading platforms, including standards, registration, and "MRV" (measurable, reportable, and verifiable) protocols. The Bank is supporting the multi-billion dollar "China CDM Fund" in developing its early investments in climate finance in China. The Bank supported the NDRC's Climate Change Department in presenting "China Day" at the November-December 2011 Climate Change Conference (COP 17) in Durban, South Africa. * IFC is supporting energy efficiency, renewable energy, clean technology, green buildings, and forestry activities, all contributing to carbon emission reductions. IFC also supports climate adaptation, such as water use efficiency. IFC and MIGA are supporting green finance and the Equator Principles in the banking sector (see Box 9). * Supporting the establishment of carbon trading pilot schemes across China, through the Partnership for Market Readiness and related trust funds. China has ambitious plans to implement seven carbon pilot trading schemes by 2013, to be merged into a national scheme by 2016. The World Bank will function as both a provider of TA and convener of interested partners and stakeholders. * Exploring innovative climate finance instruments, through TA, investments, and knowledge exchange supported by WBI's Climate Change Unit. The Bank Group, including 24 IFC and the carbon finance unit, is an active partner in exploring new ways to use concessional and market-rate, public sector and private sector, and international and domestic sources of finance for climate-related investments. * Improving knowledge on the economics of climate change, through TA and analytical work, including analyzing the costs and benefits of strategies to adapt to projected climate impacts; promoting access to new technologies to address both mitigation and adaptation challenges; and mainstreaming low-cost adaptation measures in sectoral investments across the rural, urban, transport, and energy sectors. * Assisting IFC's private sector clients enhance their environmental and social sustainability by identifying potential opportunities and delivering approaches that are good for both the company and the environment as part of IFC's due diligence and by applying the revised IFC Performance Standards in place since January 2012. IFC will also continue to help drive sustainability through financial markets using standards such as the Equator Principles and the Green Credit Guidelines, which show banks how to incorporate sustainability, including climate change dimensions, into both domestic and overseas lending. D. Strategic Theme Two: Promoting More Inclusive Development 56. Addressing the inequalities that have emerged during the reform period is a key social challenge as China seeks to build a harmonious society. The 11th and 12th FYPs recognize the emerging limitations of the current growth model and place greater emphasis on addressing inequality and enhancing the basic security of the population. The disparities are both spatial (between urban and rural areas; between coastal and inland provinces), and between different social groups (most notably migrants and local urban residents). Some inequalities are unintended consequences of market reforms and past failures to deal appropriately with the public goods nature of investments in human development and with inter-regional disparities. Others, however, are direct products of policies that institutionalize inequality of opportunity (such as the hukou system) or do not provide an effective framework for addressing disparities (such as the inter-governmental fiscal system). The government seeks to overcome such disparities with a stronger emphasis on integration between urban and rural areas, both in terms of facilitating physical mobility of people and economic activity, and in terms of policies that harmonize social entitlements and build a deeper and more equal human capital base and social protection system. 57. Reforms to enhance equality of opportunity in China are also likely to facilitate its shifting growth model. In addition to enhancing equity, investments in human capital and a healthier and more secure population will enhance consumption and contribute to rebalancing. They will also ensure that China has the quality of workers to navigate the decline in the labor force and move up the value chain in production. However, in order to translate increased investments in people into improved social and economic outcomes, there will also need to be ongoing structural reforms of its health, education and social security systems to increase efficiency of public spending. 58. The Bank Group will help promote more inclusive development by geographically focusing on lagging regions and small towns and by supporting policies and demonstration projects that address inequalities. In the human development sectors health care, social protection, and skills development-the Bank will continue to emphasize subnational engagement, focusing on implementation challenges at the local level, with mutual leveraging of lending and AAA activities, as seen in Yunnan and Guangdong provinces. Also, the Bank will continue to provide cross-sectoral support for rural and small town development and engage in transport projects that help balance development. These activities can be mapped to the four outcomes below. 25 Outcome 2.1: Increasing Access to Quality Health Services and Social Protection Programs 59. Deepening health sector reform is one of China's biggest social challenges. In China, the urgency of health reform is exacerbated by rapid aging of the population and the increase in non- communicable diseases (NCDs), which already account for over 80 percent of the disease burden and will rise as urbanization progresses. Yet, the health care delivery system remains oriented towards curative care and its payment and incentive systems do not promote cost-effective or health- promoting practices. A critical challenge is reorienting China's health delivery system away from reliance on hospital care and building a revitalized primary health care system well coordinated with higher levels of care. China has initiated a health system reform that seeks to address a number of the efficiency and equity challenges of the system, and the Bank will continue to play a role through both lending and AAA in supporting health system innovations to drive structural change. IFC will continue to work with the private sector to expand quality health service, especially to middle- and lower-income families. 60. As China deepens its social protection reforms, integrating policies and program administration will become more pressing needs. While the building blocks of a modern social protection system are largely in place, they remain fragmented in policy and administration terms. The Bank has had a long-term engagement on pension and social protection reforms in China and will continue to support second-generation reforms of system integration and the government's development of aged care services. In health and social protection, the Bank Group will support: * Piloting and evaluating health care innovations that will further the government's ongoing health system reform agenda, including helping poor rural residents improve access to health services and reduce their financial risk, improving the quality, efficiency and coordination of service delivery, and increasing the focus on preventive and primary care. Investments will continue to be monitored for their gender impacts. Demonstration projects will be complemented by analytical and policy work drawing on lessons of good practice in China and globally. * Piloting reforms in pension and health insurance administration to promote social equity and labor mobility, through integrated management of social insurance programs and portability of entitlements across jurisdictions. * Sustaining policy advisory and evaluation work on social protection. The Bank will also support the authorities in evaluating the outcomes of new pension programs for the rural and urban informal sectors, and continue its work on social assistance to support the government's efforts to strengthen the safety net for the poorest and most vulnerable citizens. * Helping China face the challenge of an aging population. China will face growing needs for aged care services, and exploring international good practice and its own emerging experiences with public-private-community partnerships can help develop new policy and practices. More broadly, AAA on the impacts of aging on China's economy and society can support government as it elaborates the policy framework for managing rapid aging. * Through IFC interventions, enhancing private sector provision of quality and comprehensive healthcare through networks of local and regional hospitals and through outpatient clinics accessible to the underserved. * Increasing availability of affordable quality medicines through IFC support for private sector investments in the pharmaceutical sector. 26 Outcome 2.2: Strengthening Skills Development Programs-Including for Migrants 61. To move up the value chain and become a high-income country, China is seeking to develop a workforce with the competencies needed for a more complex and dynamic economy. As enrollment rates at all levels of education rise, it will be important to ensure quality and provide the core competencies that employers demand. China's National Plan for Medium- and Long-Term Education and Development lays out a vision for China's education system, including promoting equality of access at all levels of the system, enhancing educational quality, and promoting innovation and greater diversity in the education system. The World Bank can provide assistance by: * Piloting reforms and investments that improve the quality and relevance of technical and vocational education (including modular, competency-based curricula, deepening ties with industry, and promoting life-long learning) and supporting systems to evaluate quality and guide future reforms. The policy lessons emerging from project engagements will be supplemented through ongoing analytical work on technical and vocational training, and exploration of the wider skills challenges in higher education. * Piloting activities that help rural workers transition to urban areas and improve their incomes and working conditions, including through strengthened worker protections, better access to skills development and employment services, and reforms to the hukou system to further remove barriers to labor mobility. Project support will continue to be informed by analytical work on labor markets and hukou, building on ongoing AAA and China 2030. * Supporting the government's planned expansion and quality enhancement of early child education and related early child development programs such as nutritional interventions by piloting and evaluating different models of provision and supporting financing reforms to ensure that rural, migrant, and poor children have the same early start as others. * Supporting, through IFC, quality private education institutions and technical and vocational education and training institutions that have the potential to reach underserved markets. Outcome 2.3: Enhancing Opportunities in Rural Areas and Small Towns 62. Although rural development has been a long standing priority in China, continuing efforts are needed to address obstacles to rural economic growth and rural income generation. Many of China's remaining poor live in the upland areas of western and central provinces, where they face low agricultural productivity and limited access to higher value markets. Improving access to roads, water supply, and electricity will help increase rural incomes and spur overall rural development. Promoting non-farm economic activities is an effective means to increase rural incomes. Small towns can become economic hubs that help people transition out of agriculture and boost the rural economy. In addition, rural finance reform should be advanced to improve access to financial services in rural areas, and strengthened land acquisition and compensation policies will improve land tenure security. The World Bank Group can help by: * Piloting new ways to boost rural incomes and reduce poverty under the umbrella of the Development-Oriented Poverty Reduction for China's Rural Areas Strategy (2011-2020), building on 20 years of collaboration between the government and the Bank in poverty reduction. * Enhancing secondary town development by helping local governments design integrated rural-urban development plans, financing small town infrastructure, including water supply 27 and sanitation, and undertaking analysis on the financial viability of small towns in light of existing intergovernmental fiscal arrangements. * Providing analytical support to help the government strengthen land tenure security for rural households and advance land policy reforms to reduce involuntary land transactions and improve compensation procedures and standards and appeals mechanisms. * Promoting greater financial inclusion. The Bank, building on its experience of promoting commercially sustainable micro and small enterprise (MSE) lending, will explore ways to help establish a platform for microfinance knowledge sharing. IFC will continue to promote MSE lending through investment in financial institutions and support to improve financial infrastructure, such as credit reporting institutions and secured transactions. * Promoting "inclusive innovation" (innovation that addresses the needs of the poor) as a tool to help increase productivity and reduce disparities. * Assisting in building capacity to implement China's rural roads program, connecting villages to urban centers. * Catalyzing private sector investment in lagging regions through support from IFC and MIGA. Outcome 2.4: Improving Transport Connectivity for More Balanced Regional Development 63. Improving inter-urban transport connectivity remains a high priority for sustainable economic development and for reducing rural-urban and regional disparities. The growth in freight and passenger flows, in excess of 8.6 percent per annum over the past three decades, is expected to continue. For passengers, it is coupled with growing needs for differentiated levels of services as demonstrated by the rapid growth in air transport, road transport, and, more recently, high speed rail transport. For freight, it is coupled with a need to realign the transport system to support the economic shift towards domestic consumption and services, as well as the regional rebalancing towards western and interior provinces. Meeting mobility needs will require additional infrastructure capacity, broadened service diversity, as well as targeted interventions to ensure vulnerable populations are provided with suitable access. Meeting such needs sustainably will call for a strong emphasis on transport modes with lower resource footprint like rail or river transport, as well as effective multimodal integration and a close integration between the urban and inter-urban networks. The rapid development of the expressway, highway, airports, and high speed rail system will create a step change in connectivity. It will support wider economic opportunities for China's citizens, by shortening economic distance between Chinese cities, leading to greater concentration of economic activity, with better access to job opportunities and trading centers. These networks will also be crucial to spreading the opportunities for and benefits from development from the richer coastal areas of China to poorer inland regions and to giving those areas efficient access to the eastern cities and ports and widening the pool of firms, labor, service and products within their reach. The World Bank can help by: * Supporting the development and operation of sustainable and safe intercity transport solutions meeting future mobility needs, by participating in projects connecting urban centers, particularly in western and central provinces, with an emphasis on integration and lower carbon options. * Demonstrating the application of intermodal integration concepts through selected projects, leading to an optimal use of each mode. * Increasing the development impact of expressways on local communities, by strengthening planning that ensures effective interface between expressways and the local road network, and improving safety and asset management of the expressway system. 28 * Piloting innovations that reduce the environmental impact of roads and expressways, such as an environmental compliance framework for contractors and a safeguards compliance monitoring system. E. Cross-Cutting Theme: Advancing Mutually Beneficial Relations with the World 64. China is playing an increasingly important role in the world economy, and is expanding its role in international cooperation. Over the last five years, China has added US$4.6 trillion to global nominal GDP. It is the world's largest exporter and second largest manufacturer. Moreover, China is increasing its role and influence in international organizations and institutions. It will be the third largest shareholder in the World Bank upon completion of the capital increase approved in 2010, and is becoming an active member and shareholder of other multilateral development institutions, as well as an active and influential member of international and regional groupings such as the G-20 and ASEAN+3. Although China's official aid flows to other countries are relatively small, China is a significant source for concessional lending, export credits, and FDI to countries in Africa, Asia, and Latin America and is becoming the most important source of financing in sectors such as infrastructure. China started contributing to IDA in IDA15 (2007) and increased its contribution and engagement in IDA16. Other countries increasingly look to China as a source of knowledge and experience given its record of growth and poverty reduction. 65. While China's growing role creates numerous opportunities and benefits, it also creates new challenges and responsibilities. These include calls for China to assume greater responsibility in addressing global challenges such as climate change. Some have expressed concerns about China's exchange rate policy, capital account restrictions, and foreign exchange reserves. Consistent with China's economic importance, the government is facilitating a gradual increase in the international use of the RMB and taking measures to relax capital controls. In the field of international development assistance, China is being called upon to harmonize its economic cooperation programs and approaches with those of traditional partners, and to increase its contributions to multilateral assistance funds and channels. 66. Supporting China's growing global role is an increasingly important aspect of the Bank Group's engagement and strategy, drawing from knowledge and relationships built through lending and AAA. The Bank Group's engagement in development issues throughout China positions the Bank Group to facilitate China's South-South cooperation and to support China as a global stakeholder. Given that China is now a contributor to IDA, the IDA replenishment process also offers China an opportunity to deepen its engagement in the global development policy dialogue. Supporting China's South-South Cooperation 67. China is increasingly engaging in South-South knowledge exchange (SSKE), both as a key dimension of its own development cooperation policy and in response to requests from other developing countries. Chinese ministries, specialized agencies, think tanks, and other institutions in virtually all sectors are being called upon to provide technical assistance or training to other developing countries. As a result, there is a growing need for Chinese institutions to effectively and objectively document China's own experiences (both successes and failures) and to develop capacity to share these experiences and help adapt them to the needs of other countries. The Bank Group can help by: * Working together with Chinese knowledge institutions to analyze and document key policies, programs, and institutions that are of greatest interest to other countries; and to disseminate China's experience through SSKE. 29 * Enhancing the capacity of Chinese institutions engaged in SSKE, including the International Poverty Reduction Center and Asia Pacific Finance and Development Center; and help Chinese researchers and academic institutions foster linkages with counterparts in other countries. * Facilitating links between networks of Chinese practitioners and related practitioner networks in other countries in fields such as urban planning, climate change, health, agricultural research, environmental protection, accounting, auditing and financial reporting, and assisting China in sharing its experience in global public goods areas such as alternative energy and carbon finance. * Helping to ensure that China's SSKE activities involve "mutual learning." * Facilitating China's own access to international knowledge and experience, both through project assistance and through practitioner exchange, particularly with other middle-income countries (MICs). 68. The Bank Group can play a role in enhancing the development impact of China's international economic engagement and cooperation. China, like a number of other MICs, is both a provider and recipient of aid. Moreover, Chinese firms both private and state-owned are rapidly increasing the level and scope of their activities in other developing countries, both through trade and outward FDI. A good deal of this engagement takes place in the context of China's economic cooperation, involving an integrated package of aid, trade, and investment. As Chinese firms become increasingly active in international markets, particularly in developing countries, they are beginning to encounter challenges and difficulties in areas such as environmental and labor standards and understanding of local business practices. The Bank Group can help by: * Sharing global experience in adopting and implementing standards for outward investment, such as the Equator principles, through policy dialogue and AAA in the context of IFC support for South-South investment (see Box 9 on China's Green Credit Policy)." * Through IFC and MIGA, assisting Chinese enterprises to invest sustainably in developing countries, and to establish links with local supply chains in order to increase opportunities for local value added and technology transfer. * Continuing exchanges on international development cooperation to facilitate China's participation in international development partnership networks, and jointly organizing workshops on international development cooperation. * Providing Chinese financial institutions, through IFC, the opportunity to participate in financing projects outside China, such as China Development Bank's and China EXIM Bank's participation in the financing of the Vodafone project in Ghana. * Exploring opportunities for project-level cooperation in third countries under various tripartite/trilateral and multipartite frameworks12 and based on specific demand from recipient countries. Bank Group instruments include Bank lending for joint or complementary projects, and IFC/MIGA support for enterprise investments. * Developing innovative RMB-denominated trade assets financing schemes that will help accelerate trade finance, stimulate the development of an RMB trade risk sharing market, and mobilize South-South trade financing from Chinese banks, such as China's EXIM Bank. " The Equator Principles, launched by private banks in June 2003 and based on IFC Performance Standards, are voluntary standards for determining, assessing, and managing environmental and social risk in project financing. 12 China's White Papers on Economic Cooperation with Africa (December 2010) and Foreign Aid (April 2011) both signal the Government's interest in increasing its collaboration with multilateral institutions within the context of its international cooperation. 30 * Facilitating deeper Chinese engagement on IDA policies and global development priorities through the IDA replenishment process. Supporting China as a Global Stakeholder 69. As China's global role increases, so does the importance of China's positions within global economic governance institutions and China's policies influencing global public goods. China has benefitted tremendously from globalization and from the rules and norms of institutions of global economic governance, most notably the multilateral trading system. China has been a strong advocate for greater voice by developing countries within institutions like the World Bank, and for an enhanced role for the G-20. Other countries will now be looking to China to use its increased influence in ways that promote common interests. In addition, China's policies and behavior are important in influencing a number of global public goods, most notably climate change. Given the size of China's population and of its economy, reducing global carbon emissions requires China's active engagement. China's people and economy stand to benefit from positive action to preserve global public goods. The Bank can support China in its role as a global stakeholder by: * Continuing to engage in dialogue on China's global economic governance role and undertaking analytical work that helps China assess policy options for further liberalization, such as in the services sector. * Undertaking analysis that encourages China to play a productive role in proposing solutions and developing consensus on climate change and other global public goods. The Bank will also continue to help China identify and implement initiatives to reduce carbon emissions and to promote environmental sustainability. Box 9: China's Green Credit Policy Since 2007, when China launched its Green Credit Policy, IFC has advised Chinese banks on the Equator Principles and has supported Chinese government agencies in adapting international environmental and social (E&S) standards to China's context. In 2008, the China Industrial Bank, an IFC investee bank, adopted the Equator Principles, becoming the first Equator Bank in China and in emerging markets in Asia. IFC supported the Industrial Bank in this endeavor by providing TA and training and sharing knowledge through IFC's network of Equator Principles Financial Institutions. IFC has also promoted international E&S standards through joint deals with China Development Bank (CDB) and the China EXIM Bank. In May 2011, IFC facilitated participation of the CDB and China EXIM Bank in an IFC syndication in Ghana. Similarly, in May 2011, IFC invested in the China-ASEAN Investment Cooperation Fund (sponsored by China EXIM Bank), which applies E&S policies similar to IFC's Performance Standards. In February 2012, the China Banking Regulatory Commission (CBRC) launched Green Credit Guidelines with IFC support. These guidelines require banks to develop and implement strategies for E&S risk management and E&S friendly investment and to reduce their own environmental footprint. They also encourage banks to adopt international E&S standards in their overseas investment engagements. China's experience in developing green credit policies is being shared with other countries through South-South exchanges facilitated by IFC. Vietnam, for example, is now replicating China's experience IFC will continue to support Chinese agencies and banks in sharing their experience and further building their capacity to implement Equator Principles and Green Credit Guidelines, including in their overseas engagements. In related work, the World Bank is supporting South-South exchanges with China's Ministry of Environmental Protection on investment-related environmental assessment and social safeguard policies. 31 F. Delivering the World Bank Group Program 70. The Bank Group will maintain a decentralized and high-capacity Beijing Country Office. The Bank office currently comprises about 120 staff. WBI's Regional Coordinator is based in Beijing. Since 1992, IFC has maintained an office in Beijing co-located with the Bank office. In July 2000, a joint IFC/World Bank regional office for private sector development was established in Hong Kong SAR, China. In 2002, IFC opened an office in Chengdu, Sichuan Province, to provide advisory and investment services primarily to SMEs in the western region of China. MIGA has established an Asia hub office in Singapore as well as a presence in Beijing, co-located with IFC. 71. The Bank Group will continue to work closely with national partners and, where possible and relevant, with international partners. The Bank Group places great importance on partnering with local agencies, research institutes, and universities. Bilateral donors have shifted their focus mainly to global public goods and South-South cooperation, providing opportunities for collaboration in those areas. The Bank will collaborate with UN agencies where possible, such as with WHO on NCDs and UNICEF on early childhood development and education. Like the World Bank, the Asian Development Bank (ADB) lends about US$1.44 billion per year to China, mainly for infrastructure and the environment. The World Bank and ADB collaborate and exchange information at the program level. The ADB's country partnership strategy for 2012-2015 focuses on three pillars: inclusive growth; environmentally sustainable growth; and regional cooperation and integration. 72. The CPS Results Framework presents the results chain for the Bank Group's program of support (see Annex 1). CPS outcome indicators will be monitored over the CPS period. Most milestones are expected to be completed by the CPS Progress Report in 2014. Results during this CPS period will come from existing operations and quicker-disbursing operations included in this CPS; many of the new operations to be undertaken during this CPS will not be completed by the end of the CPS (FY16). 73. The Government of China and the Bank will meet regularly to review project preparation and implementation and address weaknesses. For example, during their most recent lending program discussions, MOF, NDRC, and the World Bank agreed to work together to strengthen project monitoring and evaluation and planning of AAA. MOF also requested increased project management training, especially procurement and financial management, and better communication between task teams and local authorities. 74. Trust funds are fully integrated in the CPS and will be managed accordingly. Trust fund-financed activities are implemented in accordance with the same fiduciary requirements as IBRD-financed operations; and analytical work and policy notes funded by trust funds undergo the same rigorous review as Bank budget-funded analytical work. 75. Continued strong support will be provided to ensure compliance with Bank fiduciary and safeguard policies. This will be challenging given the large geographic span of the portfolio and given that many new projects are being implemented in secondary and smaller cities unfamiliar with World Bank procedures. The Bank's procurement team will continue to provide procurement training to project management office (PMO) staff, implementing agencies, and tendering companies. The Bank's financial management team will continue to conduct training for counterparts, including PMOs, auditors, and finance bureaus. 76. The Bank will also continue to support greater use of country systems. The World Bank and the ADB are working together to help harmonize procurement legislation and prepare model 32 bidding documents. Financial management is already harmonized with some of the government's own systems: project financial management is undertaken in accordance with Circular 13 issued by the Ministry of Finance for all donor funds; and the China National Audit Office (CNAO) Foreign Funds Application Audit Department conducts audits of projects. CNAO is also increasing its focus on performance audits and assessment of sustainable development. The results of the project financial and performance audits are now made available to the public. Additionally, the Bank is facilitating South-South cooperation in accounting, auditing, and financial reporting to benefit other countries in the region. 77. The Bank Group will further strengthen gender's integration into its work, building on good practices and lessons learned from the previous CPS period (see para. 33(v) and Box 5). During project preparation, the Bank's social development team will review project design to analyze opportunities to mainstream good practices. Particular attention will be paid to ensuring that operations in the areas where the Bank will be most strongly engaged environment, energy, transport, and urban development-are gender informed.13 A China Country Gender Action Plan will be updated every two years to assess the gender dimensions of the portfolio and make recommendations. In addition to gender mainstreaming, participatory design elements and use of enhanced complaints handling mechanisms will be considered and discussed with government counterparts. IFC will continue to deepen its work on gender in both its investment and advisory work, with a focus on supporting women-owned businesses and facilitating better targeting of women clients in the banking sector. 78. The Bank Group will prepare a CPS Progress Report in 2014, or earlier if needed, to evaluate progress toward CPS outcomes and adjust the strategy and program. " An operation is defined as "gender informed" if: (i) The project documents explicitly refer to analysis and/or consultation on gender related issues, and/or; (ii) The project include action(s) that is expected to narrow gender disparities, including through specific actions to address the distinct needs of women/girl (men/boys) and/or to have positive impact(s) on gender equality, and/or; (iii) the project documents explicitly refer to mechanisms for monitoring and evaluating gender impacts, and facilitate gender disaggregated analysis. 33 IV. MANAGING RISKS 79. Risks to the Bank Group's development effectiveness in China are moderate given China's good capacity, strong ownership of the Bank Group program, and track record of high performance. 80. As any open economy, China faces risk related to the global economy, which is likely to remain uncertain and volatile for some time. Unlike many counties, however, China's fiscal and debt position allows it the space to respond with stimulus measures that could substitute domestic demand for external demand. There is a risk that stimulus measures would postpone tackling, or even exacerbate, long-term structural weaknesses that will affect growth down the line. Short-term stimulus measures should be designed to support medium- and long-term structural reforms by increasing expenditures for health, education, pensions, and the environment and decreasing them for infrastructure and enterprises. In the medium-term, policies to rebalance growth from investment and exports towards consumption will enable the economy to better withstand external demand shocks. 81. Domestic economic policy risks need to be managed. The uncertain trajectory of the ongoing (and necessary) adjustment in China's property sector constitutes a significant near-term risk given the sector's importance for the overall economy. Risks associated with the recent extensive off- budget borrowing by China's local governments could also spill over into fiscal and financial pressures, and need to be managed. However, public debt sustainability is not a major issue of concern, because total debt stocks remain well below those in many other countries and the economy continues to grow relatively rapidly. Also, the authorities have launched a "local financing platform" audit system to increase transparency and control of fiscal debt. 82. Several trends may increase social tensions, which, if unresolved, present risks to growth and stability. One source is China's relatively wide economic and social disparities, exacerbated by barriers to labor mobility and policies that favor enterprise profits and implicitly tax household incomes. Social risks are also expected to grow as the rising ranks of the middle class and higher education levels increase the demand for better social governance and greater opportunities for participation in public policy debate and implementation. This can already be seen in the increasing public discussion about the quality of growth. The government is taking measures to address income disparities and shift the focus from quantity to quality of growth. 83. Vested interests could thwart the efforts of China's government in implementing structural reforms. Unlike in 1978, significant vested interests have accumulated behind the industry-led, export-oriented, energy- and resource-intensive pattern of production. Not only do they impose costs on downstream production, they have also become lobbies opposing reforms. 84. At the project level, risks are moderate, but more attention to capacity building will be needed. The shift to central and western provinces and smaller cities means that counterparts will be less experienced and may require more support during preparation and implementation. 85. The CPS is also subject to Bank-related risks. Going forward, the Bank may need to be even quicker to adjust to the fast pace and scope of China's development and needs. The main risk to the Bank Group's development effectiveness is its own ability to nimbly deliver innovation and cutting-edge knowledge. 34 ANNEXES Annex 1: China Countr Partnership Strate Results Matrix China CPS Results Matrix Indicators Milestones Bank Group Interventions (indicative) STRATEGIC THEME 1. SUPPORTING GREENER GROWTH 1.1 SHIFTING TO A SUSTAINABLE ENERGY PATH 1.1.1bl Assoiate annua energyng saving fromEfiinc E)iacig12 1.1.1 Associated annual energy savings from - Policies promoting smoother grid integration developed by mid 2014 Shandong EE, Urumqi District Heating, Shanxi Coal Bed energy efficiency investments (million tons of - Renewable energy quota system established by mid 2014 Methane Development, Liaoning Medium Cities Infra. III coal equivalent) - Distributed generation piloted by mid 2014 GEF: Heat Reform & Bldg EE, Sino-Singapore Tianjin Baseline: 2.22 (2011) Target: 8.94 (2015) Eco-City, Provincial EE, EE Promotion in Ind, Thermal Energy Efficiency (EE) Power Efficiency, EE Financing (EE Phase Ill with Exim 1.1.2 GHG emissions expected to be avoided - Innovative pilots for promoting adoption of energy efficiency in at Bank), Technology Needs Assessment, Green Freight (metric tons/year) least three provinces promoted by 2015 Demonstration CF: Xiaogushan Hydropower, Nanjing Baseline: 0 Target: 20 million (lFCQ - Energy savings verification system developed by 2015 Steel Factory Gas Recovery, Inner Mongolia Huitengxile - EE standards and guidelines for green field investments developed by Wind Farm, Hubei Guangrun Hydropower, Shandong mid 2014 Manure Biogas, Baotou Iron & Steel EE Proj, Yingkou - 6 Fis and 3 Hangzhou banks have stronger capacities to offer EE/RE Economic Dev Zone Heating, Dashiqiao Central Heating products by 2015 (WB/FC) IFC: China Wind Power, Zhongda Hydro, Yanjin, CHUEE - Green Building Codes for commercial and residential buildings SME B1, Nature Elements Renewable Energy and Clean developed by 2015 (IFC) Tech Fund; C&G Environmental Protection Holdings; CHUEE 1 B1, CHUEE SME B1, CHUEE I BOB, CHUEE 11 Low Carbon Cities SPDB, CHUEE 11 B1, Sunpreme Silicon; Microvast, - Innovative pilots for promoting renewable and cleaner energy and Shuoren, CHUEE SME BRCB energy efficiency including in Shanghai and Tianjin launched by 2013 Pipeline: IBRD: Beijing EE and Emission Reduction New Technologies Demon (FY13), Shandong RE (FY13), Shanghai Building - Gas utilization applications demonstrated by 2015 EE and Low Carbon District (FY13), Concentrated Solar - Schemes to promote access to clean household energy developed by Power (FY14), Shanxi Coal-bed Methane Utilization 2015 (FY15), Hebe New Energy Development in Rural Areas - Knowledge on feasibility of CCS deployment gained (FY15) GEF: China RE Scale up bd, Urban Scale Building - Technology needs assessment completed EE and RE, Green Energy Schemes for Low-Carbon City in Shanghai,IFC IS : CHUEE SME SPDB, Sino Green Fund, EAP ALOE Ill Fund AAA: Carbon Capture & Sequestration, Tech - Economic Evaluation of Incentives for Wind, Green Energy Schemes for Low Carbon City in Shanghai, Smart Grid Development, EE in Public Institutions, Provincial Dnemgy onservation Practitioner's Forum, Defining and 35 Chn CPS Reut Matrix Measuring Low Carbon Cities, Clean Stove Initiative; Heat Regulation Phase II; Electricity Regulation to Integrate Climate Change Considerations; Issues and Options in Monitoring, Verification and Reporting in Energy Efficiency; IFC: CHUEE I IB AS, CHUEE SME lB AS, CHUEE I BOB AS, CHUEE II SPDB AS, CHUEE II IB AS, Performance Standards for the Banking Sector 1.2.1 People with access to improved water Water supply On-going: IBRD: Liuzhou Environment Management II, supply in more than 50 targeted small towns - Increased water production capacity, rehabilitation and expansion of Nanning Urban Environment, Sichuan Small Towns and cities: distribution networks in 38 Henan and 68 Jiangsu towns by 2014 Development, Bengbu Integrated Environment Baseline: 2.6 million (2011) Target: 6.8 - Bengbu Municipality (population 3.5 million) has increased water Improvement, Chongqing Small Cities, Chongqing million (2015) (WB) reliability (90 days of emergency water supply) by mid 2014 Urban-Rural Integration, Guangdong/PRD Urban Baseline: 4.6 million (2010) Target 5.0 - 3 banks improve lending process for water efficiency and water Environment 1+ 2, Yunnan Urban Environment, Han million (2014) (IFC) quality improvement projects and lend $100 million by mid 2014 (IFC) River Urban Environment, Henan Towns Water, Hunan - 20 industrial facilities or 3 industrial zones reduce 20% of water Urban Development, Jiangsu Water and Wastewater consumption, or increase the alternatives of fresh water by 20%, or Project, Liaoning Med Cities Infrastructure 1+2+3, decrease 20% of total pollutants from wastewater discharge by mid Shandong Environment 2, Shanghai Urban APL 2+3, 2014 (IFC) Tianjin Urban Development 2, Sichuan Urban - Increased water supply capacities by 25 million m3 per year (IFC) Development, Fuzhou Nantai Island Peri-Urban Development, Xining Flood and Watershed Mgmt, 1.2.2 Targeted towns and cities with at least Wastewater collection, disposal and treatment Wenchuan Earthquake Recovery Project, Guizhou 70% of municipal wastewater treated - Five new wastewater treatment plants in seven second-tier cities in Cultural and Natural Heritage, Gansu Cultural & Natural annually Hubei by 2014 Heritage, Shandong Confucius & Mencius Culture, Baseline: 0 Target: 25 (2015) - Wastewater treatment plan with installed capacity of 100,000 m3 day Gansu Qingyang Urban Infrastructure Improvement in Tianjin meeting class 1B discharge standards by mid 2014 IFC: Epure BOT/Sound Global Ltd; Asia Environment 1.2.3 People with access to improved - 200,000 m3/day additional WWTP capacity in four cities in Liaoning by wastewater management services (number) mid 2014 Pipeline: IBRD: Ningbo Domestic Waste Collection & Baseline: 586,000 (2011) Target: 2.2 million - 240,000 m3/day additional WWTP capacity in Jiangnan WWTP in Recycling Demonstration (FY13), Jiangxi Small Towns (2015) Nanning by 2015 Infrastructure Development Demonstration (FY13), Shaanxi Yan'an Water Supply (FY13), Liaoning Coastal 1.2.4 Solid waste collected and transferred to Solid waste collection and disposal Economic Belt Infrastructure and Environment (FY13), sanitary landfills in eight targeted cities (%) - Land fill capacity constructed : Liaoning 2,170 tons/day by 2012; Guangxi Laibin Water and Environment Management Baseline: 0% Target: 80% (2015) Yunnan 470 tons/day by mid 2014 (FY14) Chongqing Small Towns Water Resources - 446 mu dump sites closed (Hubei seven cities) Integrated Management (FY15) Shaanxi Small Towns - New program piloting household-based waste source separation Infrastructure (FY15) Qinghai Xining Integrated launched in Ningbo by 2015 Environment Management (FY15), Guilin Integrated Environment Management (FY15) IFC: United Water, Earthquake restoration in Sichuan and Gansu Aqualyng, CHUEE Water, CEI Water - Reconstruction and appropriate expansion of infrastructure services in 16 counties in Sichuan and 7 counties in Gansu with 100% of facilities AAA: IFC AS on Water efficiency finance; CHUEE Water 36 Chn CPS Reut MatrixS built to applicable government standards for flood and seismic AS hazards Public Transport On-going: IBRD: Wuhan Second Urban Transport, Xi'an 1.3.1 Demonstration corridors successfully - National sustainable urban transport framework and associated Sustainable Urban Transport, Anhui Medium Cities meeting public transport ridership, peak hour technical guidelines developed and issued by mid 2014 (GEF) Urban Transport, Liaoning Medium Cities Guiyang travel time and road safety targets - 30 cities use updated technical guidelines in designing 5 year master Transport, Kunming Urban Rail, Taiyuan Urban Baseline: 0 plan updates by 2015 (GEF) Transport, Fuzhou Nantai Island Peri-Urban Target: 26 corridors in 22 cities (2015) - Improved service on thirteen demonstration bus routes in Xian and DevelopmentSecond Tianjin Urban Development and five high demand demonstration corridors in Wuhan by 2014 Environment, Sichuan Small Towns Development, Hubei - Bus terminals, bus depots and stops, maintenance facilities Xiangyang Urban Transport, Shanxi Changzhi constructed in four cities in Anhui by 2015 Sustainable Urban Transport, Xinjiang Yining Urban - Demonstration bus priority scheme developed and bus infrastructure Transport GEF: Urban Transport Partnership, City constructed in Taiyuan by 2014 Cluster Eco-Transport, Green Freight Demonstration Urban Transport Efficiency Pipeline: IBRD: Zhengzhou Urban Rail (FY14), Yunnan - Road improvements on major urban traffic routes (>100 kms) in six Honghe Prefecture Urban Transport (FY14), Qinghai cities in Liaoning, four cities in Anhui, Xian, Wuhan and Taiyuan by mid Xining Urban Transport (FY14), Jiangxi NanChang Urban 2014 Rail (FY14), , Jiaozuo Safe and Green Transport - Roads constructed (36.6 km) and rehabilitated (7.6 km) in 6 small Development in Transforming Economy (FY15) GEF: Model Development Towns demonstrating sustainable infrastructure Large-City Congestion and Carbon Reduction service provision in Sichuan by 2014 - Creation of a Ming Walled City bicycle route in Xian by mid 2014 AAA: China Urban Transport Knowledge Management Platform TA Program (FY12-14); Rail Financial Futures Urban Transport Safety Analysis; Support Chinese Participation in 2011 WB- - Road safety measures implemented on targeted corridors in Wuhan Singapore Infrastructure Finance Summit; Transport by mid 2014 System Safety; Low-carbon Eco-city Financing Models - Traffic management measures including Area Traffic control system and Low-carbon Industry Development; Urban and road safety program implemented in Xi'an Transport Programmatic Knowledge Management - Traffic safety and management program implemented on main Platform; transport corridors in Taiyuan city by 2014 Agriculture Technology Ongoing: IBRD: Eco-Farming, Henan Ecological 1.4.1 Households and farms adopting targeted - Pilot the establishment of 30,000 biogas digesters leading to an Livestock, Jilin Food Safety, Xinjiang Turpan Water innovative sustainable practices (number) estimated annual reduction in C02 emissions of 60,000 tons (EFP) Conservation, Changjiang/Pearl River Watershed Baseline: 0 (2011) - 30,000 farm technician training days in proved livestock production Rehabilitation, Sichuan Wudu Irrigation GEF: Shanghai Target: 450,000 (2015) and waste management methods by mid 2014 (HELP) Agricultural and Non-point Pollution Reduction, - Effective livestock waste management technologies demonstrated on Mainstreaming Climate Change Adaptation in large and medium scale farms in Shanghai rural areas by 2014 Agriculture, Huai River Basin Marine Pollution 37 1.4.2 AreS where io v sta prcie Ihv en demaosae (ha)ou nereton idiaie - Use of organic fertilizer and scientific application of agricultural Reduction, Liaoning Bohai Sea Pollution, Shandong 1.4.2 Area where innovative sustainable chemicals demonstrated in Shanghai rural areas by 2014 Environment 11 CF: Shandong Poultry Manure Biogas, practices have been demonstrated (ha) Hubei eco-farming biogas, IFC: Deqingyuan Egg; Baseline: 0 (2011) Irrigation Muyuan Pig, North Andre Juice, JY Organic, Hwagain, Target: 100,000 ha (2015) - 24 kms of irrigation canals rehabilitated in the Turpan Basin (XTWCP) Xiwang Sugar, Jiuda Salt, Koyo Fertilizer and area with improved irrigation technologies increase in target areas from 0 to 8,000 ha by mid 2014 (CPRWRP) Pipeline: IBRD: Integrated Modern Agriculture - 12 Farmer Drainage and Irrigation Associations functioning as per Development (FY13), Guangdong Non-Point Pollution requirements by 2013 and appropriate incentives for water saving Control (-FY14), GEF: Climate Smart Agriculture, technologies and behaviors piloted (HRBFMR) Guangdong Non-Point Pollution Control CF: Hebei - Female membership for Water User's Associations and Producer large-farm biogas program, Shandong Household biogas Groups in targeted areas in Sichuan Wudu increases from 0 in 2012 to program IFC: Nature Forestry, Muyuan Pig 40 by mid 2014 AAA: Mainstreaming Water User Associations (IDF), Food Safety Economics of Adaptation to Climate Change in Water - 30 technical standards for safe agricultural practice developed and and Agriculture Sectors; Food Safety Engagement; Risk adapted to local conditions in Jilin by mid 2014 (JFSP) Assessment of China's Agriculture Product Quality and Safety; China 12 th ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~Mya Pig, Northts Andreag eruitofidutiuice, JYddclns y 0,n teefOrganic,-ffcen o atrusdinaHwagain,riato rss o0.3 Forest ~~~~~~~ ~~iwn Sugar, riiuda Salt Koyo Fertilizerftndn frstadig60 ilin 3 Ecosystem Management and Restoration On-going: IBRD: Guangxi Integrated Forestry 1.5.1 Targeted forest and range-land area - Mixed forest structures built with at least three tree species in IFDP Dvlpment, Integrated Forestry DvIpment, Shandong rehabilitated and restored through successful project sites by 2013 and 38 different types of local tree and shrubs Ecological Afforestation, Changjiang/Pear River demonstration of sustainable forest species in the Shandong project area by mid 2014 (SEAFP) Watershed Rehab, Sustainable Development in Poor management models (ha) - 27 different planting models introduced in five provinces to establish Rural Areas, Guangxi Watershed Mngment, Xinjiang Baseline: 0 (2011) new multi-function forest plantations by mid 2014 (IFD) Turpan Water Conservation, Huai River Basin Flood Target: 400,p000 ha (2015) - 8 different afforestation models for degraded mountainous area Mgmnt, Xining Flood and Watershed Mgmt, introduced in Shandong province by mid 2014 (SEAP) Bayannaoer Water Reclamation & Environment, - Guangxi provincial forest strategy formulated by 2012 (GIFD) Changjiang/Pearl River Watershed Rehab Zhejiang - Technical and methodological approaches related to credible carbon Qiantang River Basin Small T, Jiangxi Shihutang sequestration piloted in Guangxi by mid 2014 Navigation and Hydropower, Hunan Urban - Shelter Belt Plantation contracts in place to protect farmland and Development, Ningxia Desertification Control, Second infrastructure in Ningxia by mid 2014 (NDCP) Water Conservation GEF: Sustainable Management and - Management Effectiveness Score in Lake Aibi National Wetland Biodiversity Cons. Lake Aibi Basin, Guangxi Integrated Reserve increased by 10% and in five targeted nature reserves in Forestry Dev and Conservation CF: Reforestation on Guangxi from score 43 (2006) to 70 by mid 2014 Degraded Land in Guangxi, Facilitating Reforestation IFC: Hwagain Paper, Nature flooring 1.5.2 Targeted watershed area treated to Water Resources Management reduce soil erosion - Waterways strengthened for improved flood protection and reduced Pipeline: IBRD: Hunan Forest Restoration and Baseline (2010): 0 Target (2015): 1,800 kM soil erosion (85 km - Xining area; 61.4 km - Xiang River; 757 kms -Huai Development (FY13), Shaanxi Yan'an Water Supply S River basin) by 2014 (FY13), Jiangxi Jingdezhen Wuxikou Integrated Water 38 Chn CPS Reut Matrix 1.5.3 Groundwater overdraft reduced in - Three dams constructed in Turpan Basin (17 out of 29 contracts Scheme (FY14), Anhui Ma'anshan Cihu River Basin Turpan basin (million in3) completed by mid 2014) (XTWCP) Environment (FY13), Guangxi Laibin Water & Baseline: 0 (2011)Target:3.75 (2015) - 4389 Ha of crop fields protected against 10 year flood in the Jiangxi Environment Management (FY14), Huainan Coal Mining Gan river area by mid 2014 Subsidence Area Rehabilitation (FY15), Chongqing Small 1.5.4 People protected from flooding (number) Towns Water Resources Integrated Management (FY15) Baseline: 0 (2011) Target: 10 million (2015) GEF: Landscape Approach to Wildlife Conservation in Northeast China IFC: Nature Flooring II, Stora Enso II AAA: NE Forest Reform, Land policy dialogue, Transboundary rivers; Trial Conservation of Cultural Heritage Assets in Shandong Province; State Forest Reform; Air / Water On-going: IBRD: Shandong Flue Gas Desulfurization, 1.6.1 Successful demonstration of clean - Action plans for addressing air pollution issues completed for at least Bayannaoer Water Reclamation & Environment up/pollution reduction measures (e.g. 4 of the most polluted cities by mid 2014 Improvement Xian Sustainable Urban Transport, adoption of BAT in municipal incinerators and - Motor Vehicle Emission Control Plan for Xian by mid 2014 (XUTP) Urumqi District Heating, Liaoning Third Medium Cities - Demonstration of wetland for pollution reduction (66.5 ha) in Shanghai rural areas by 2014 pulpandpapr mlls)Shagha rual aeasby 014CF: HFC-23 Destruction co-purchase, GEF: PCB Management & Disposal, Dioxins Reduction from the Baseline: 0 Target: 7(2015) Pulp and Paper Industry, Shanghai Agricultural and POPs Non-point pollution reduction, Green Freight - All temporary PCB storage sites in Zhejiang identified, the low Demonstration, MP: ODS IV Phaseout, IFC: Universtar contaminated waste cleaned up and the highly contaminated waste disposed of by mid 2014 (PCB management project) Pipeline: IBRD: Ningbo Domestic Waste Collection & - Best available techniques (BAT)/best environmental practices adopted Recycling Demonstration (FY13), Guangdong Non-point in three selected municipal solid waste incinerators (GEF MSWP) and Source Agricultural Pollution Clean-up (FY14), Huainan in four selected non-wood pulp mills by 2015 (GEF Pulp) Coal Mining Subsidence Area Rehabilitation (FY15) GEF: Municipal Solid Waste POPs, POPs Contaminated Sites MP: HCFC Phaseout Project ODS - Completion of the ODS phaseout plan for the pharmaceutical aerosol AAA: Brownfields/Land remediation, Air Quality Action sector by mid 2014 Planning, Non-Point Source Water Pollution - Demonstration projects to phase out HCFCs completed by mid 2014 - Production and consumption of HCFCs in the PU Foam Sector freeze at the baseline level by 2013 as per the Montreal Protocol 39 - Overview of climate technologies in the selected sectors/provinces On-going : IBRD: Sustainable Development in Poor 1.7.1 Assessments of key technologies in and identification of a shortlist of key climate technologies for ten Rural Areas, Carbon Asset Development Fund identified mitigation and adaptation sectors sectors/provinces by 2014 completed - New concepts for market instruments, both for domestic schemes and Pipeline: GEF: Climate Technology Needs Assessment, Baseline: 0 Target: 20 (2015) new international off-setting mechanisms piloted in 6 schemes by Monitoring, Verification and Reporting in Energy 2013 Efficiency - Improved knowledge on the costs and benefits of early adaptation to climate change AAA: Partnership for Market Readiness, China's CDM - New methodology for Integrated Gasification Combined Cycle (IGCC) Experience and Lessons Learned technology developed and approved by the Clean Development Mechanism (CDM) Executive Board and one investor-ready programmatic program completed - Pilot indicators for sustainable land management, climate change vulnerability and adaptation formulated for consideration in national poverty monitoring by 2013 (SDPRAP) - 40% of pilot villages in Henan, Shaanxi and Chongqing have successfully completed village assessments and resource mapping and identified adaptation needs by 2013 (SDPRAP) STRATEGIC THEME 2. PROMOTING MORE INCLUSIVE DEVELOPMENT 2.1 INCREASING ACCESS TO Q1IAILITY VH-EAL TI- SERVICES AND SCIrAL DDOTECTION DROGRAIMSI 2.1.1 Additional population with access to - At least 50% of targeted counties implementing the healthy village On-going: IBRD: Rural Health, Chongqing Urban-Rural primary health care services at community standards by mid 2014 (RHP) Integration, Chongqing Rural-Urban Integration II level in targeted service areas - At least 8 counties have implemented the successful models on (county health services) TF: Avian Influenza IFC: Aier Baseline:0 (2010) Target: 280,000(2015) comprehensive county hospital reform by mid 2014 (RHP) Medical, BUFH, Chindex, Healthway, Wanjie Hospital, - At least half of project hospitals have standard cost accounting system Fosun Pharma lntnl, Weigao, BioChina, Q&M, APMG 2.1.2 Inpatients in project hospitals referred to producing quarterly departmental unit cost data by 2016 (CURIP II) upper level hospitals, disaggregated by gender - 320 standardized community-level health care facilities put into Pipeline: IBRD: Guangdong Urban-Rural Social Security Baseline: 8% Target: 6% (2016) operation in targeted service areas in Chongqing by mid 2014 (CURIP) Integration and Migrant Workers' Training (FY13) IFC: - Provincial approval by Guangdong of MIS architecture and technical Asia Pacific Medical Group (APMG) 2.1.3 Public Health System scorecard rating specifications by 2014 for targeted counties Baseline: 61.78 (2008) Target: >80 (2013) AAA: Health Programmatic AAA; Social Protection and Labor Market Programmatic MAA; HMIS IDF; Demand 2.1.4 Share of prefectures in Guangdong Analysis of Old Age Health Services in Both Demand and exchanging social insurance beneficiary data Supply Sides; Developing and Improving China's through integrated provincial MIS Pension System; Early Child Development; Health and Baseline: 0% (2013) Target: 60% (2016) Medicine System Reform; Improving China's Social Assistance System; 40 2.2.1 Graduates who pass skill certification - Strengthened linkages between targeted institutes and industry On-going: IBRD: Guangdong Tech & Vocational exams in targeted institutions (%) through advisory boards, partnerships and contract arrangements by Education and Training, Rural Migrant Skills Dev. and Baseline: LN: 90%; SD:93.5%; GD: 70%; YN: 2015 Employment, Chongqing Urban-Rural Integration, 84% (2010) - Curricula and training materials in targeted training institutions in Liaoning and Shandong Technical and Vocational Target: LN: 96%; SD:98%; GD: 85%; YN: 93% Chongqing, Liaoning, Shandong, Guangdong and Yunnan upgraded to Education, Sustainable Development in Poor Rural (2015) increase the quality and relevance by 2015 Areas, Yunnan Technical and Vocational Education and - More than 50% of students in targeted institutions in Guangdong, Training IFC: Ambow Education Holding Ltd 2.2.2 Graduates finding initial employment Shandong, Liaoning, Yunnan enrolled in modular, competency-based within 6 months of graduation (%) curriculum by 2015 Pipeline: IBRD: Guangdong Urban-Rural Social Security Baseline: LN:72%; SD 73.4%; GD: 34%; YN: - At least 60% of students in targeted institutions in Guangdong, Integration and Migrant Workers' Training (FY13), 58% (2010) Shandong, Liaoning, Yunnan assessed with outcomes-based systems Industry based Poverty Alleviation (FY15), Economic Target: LN: 82%; SD:88.2%; GD: 56%; YN: 75% by 2015 Reform Promotion and Capacity Strengthening (FY15) (2015) - Migrant Worker Service Centers established in Chongqing by mid 2014 (SDPRAP) AAA: Programmatic Skills TVET AAA, Korean TF, Social 2.2.3 Migrant trainees successfully completing Protection and Labor Market Programmatic AAA; Skills targeted vocational training programs in Development in Four Economic Sectors in Yunnan project schools (%) Province Baseline: 84% (2011) Target: 96% (2014) 2.3.1 People with access to safe water supply Rural Water and Sanitation On-going: IBRD: Ningbo New Countryside and sanitation in targeted rural areas - 100 villages in Ningbo with wastewater treatment infrastructure by Development, Chongqing Urban-Rural Integration, Baseline: 40,392 Anhui, Chongqing, Guangxi mid 2014 (NNCDP) Sustainable Development in Poor Rural Areas, W. (2011); 378,000 (Shaanxi, Sichuan) (2011) - 80% of people in targeted communities and schools have adopted Region Rural Water & Sanitation, Fujian Highway Sector Target: (i) Anhui, Chongqing, Guangxi - safe hygiene and sanitation behaviors by mid 2014 (RRWSP) Investment, Guiyang Transport, Ningxia Highway 150,000 (2014), (ii) Shaanxi - 326,716 (2012), - All financed water supply schemes operating sustainably after one project, Integrated Rural Economic Development of Sichuan - 258,000 (2012) year Demonstration Towns and Counties, IFC : Xiwang Sugar; North Andre Juice, Epure BOT Il--Water, CEF IV--FM, Rural Transport Nature Elements-CC Fund in frontier, CGCCD- - Rehabilitation of about 5000 km of rural roads under Fujian's Rural Earthquake restoration; Fullerton Credit, Beichuan VTB, 2.3.2 People in targeted rural areas with Roads Improvement Program by 2015 CHUEE SME B, CHUEE SME SPDB, ZhongAn Credit, access to an all season road - 500 kms of new village roads or paths connecting households to Shenzen VTB., MC China, CFPA MFI, Baseline: 950,000 (Ningxia, Fujian, Guiyang) village roads and 315 km of village roads connecting natural villages to (2010) each other in AnhuD, Chongqing, Guangxi by 2014 (EFP) Pipeline: IBRD: Guiyang Rural Road (FY14), Anhu, Target: (i) Ningxia - 240,000 (ii) Fujian - - 241 villages connected by project roads and 348 villages serviced by Yellow Mountain New Countryside Demonstration 1,250,000 (iii) Guiyang 110,000 (2015) project rural bus stations in Guiyang Project (FY14), Anhui Xuancheng Infrastructure for - 9 local roads (about 100 ki) in the poorest counties in Ningxia Industrial Relocation from Coastal Area (FY14), Zhejiang improved by mid 2014 Rural Area Wastewater Management (FY15), Industry based Poverty Alleviation (FY15), Economic Reform Financial Inclusion (IFC) Promotion and Capacity Strengthening (FY15), Guizhou 2.3.3 Increase access to financial services for - PRGC is developed into a competitive rural guarantee company Rural Development (FY15) IFC: Chifeng MFR, Renzhou Micro Finance Clients (IFC) serving micro, small, and rural clients by 2014 VTB, Harbin Bank VTB, CYCCB, CGCCD Rsf; Puhui Baseline: 0 Target: 7 million (2016) - Successfully transformed CFPA into a professionally managed Guarantee; Xinjiang MCC 41 microfinance institution by 2014 AAA: Improving Public Expenditure in Rural China (IDF), - A full range of financial services developed for small and micro Sustainable Financing Mechanism for Small Town enterprises in rural areas for client MFIs by 2014 Infrastructure Development, The Mortgage of the Right to Contract for Management in Rural Areas, Housing Poverty Alleviation Approaches Policies, Urban Planning and Integration in China; 2.3.4 People benefitting from improved access - More innovative ways of providing poverty reduction assistance to Inclusive Finance Academy in China (IFA); Innovation to services and income generating activities by the poorest communities and households in Henan, Shaanxi and Model of Affordable Housing Investment and Financing; 2015 Chongqing piloted through CDD and participatory approaches (with Promoting Inclusive Innovation in China; Financial Baseline: 0 Target: 715,298 people in 25 60%Consumer protection and Financial Literacy in China; counties in Henan, Chongqing and Shaanxi 770 paa t vil cmltn mutyea Sub-national Public Finance and Debt Management; development plans by mid 2014) (SDPRAP)IFC: Harbin Bank VTB AS, Network China Foundation for - Women participating in village committees in targeted areas increase Poverty Alleviation Microfinance Transformation, from 0P% in 2011 to 25% by mid 2014 (SDPRAP) Beichuan VTB AS, Renzhou VTB AS Accion AS Binhai Rural Commercial Bank (BRCB) , Sichuan CCB, CHUEE AS. 2.4.1 Reduction in transit times on railway Railways On-going: IBRD: 3rd National Railway, Guizhou- sections connecting less developed regions - 355 km high-speed passenger rail line between Shijiazhuang (Hebei) Guangzhou Railway, ShiZheng Railway ,Jilin-Hunchun with more developed (%, min) and Zhengzhou (Henan) completed by 2015 Railway, NanGuang Railway, Anhui Highway Rehab & (i) Tumen -Jilin: 68% (315 min) (2015) - 254 km Liupanshui-Zhanyi section of the Guiyang-Kunming railway Improvement, Hubei Yiba Highway, Fujian Highway (ii) Sanyanqiao - Litang West: 72% (450 line upgraded to increase capacity and reduce travel times by 2012 Sector Investment, Ningxia Highway, Anhui Shaying min)(2015) - 400 km high-speed passenger and freight line between Sanyanqiao - River Channel Improvement, Jiangxi Shihutang Navi & (iii) Guiyang - Guangzhou: 78% (1170 min) Litang West completed by 2014 Hydropower, Zhangjiakou-Hohhot High Speed Railway (2016) - 75% of civil works on new shorter and more direct railway line linking GEF: Guangdong Green Freight Demonstration IFC: (iv) Guizhou - Yunnan: 47% (105 min) northwestern China (Guiyang) with the Pearl River Delta completed Minsheng (2012) by mid 2014 (v) Shijiazhuang -Zhengzhou: 61% (120 - 40% of civil works on new 360 km passenger-dedicated rail line Pipeline: IBRD: Harbin-Jiamusi Railway (FY13), min) (2013) between Tumen and Jilin completed by mid 2014 Yinchuan-Xi'an Railway (FY14), Fujian Meizhou Bay Waterways (FY13), Jiangxi Shangrao Sanqingshan 2.4.2 Increase in railway capacity (train Waterways Airport Development (FY13), Fujian Fishing Ports pairs/day) - Navigable time per year for 1000 ton vessels on 38 km channel on Demonstration Project (FY14), Yunnan Highway Assets (i) Tumen -Jilin: 162% (2015) Nanchang- Ganzhou corridor increase from 27% in 2007 to 95% by Management (FY15), Henan JiaoZuo Green (ii) Sanyanqiao - Litang West: 185% mid 2014 Transportation and Road Safety Improvement (FY15), (2015) - 205.6 kms of Class IV channel are upgraded along Anhui Shaying Gansu Rural-Urban Integration Infrastructure (FY15), (iii) Guiyang - Guangzhou: 400% (2016) River by 2015 Hubei Xiaogan Logistic Infrastructure (FY15), (iv) Guizhou - Yunnan: 61% (2012) Heilongjiang Cold Weather Smart Public Transportation Roads System (FY15) 2.4.3 Annual volume of cargo along targeted - Green Freight Technology Rebates and Performance Based Incentive waterways schemes to improve energy and economic efficiency of fleet in AAA: Modeling Regional Economic Benefits of Railway (i) Gan River Guangdong demonstrated by mid 2014 Projects; Baseline: 85 million ton (2007) - Expressway connecting the two major industrial areas that are the Target: 131.6 million ton (2013) backbone of Ningxia's economy constructed by 201 (ii) Shaying river (passing Yingshang Lock) - 195.2 km Yong'an- Wuping Expressway (Fujian province) completed Baseline: 0.D17 million ton (2009) by mid 2014 Target: 3.07 million ton (201) - Pilot provincial road contract maintenance approaches in Fujian and 42 2.4.4 Travel time reduction on targeted road Anhui by mid 2014 corridors - 890 km key national and provincial roads rehabilitated and (i) Yongan (Fujian) - Wuping (Guangdong maintained and 320 km improved in Anhui by mid 2014 border): 67% (2013) - Innovative environmental compliance framework with incentive (ii) Qingtongxia -Guyaozi (Ningxia):60% system developed and implemented in the Yiba Hiqhway project (2015) (Hubei) (iii) Yichang - Badong (Hubei):42% (2015) 43 Annex 2: Gender and Development in China 1. To inform the FY13-FY16 Country Partnership Strategy (CPS), the World Bank conducted two pieces of background analysis: a literature review of gender in key sub-sectors; and a review of good practices in mainstreaming gender in the lending portfolio during the previous CPS period. The Bank also drew upon analysis in the East Asia and Pacific (EAP) Companion to the 2012 World Development Report on Gender Equality and Development. 2. Over the last two decades, China has made remarkable progress in reducing gender disparities. An appropriate legal and organizational framework is in place for protecting women and implementing China's strategy-the Program for the Development of Chinese Women (2011- 2020).14 The 12th Five Year Plan includes a significant gender dimension to its focus on inclusive development, focusing on ensuring that women are able to benefit from development gains. It emphasizes the protection of women's legal rights and the importance of ensuring women's access to basic services. It further highlights the need to improve women's ability to contribute to economic development by promoting female employment and entrepreneurship. 3. China has improved women's access to health and education. From 1990 to 2008, there was a dramatic decline in maternal mortality from 110 to 38 (per 100,000 live births). On the other hand, non-communicable diseases have increased. This is partly linked to the incidence of tobacco use among men at 59.5 percent in 2008 (compared to 3.7 percent among women). Gender parity has been achieved in education at primary and secondary levels, with the share of female students now slightly higher than that of male students. 4. Rates of female labor force participation have remained high in China at 75 percent in 2008. Economic reforms in recent decades have increased the range of opportunities for men and women in paid employment. However, rates of female employment have stagnated behind those of men over the last 10 years. Once in the labor force, women earn approximately 70 percent of men's wages for similar work and tend to have less secure employment and longer periods of unemployment. Access to child-care has become increasingly important for women's labor force participation (particularly for migrant women), following child-care reform. Large numbers of female migrants to urban areas, often migrating alone given the restrictive migrant registration system, face multiple disadvantages, such as segregated jobs, lower wages, and poor working conditions. The mandatory age of retirement for women at 55 (60 for men), means that men and women have significant differences in retirement prospects in urban areas. Few female migrant workers participate in pension, unemployment, or workplace injury insurance schemes, or receive maternity insurance. 5. Women from ethnic minority communities and remote rural areas remain particularly vulnerable, and lag behind in terms of access to basic services and economic opportunities. Women remain less likely to own land in spite of an enabling legal framework. Values and norms regarding the transmission of rights to land to women (in the case of inheritance for example) can 14 The legal framework includes: the Law of the People's Republic of China on the Protection of Rights and Interests of Women; the recently revised Marriage Law, providing protection against domestic violence; and recent amendments to land laws to confer women equal rights to land titling. Organizations include: the National Working Committee on Women and Children and All China Women's Federation. 44 create difficulties in enforcing legislation. The amount of land per capita for female headed households was 70 percent that in male headed households (2008). In the six regions where minorities are concentrated the school enrollment rate is largely lower than the national average. The average dropout rate in these same provinces is about three times the national average. In addition, urban labor force participation also fell faster among minority women than among Han women between 1990 and 2000, which is consistent with a widening gap in income and occupational attainment between Han and ethnic minorities. 6. China has a high proportion of women parliamentarians (21 percent) compared to other countries in the East Asia and Pacific Region. The proportion of women in local government in urban areas is double that at 48 percent. The promotion of the village self-government system has helped expand opportunities for women in village governance. In critical areas such as environmental policy, energy, and transport, which are central to the current World Bank Group portfolio in China, national programs are not systematically informed by an understanding of the different needs and use of resources by both women and men. The significant gender gaps in employment in these areas and women's weaker voice in the governance of these sectors may also hinder their ability to help determine options and sector priorities. 45 Annex 3: Country Partnership Strategy Completion Report CHINA: CPS (2006-2010) COMPLETION REPORT Date of CPS: May 23, 2006 (Report No. 35435- CN) Date of Progress Report: Board discussion January 22, 2009 - Report No. 46896-CN Period Covered by the CPS Completion Report: July 2006 to December 2011 Summary of Evaluation Ratings Program Performance China has made significant progress in the areas of the 1 1th Five Year Plan identified as Country Partnership Strategy (CPS) engagement pillars, and the World Bank Group (WBG) has supported these advancements. Based on WBG's country team assessments and consultations with the authorities and stakeholders, WBG program performance is rated in the aggregate as satisfactory.15 All 35 outcomes identified in the CPS have been achieved or partially achieved. Bank support has made a significant impact on the lending side through innovation, demonstration, and scale-up, and on the AAA front through intensified knowledge engagements, many of which leveraged and complemented operations. IFC's China program was focused on relevant CPS outcomes and is rated satisfactory. IFC contributed to relevant CPS outcome areas where it has a comparative advantage. The development outcomes of IFC investment services operations improved consistently during the CPS period, surpassing IFC average in FY11 while advisory services engagements were marked by far reaching operations in access to finance and climate change initiatives. Of IFC advisory services engagements completed during the reporting period, 74 percent led to significant results, including more than US$4.9 trillion in financing facilitated through credit reporting and secured transactions systems, and 17.8 million tons of GHG emissions avoided annually. 16 WBG Performance The Bank's performance in strategy design and program implementation is rated as satisfactory. The CPS strategy was appropriate to country priorities and goals, as evidenced by close alignment with the 1 1th Five Year Plan and strong country ownership. The program proposed in the 2006-2010 CPS was realized as envisaged with only minor shifts to meet exceptional circumstances (e.g., post- earthquake reconstruction support) and shifting emphasis within the program (e.g., intensification of support for China's global engagement). IBRD portfolio performance compares favorably with other large Bank borrowers. The portfolio was well managed and performance was solid. Trust funds have been used effectively, especially in the areas of environment, climate change, and global engagement. IFC's performance is also rated as satisfactory. The program sought to align investment and advisory services to deliver greater reach and development results. IFC quickly responded to changes in the country context and has started to streamline its focus towards high impact initiatives in frontier regions/rural growth, climate change, and South-South investments. Steady improvement " This completion report also covers program activities in 2011. The new CPS will provide a framework for WBG engagement from FY13-FY16. 16 About 17.8 million tons of avoided GHG emissions achieved directly through the CHUEE guarantee program and an additional 41 million tons avoided indirectly through partner financial institutions. 46 in development outcome tracking system (DOTS) indicators can be linked partly to the quality of project supervision during the period, which was satisfactory in 96 percent of projects evaluated between 2006 and 2010. For those operations reporting on additionality, over 90 percent achieved or partially achieved the expected additionality. From FY06 to end-201 1, IFC's China program reached historical highs with more than US$3 billion in over 100 projects, representing 60% of total investment volume since its first investments in 1985. On the basis of the rating of the Bank and IFC, the overall performance of the World Bank Group is rated as satisfactory. I. Introduction This Country Partnership Strategy Completion Report (CPSCR) assesses the effectiveness of the 2006-2010 CPS for China. The CPS was aligned with the Government of China's 1 1th Five Year Plan (FYP). The CPSCR also evaluates program activities in 2011, because the new CPS covers WBG engagement from FY13-FY16. This evaluation draws on findings of the mid-term CPS Progress Report as well as consultations with clients and stakeholders in the capital and the provinces. II. Progress on China's Long-Term Development Goals In 2006, when the CPS was prepared, China had been achieving impressive growth for three decades (annual GDP growth of about 9 percent since 1978 when reforms started). The number of poor had declined significantly with over 500 million people coming out of poverty. The country had shifted from a centrally planned to a market model, and China had become the world's fourth largest economy and the third largest trading nation. Yet, it remained a developing country with per capita GDP of about US$1,740 and about 135 million people living on less than US$1/day. Maintaining the pace of rapid growth was a key challenge along with resource demands, environmental impacts, and rebalancing the pattern of development to avert or mitigate emerging inequalities. China's 1 1th FYP (2006-2010) aimed to address these and other challenges to build an inclusive harmonious society with higher living standards for its citizens, and it made significant progress in implementing the Plan. III. WBG Program Performance With WBG financial investments accounting for less than 0.02 percent of China's overall Gross Domestic Investment (GDI) over the CPS period, any attribution of the country's achievements to WBG interventions needs to be approached with modesty. The WBG strategy revolved around innovative interventions that leveraged its international expertise and cross-country experience. Lending operations were built around cutting-edge knowledge-based pilots that could be replicated on a national scale. They tested reforms to support institutional development, the transition to a market economy, and sustainable resource management practices. The WBG's convening power supported China's integration in the global economy, and its expertise facilitated two-way knowledge transfer and a growing program of South-South exchange that allowed China to share its development experiences with other countries. IFC's and MIGA's investments, guarantees, and advisory services helped facilitate both domestic and Foreign Direct Investment (FDI), fostered innovative transactions, and supported projects which utilize best practices to create demonstration effects, with a particular focus on frontier and lagging regions 47 WBG assistance was organized around five thematic pillars (see below, and Attachment 1). The CPS results framework offered a good starting point, but in retrospect the specific goals and anticipated outcomes could have been better differentiated and fewer in number. Also, it would have been helpful to focus more on milestones to gauge progress towards outcomes rather than outputs. The mid-term review undertaken for the 2009 CPS Progress Report (CPSPR) found that the original strategic priorities and objectives remained valid. It noted that progress was on track and in line with China's advancements under its 1 1th FYP goals. As mid-course adjustments, the review noted intensified engagement in supporting China's integration into the global economy, greater emphasis on energy efficiency objectives and climate change issues, and accelerated implementation of integrated rural-urban development, particularly through the Guangdong and Chongqing pilot initiatives. It formalized Bank support for disaster risk management, and for earthquake reconstruction in the wake of the tragic May 2008 Wenchuan earthquake. Since the 2009 Progress Report, progress under the CPS pillars has continued to be strong. The preparation by the World Bank and the Development Research Center (DRC) of the State Council of the joint China 2030: Building a Modern, Harmonious, and Creative, High-Income Society, was a particularly important collaboration initiated in September 2010 and launched at a conference in February 2012. Pillar 1: Integrating China into the world economy Outcome Status: China has emerged as an increasingly influential player in the global economy with a growing role in international economic institutions and South-South exchange. It has increased its engagement with regional development banks and has shifted its role in IDA to that of a contributor. There is high and growing demand from other countries for investment, trade, and knowledge- sharing with China and the country has become a significant source of financing and investment in infrastructure, particularly in Africa. WBG Support: The WBG has facilitated engagement through a number of activities, particularly experience-sharing with other developing countries, most notably in Africa. It has contributed to institutional strengthening through its advisory support (e.g., on trade, debt management, South- South), while MIGA and IFC have provided support for enhancing the quality of China's investments and related knowledge sharing, especially in financial and non-financial risk mitigation and standard setting (e.g., environment and social, and corporate governance). The WBG maintained a productive dialogue with relevant Chinese institutions on issues of development cooperation and aid effectiveness both directly and through the China-DAC Study Group. Moreover, Chinese ministries and agencies have been assisted in documenting and sharing development experience on issues such as industrial zones, health, water, and poverty reduction. WBI has been particularly active in supporting experience sharing and in building the capacity of key Chinese South-South cooperation institutions, most notably the International Poverty Reduction Center in China (IPRCC) and the Asia Pacific Finance and Development Center (AFDC). The Bank has worked well as a trusted partner and facilitator in disseminating knowledge about China's development experience with the world, as well as supporting China's integration with the global economy. A Department for International Development (DFID)-financed trust fund provided support for a number of important studies and activities aimed at improving information exchange and knowledge sharing. Bank reports (such as the Quarterly Economic Reports and the book China: New Trade Issues in the Post- WTO Accession Era) have helped generate accurate information on China's economic and social 48 development, its impacts on the world economy, and how it is managing a resource-scarce economy. The Bank collaborated more closely with Chinese research partners to gain from their local knowledge and to build their analytical capacity. The Bank also worked with China on regional initiatives including the Greater Mekong Sub-region, the Central Asia Regional Economic Cooperation (CAREC) program, and management of the avian flu threat. Following IFC's advisory services, knowledge sharing and exchanges between the Chinese and Vietnamese governments and financial sectors have resulted in plans by the State Bank of Vietnam to develop environment and social (E&S) risk management guidelines similar to China's Green Credit Policy. IFC is also assisting the Chinese private sector in investing profitably and sustainably in other parts of the world. In 2010, IFC made its first investment in a Chinese company operating in Sub-Saharan Africa - CREJ Estates in Tanzania. In 2011, IFC co-invested with China EXIM Bank, China Investment Corporation, BOCI and CCCC, to support infrastructure projects in ASEAN countries. China Development Bank and China EXIM Bank became the first Chinese banks to participate in an IFC- syndicated parallel loan for a project in Africa: Ghana Vodafone. Pillar 2: Reducing poverty, inequality, social exclusion Outcome Status: China has continued to make progress in reducing poverty, building on the dramatic reductions after 1980. Policy changes aiming to enhance equity and quality have been introduced, including the abolition of the agricultural land tax, the nationwide introduction in 2008 of free compulsory education, the expansion of student financial assistance to tertiary education, and the adoption of ambitious 12th FYP targets for universal early childhood education coverage. China's health reforms represent a major achievement in health equity by providing basic near-universal coverage through insurance mechanisms and a public health package. A means-tested cash transfer program (Social Safety Net) was rolled out across rural China (dibao), and a major national initiative to achieve comprehensive coverage of rural pensions is rapidly expanding, as well as a more recent pension program for the urban informal sector. To improve the conditions of work for Chinese workers and strengthen worker protection, the Labor Contract Law was enacted, and integrated rural- urban development models of social security and other entitlement programs are being piloted. In November 2011, the government adjusted the official rural poverty line to be more in line with international standards (a step strongly supported by the Bank), qualifying 100 million more people for a variety of benefits that will bring more resources to poor regions. Despite progress during the period of the 1 1th FYP in reducing poverty (average rural per capita incomes exceeded 1 1th FYP targets) and slowing the rise of inequality, continuing to reduce poverty and reversing inequality remain important challenges in China. WBG Support: The Bank Group supported government efforts to improve social safety nets for the rural and urban poor, including through key analytical and diagnostic pieces on the dibao program. The From Poor Areas to Poor People study, the result of a multi-year analytical effort, provided a comprehensive overview of poverty reduction progress, as well as recommendations to address key challenges. In the education sector, policy notes (Education Sector Review and Early Childhood Development and Education) were helpful in informing the medium- and long-term strategy for educational reform and development, with the Government now emphasizing Early Childhood Development and Education (ECDE) under the 12th FYP, and policymakers increasingly focused on the importance of addressing inequity in higher education. The Bank's ECDE AAA has also led to requests for further collaboration on impact evaluation by the China Development and Reform Foundation. 49 Bank assistance was welcomed in formulating the Human Development System reform strategy for national and sub-national governments, including the health system reform master plan. AAA on non-communicable diseases (NCD) prepared in coordination with the Chinese Ministry of Health and the World Health Organization presented evidence on the economic and social consequences of explosive increases in NCDs in China and proposed a range of policies and strategies to confront and prevent them. Bank-supported AAA and the Rural Health Project contributed significantly to building impact evaluation capacity for health system reform, for example, by mobilizing trust fund resources to hold impact evaluation training workshops in partnership with the National Development and Reform Commission (NDRC). The WBG also supported the formulation of a monitoring and evaluation indicator framework, as well as data collection for the health system reform mid-term evaluation. In addition, analytical and advisory work on the pension and elderly care systems were sustained, with a major policy report on directions of pension reform, diagnostic work on the situation of rural elderly, and initial work on aged care under social protection programmatic AAA. WBG financing (investments, TA, TFs) supported pilots of new mechanisms as well as capacity building with social sector projects on poverty reduction, rural health, migrant training and employment, and Technical and Vocational Education and Training (TVET). These activities helped support continued poverty innovations by connecting small farmers to higher value chains through bottom-up and top down approaches in agriculture. The WBG and provincial authorities have also been developing models for integrated rural-urban development in both Chongqing and Guangdong. The participatory approach and Community Driven Development (CDD) models have been advanced through Bank-financed activities, including the Poor Rural Communities Development Project, supported by the Bank and DFID, which extended the participatory approach to poor villages in 18 counties in western China and piloted the CDD model in 4 other counties in which village committees approved and evaluated subprojects, allowing for community control of funds. The follow-on Sustainable Development in Poor Rural Areas project continues to advance CDD approaches in Henan Province, Shaanxi Province, and Chongqing Municipality, and incorporates GEF co-financing to address potential climate-change risks and land degradation issues closely linked with rural poverty. Poverty reduction efforts have also included a strong gender focus, with projects identifying entry points for women's participation in community-based activities and creating space for women's voices to be heard in community-based planning processes. Bank-supported projects also financed upgrades of transport infrastructure and improved network management and traffic safety. Rural roads were a particular focus of this effort, which also included expressways, railroads, and waterways linking inland provinces to the dynamic coast so that transportation benefits accrue to the poor. IFC was involved in supporting private enterprise growth in both cities and rural areas all over China as the main source of sustainable job creation. Overall WBG support has increasingly shifted to poorer lagging regions. As of end-FYI 1, about 86 percent of projects in terms of loan/grant amount are in the interior and western provinces. IFC has also mobilized more and more resources to support the development of the frontier regions. In FY06- 09, only 30% of IFC's new projects were located in frontier regions, while the percentage rose to more than 60% from FY10 to end-201 1. Pillar 3: Managing resource scarcity and environmental challenges Outcome Status: CPS Pillar 3 aimed to support China in creating a resource-efficient society (including meeting the Government's goal of reducing energy intensity by 20 percent from 2005 to 50 2010), improving natural resource management to reduce degradation and depletion, and meeting international environmental commitments. During the 11th FYP, there has been a reversal of the negative trends in energy intensity, air pollution (though only in some cities and some parameters), water pollution (some waterways), as well as substantial progress on wastewater treatment, water savings (in some basins), and better management of lands and forests. There are major government efforts underway to enhance energy efficiency, develop renewable energy sources, and address climate change issues. In 2008, the Industrial Bank of China, an IFC client, adopted the Equator Principles (EPs), a voluntary environmental and social risk-management framework based on IFC performance standards, becoming the first EP bank in China and the Asian emerging markets. In addition, the Industrial and Commercial Bank of China, one of the world's largest banks by market value, runs a 12 category environmental and social risks system and applies the standards in its overseas investment activities. China EXIM Bank is also using a performance standards-based internal environmental and social risks review process. Despite China's achievements in these areas, significant challenges remain. China is the largest emitter of Greenhouse Gas (GHG), and GDP remains energy-intensive. WBG Support: WBG activities with environment objectives have expanded steadily and comprise more than 76 percent of new IBRD lending (81 percent including GEF) as of December 2011. There is a growing pipeline of climate change mitigation actions. WBG support to climate mitigation through its energy, transport, urban, forestry and agriculture sector interventions exceeds envisaged CPS levels. In IFC, 100% of its investment operations are required to adhere to applicable environmental and social performance standards, including resource efficiency and pollution abatement. In addition, mitigating climate change is a key focus area for IFC, and IFC has successfully partnered with three selected Chinese banks to introduce new energy efficiency financing. IFC has also introduced market-based waste-to-energy, wind and hydropower, and water treatment models. WBG's support for the energy sector has focused on renewables, energy efficiency and low carbon cities. One highlight of the WBG's support has been the China Renewable Energy Scale-Up Program (CRESP). The first phase of the program contributed to scaling-up renewable energy by supporting effective policy studies and the rapid growth and quality improvement of the domestic wind manufacturing industry. IFC's China Utility-Based Energy Efficiency (CHUEE) Finance Program also contributed by facilitating US$680 million in bank loans for US$1.4 billion in investments to finance over 160 energy efficiency and renewable energy projects in steel, cement, glass, and other key sectors, resulting in 17.8 million tons17 of GHG emissions avoided annually. The WBG has been involved with the scaling up of water supply, wastewater management, irrigation, and metropolitan service delivery, supported by AAA, GEF projects, and lending resources. The WBG has assisted sustainable cultural and environmental heritage initiatives. Environmental technical assistance has focused on developing the circular (recycling) economy, green accounting, water conservation, forestry and related land tenure issues, as well as the urban brown agenda. The Circular Economy study helped to shape the China Circular Economy Promotion Law. It contributed to the formation and implementation of the 12th FYP objectives in pollution reduction and resource-saving, and has encouraged a new generation of waste management projects. AAA on improving water resource management in the context of worsening scarcity and on adapting 17 About 17 million tons of avoided GHG emissions achieved directly through the guarantee program and an additional 41 million tons avoided indirectly through partner financial institutions. 51 agricultural production systems to climate change has provided the analytic basis for current and upcoming lending in water resource conservation, irrigation, and agriculture. The Adapting Agricultural Production System to Climate Change study used cutting-edge modeling to improve understanding about the impact of climate change on China's northern plains, its historic breadbasket. The study, together with a successful GEF-financed pilot project in agricultural adaptation to climate change, is shaping upcoming Bank lending to help Chinese farmers adapt to climate change. The WBG has also analyzed and provided recommendations on land policy and the economic cost of pollution. The Green National Accounting Study contributed significantly to the Government's efforts to value pollution costs by introducing an economic valuation methodology and establishing green accounting systems. The Bank also supported the promotion of strategic environmental assessment (SEA), shared international best practices, and promoted EIA in Bank operations. WBI's support for enhancing urban planning capacity led to improvements in training course content and delivery methods, and a better understanding of urban environmental issues (including the publication of the China Urban Development Quarterly). To support China in meeting its international environmental commitments, the WBG has engaged through AAA, lending, carbon financing, new instruments (Carbon Investment Fund), climate partnership strategies, global funds, demonstration projects, TA, and conferences. WBG support has succeeded in forwarding China's global environmental agenda including stabilizing GHG emissions and phasing out of persistent organic pollutants (POPs). The World Bank supported the National Climate Change Program study adopted by the Government in 2007, which guides the direction of China's GHG mitigation efforts and forms the basis for China's 12th FYP climate change objectives. Bank AAA work on the CDM under the previous CPS coupled with further policy dialogue and major carbon investments, including the US$1.2 billion HFC23 emission reduction project, helped confirm the viability of, and liquidity in, CDM markets worldwide. Further, the China CDM Fund was established, a major innovation funded by a tax on CDM revenues that is now poised to invest in climate mitigation investments across China. China now comprises 77 percent of the Bank's substantial CDM portfolio China is also one of a handful of countries implementing the first generation of projects under the Carbon Partnership Facility (CPF), which aims to scale up investment in clean technology. Separately, the Bank is the largest implementing agency of GEF funds in China, comprising about US$200 million in commitments during the CPS period. IFC advisory products were undertaken to better understand the quality and sustainable performance of private enterprise, carbon finance aggregation through financial institutions, and environmental and social standards in specific industries, such as ICT. The WBG has had limited success in piloting integrated urban planning, bulk water markets, and liberalizing energy and water markets. The CPS could also have been more proactive in incorporating greater WBG involvement for disaster preparedness and disaster risk management, although the response to the 2008 Wenchuan earthquake was swift and appropriate. (This response included two projects: one large IBRD-financed earthquake recovery loan, and a second quick- response GEF-financed project that assessed the public health risk associated with potential earthquake damage to hazardous waste facilities.) IFC focused its attention on the broad theme of "private sector recovery," implementing several investment and advisory services projects over the 52 past three years.18 Total investments amounted to US$120 million with significant advisory service components. Pillar 4: Financing sustained and efficient growth Outcome Status: China continues to make strides in transforming its financial sector to a modern, market-based system. Considerable progress was made during the CPS period in strengthening the financial regulatory agencies and institutions, and restructuring the financial markets. The series of policy reform measures, including capital injections by the Government, partnerships with strategic investors, and initial public offerings, as well as enforcement of prudential regulations by the China Banking Regulatory Commission (CBRC) have served to introduce modern corporate governance, risk management and internal controls to the second-tier commercial banks. The rural financial system has become more diverse and competitive, as the Rural Credit Cooperatives (RCCs) were restructured and recapitalized and new rural financial institutions entered the market. However, the financial sector reform agenda remains unfinished. According to the FSAP of 2011, the sector remains depressed, unbalanced and costly to maintain, and the financial system is exposed to potential risks of instability and inefficiency in resource allocation. WBG Support: WBG engagements include lending and AAA for developing competitive rural financial markets and housing finance (including the pilot for mortgage backed securitization), assisting RCC reforms, promoting sustainable commercial micro and small lending, strengthening corporate governance in state-owned banks, and studying options to improve the effectiveness of state-ownership function in the financial sector. The WBG has also assisted in streamlining regulations for corporate pension schemes and has facilitated the development of a strategic vision for the capital markets. WBG analytic services have been delivered to macro-prudential authorities, sub-national governments, and financial institutions. Engagement with the policy banks, notably China Development Bank and Eximbank, has had a significant impact on knowledge and capacity building, though international project-level collaboration has been less concrete. IFC investments in national and local joint-stock banks, commercial banks (both city and rural), microfinance companies, and TA on corporate governance, risk management, information management and strategy development, and green energy financing have significantly contributed to the improved development of the Chinese financial sector. The IBRD and IFC coordinated their efforts in the financial sector within their respective mandates. IFC is among the first foreign investors in supporting China's city commercial banks and rural finance institutions. IFC partnered with them and with industry associations to improve corporate governance, risk management, and commitment to expanding financing to SMEs, farmers, manufacturers, and shop owners. IFC's work with Chinese banks included offering market-based climate change financing solutions. Under the innovative China Utility-based Energy Efficiency Finance program (CHUEE), IFC shoulders some of the financial risk by guaranteeing commercial bank loans for energy efficiency projects and assisting in assessing and implementing energy efficiency projects. IFC is now expanding the successful model of China-IFC cooperation across East Asia, entering into similar partnerships with Vietnam, the Philippines, and Bangladesh and facilitating South-to-South cooperation to build on China's expertise and experience. 1 IFC projects included: Koyo Fertilizer, Chengdu Small Enterprises Credit Guarantee Company (Chengdu CGC), Beichuan Village and Township Bank (VTB), Renshou VTB, and Deyang City Commercial Bank. 53 IFC has been a key player in strengthening the financial sector with innovative investments and TA. Some examples include: (i) helping to set up a nation-wide credit reporting system that covers 792 million individuals and 17.9 million legal entities, with cumulative number of inquires reaching 812 million by end-2010 and the system supporting lending of about US$1.4 trillion per year; (ii) becoming one of China's largest rural finance investors with around 10 investments including the first foreign-invested rural commercial bank, the first foreign-invested micro-credit company, the first Sino-foreign joint venture village bank, and the first NGO transformation company; (iii) helping to establish the movable-asset secured-financing industry in China, benefiting SMEs with cumulative loans worth US$3.5 trillion secured by accounts receivable (one of the most important movable assets) over a period of nearly four years; over US$1 trillion in these loans were specifically for SMEs; and (iv) supporting the opening up of the capital market through issuing Panda Bond, Dim Sum Bond, and signing RMB SWAP agreement with China Development Bank and China EXIM Bank. Going forward, partnership with key agencies at both the central and local government levels as well as with key financial and non-financial institutions should continue. Synergies with the objectives of Pillar 1 could have been stronger and this should be considered in the new CPS. To this end, given the vast and growing demand for services such as MSME finance, innovative models such as the proposed China Academy of Inclusive Finance, might play a key role in scaling up commercially sustainable access to finance. Pillar 5: Strengthening public and market institutions Outcome Status: China continued to make good progress towards a market-based, sustainable economy. The Government was committed to helping the private sector succeed and undertook administrative reforms to advance the transition. The process of diversifying and corporatizing State- Owned Enterprises (SOE) through the State-Owned Assets Supervision and Administration Commission (SASAC) is contributing to market-enhancing reforms. Competitive cultures are further strengthened through Economic Value-Added (EVA)-based performance evaluations, and the reform of SOE dividend policy. There are widespread initiatives to improve the investment climate. WBG Support: The WBG's AAA and policy dialogue supported ongoing SOE reform efforts, including reform of EVA performance evaluation; policy notes on disclosure and dividend policies; the creation of SASAC; and a 120-city Investment Climate Assessment. Efforts by central and local officials to strengthen the climate for investment and private sector activities also benefitted from support by the Foreign Investment Advisory Service (FIAS) and MIGA, with a focus on the Central and Western regions. The WBG contributed to the development of the Independent Power Provider (IPP) strategy tested in the Western provinces and rolled out in the North-East. A Bank IDF grant supports the Ministry of Finance Treasury Department's efforts to enhance the transparency, efficiency, and effectiveness of budget execution for special purpose transfer payments. WBI's training programs supported enhanced capacity and understanding in key areas of public finance (budget and expenditure management, accountability, and fiscal decentralization). IFC Advisory Services provided capacity building and best practices advice to officials at the Credit Information System Bureau (CISB). IFC advised the government to draft and pass a new section of the Property Law which paved the way for millions of SMEs to get banks loans by using movable assets as collateral. IFC's work informed the development of the regulatory framework for China's credit reporting system which has provided financial institutions in China with a fast and cost effective way to search for the creditworthiness of credit applicants. IFC also supported the SOE 54 reorganization/privatization by investing at the project level as well as in asset management companies. IV. WBG Performance Lending: The CPS envisaged IBRD lending of about US$1.0-1.5 billion and 10-12 new projects per year over the CPS period. The actual lending program realized CPS plans consistently (Attachment 2). The program also responded to urgent client needs (e.g., US$700 million emergency reconstruction loan approved in the wake of the 2008 Wenchuan earthquake). Support to the poorer/lagging regions was emphasized. Many projects piloted new models. Towards the end of the CPS period, there was an increase in the use of additional financing. Analytical and Advisory Activities (AAA): AAA was identified throughout the CPS period based on emerging needs and priorities (Attachment 3). The Quarterly Economic Reports have international readership. A number of Bank staff and managers have added blogging and other web-based knowledge dissemination to the China AAA menu, and Bank sectoral teams and WBI have collaborated on design and delivery of distance learning courses based on China-specific and regional analytical work. Provincial level work on rural-urban integration in Chongqing and Guangdong provinces has generated interest among central and local authorities and stakeholders. Education AAA had a significant impact on shaping the government's longer term strategy. Studies on water resource management and adapting agricultural production to climate change (combined with experience gained from GEF pilot programs) are shaping upcoming lending projects, while Bank AAA helped shape the 2008 national recycling law. The WBG has also provided analytical and advisory services in renewable energy for China, including reports on large-scale wind power, biomass power generation, and policy notes on future directions in renewable energy and energy efficiency for China's 12th Five-Year-Plan (2011-2015). The non-communicable disease study has identified priority areas for health sector engagement going forward. The WBG and the Chinese authorities have also jointly undertaken a forward-looking analytical effort that looks at China's development and growth path over the medium to longer term - China 2030: Building a Modern, Harmonious, and Creative High Income Society. This compendium of work lays the framework for the WBG-China analytical engagement over the coming years. While WBG non-lending services and research findings have been valued, there is room for improvement in the dissemination process to broaden impact, and strengthened partnerships with Chinese institutions, counterparts, academics, and researchers can be also encouraged. A lesson for the WBG is to ensure better outreach and dissemination for pilot initiatives (as was done in the case of rural and national pension policy). IFC: IFC's program in China supported the WBG's five thematic pillars in the 2006-2010 CPS with a focus on (i) climate change, (ii) balanced rural-urban growth, and (iii) sustainable South-South development. IFC contributed to 14 of the 35 relevant CPS outcome areas identified in the CPSPR and in five other CPS outcome areas with no expected IFC interventions at the outset. Development outcomes of IFC investment operations consistently improved during the period, surpassing IFC's average in FY11. Steady improvement in DOTS indicators can be linked to the quality of project supervision during the period, which was satisfactory in 96 percent of projects evaluated between 2006 and 2010. IFC's work on climate change aimed to demonstrate market-based approaches to reduce the economy's energy intensity and increase efficient use of water resources, with a focus on energy efficiency, renewable energy, water management, and green finance. IFC also focused on balanced 55 rural-urban growth by, among others, helping reduce the gap between living standards in urban and frontier/rural areas, principally through investments and advisory work in micro and SME finance, rural finance agribusiness, infrastructure, food safety, manufacturing, and healthcare. IFC's South- South interventions included working with Chinese companies and banks to see that Chinese investments abroad are done in accordance with international best practice in environmental and social standards, which will make Chinese projects more sustainable and in the long run more profitable. These initiatives mobilized Chinese resources and helped Chinese companies contribute sustainably to global economic development. IFC Advisory services operations were marked by success in access to finance initiatives, including the multi-year Secured Transactions advisory. IFC has been deeply involved in providing Advisory Services starting from 2002 and has undertaken up to 54 projects, 30 of which support enhancing access to finance. IFC quickly responded to changes in the country context. Areas of financing have shifted over time in line with country priorities and IFC has started to streamline its focus towards high impact initiatives in rural growth, climate change, and China's global engagement. MIGA: The CPS projected that MIGA guarantee coverage would remain at about US$50 million per year. MIGA has been active in supporting FDI into China and its current portfolio consists of 10 projects totaling US$242 million in guarantee coverage. The vast majority of projects supported are in the infrastructure sector (96 percent), with the remaining 4 percent in services and manufacturing. MIGA (along with FIAS) cooperates with the Ministry of Finance and Ministry of Commerce in focusing on outward investments, (especially in Africa), and with Sinosure and Eximbank and other partners in marketing co-insurance of Chinese outward investments. MIGA also provided TA in supporting investment promotion and benchmarking studies. Trust Funds: The WBG mobilized US$1.4 billion in trust funds during the period in support of the five CPS pillars. These complementary resources helped maximize the impact of WBG operations across China. Concessional grant financing available for China has declined over time and bilateral TFs are being phased out; however, the WBG continues to administer a significant portfolio of trust funded activities, many from global funds. Partnerships included DFID co-financing of the Poor Rural Communities Development Project and support for studies and knowledge sharing as well as TF financing from Italy, the European Commission, and Netherlands. However, in the course of the CPS period, the donor landscape changed concurrently with China's economic growth and these partners decreased their development assistance to the country. By end-FY 11, the China trust fund portfolio comprised 96 projects with total commitments of US$2.1 billion, with Carbon Finance, GEF, Montreal Protocol, IDF and bilateral TFs as the major funding sources. China is a key player in delivering on the global environmental agenda and is increasingly accessing available funds. Completed and ongoing GEF and Montreal Protocol projects, many with IBRD co-financing, include projects in areas such as Ozone Depleting Substances Phase-out, Persistent Organic Pollutants (POPs), global climate change (including GHG, energy conservation, renewable energy development, and energy efficiency), biodiversity (e.g., natural reserve management, sustainable forestry, water resource management), and land degradation. China has also received US$6.15 million from the Global Facility for Avian and Human Influenza Facility for the China HPAI and Human Influenza Prevention and Control Capacity Building Project from 2007 to 2011. IDF grants are important knowledge cooperation instruments which play a key role in improving capacity in management, procurement, and monitoring and evaluation. 56 CPS Implementation: The CPS results framework was used to track implementation progress; gauge outputs, outcomes, and results; and address emerging issues and needed adjustments. In retrospect, while this framework offered a good starting point, it proved overly complex with too many goals, outputs, and outcomes. Measureable indicators were not developed, and assessment of achievements are based on self evaluations. Going forward, there should be more selectivity and specificity, with outcomes and indicators well linked to the portfolio. Supporting the CPS strategic objectives, the WBG program emphasized demonstration projects. Analytical work linked well with the development of new project approaches. Innovative funding instruments were used to support China in meeting its international environmental commitments, as well as blended project financing mixing global funds with IBRD lending. During the CPS period, the WBG made strong efforts to simplify and streamline processes, resulting in a substantial reduction in project preparation costs as well as a modest increase in the numbers of repeater projects, APLs, and additional financing. Portfolio performance is one of the strongest among the large IBRD borrowers. About 97 percent of projects were rated satisfactory or above; only 3 percent of projects evaluated by IEG in the last five years were rated unsatisfactory/highly unsatisfactory. V. Key Lessons and Recommendations * First, the Bank Group has supported China's efforts to reduce poverty among citizens living below the poverty line. Despite unparalleled success in moving 600 million people out of poverty over 30 years, poverty reduction remains a fundamental challenge in China. The WBG has supported China in introducing economic reforms that have helped to bring sustained growth and poverty reduction, and in developing approaches to reduce inequality. Particular attention was paid to the Western and Central provinces. Of 70 active IBRD-financed projects (February 2012), more than 80 percent are in the poorer interior and western provinces. More than 60% of IFC's new projects were located in frontier regions from 2009 to 2011.9 * Second, the majority of the WBG-supported activities feature environmental objectives, many with global implications, including a cross-cutting focus on climate change. China is essential to global efforts to improve environmental management and address global warming. Over 80 percent of ongoing and planned Bank-financed projects include environmental objectives. * Third, the developing world can benefit from WBG engagement with China. China is increasingly playing an important and influential role in the world economy and its policy decisions have a global impact. China has a strong interest in learning more about international experiences and best practices, a role which the WBG, as knowledge broker, is well suited to play. There is also a growing demand from other nations to learn from China's experiences. China is an increasingly important source of knowledge and is at the forefront of innovation in key areas (for example, urbanization) that can help inform and motivate the development process in other countries. WBG financing represents only a small share of China's financing and investment needs; however, as a preeminent provider of knowledge products, best practice experience and innovation expertise, WBG support has played a much larger role in China than lending figures might indicate. 19 Excluding transactions with repeat clients on Trade Finance, Rights Issue, CHUEE, and with investment funds. 57 General lessons from the CPS implementation include: * Build on the strength of the WBG by ensuring that engagements maximize the entities' respective strengths. The greatest impact and results were achieved when the WBG entities (IBRD, IFC, MIGA, and WBI) coordinated on common objectives and each unit emphasized its complementary strengths. * Augment the Bank's role as knowledge broker and provider. Impacts have been greatest when WBG financed operations were grounded on solid, high quality, and client-owned AAA, and involved intensive engagement with local counterparts. Going forward, the WBG should continue to maximize the impact of AAA findings by strengthening dissemination. * Continue WBG support for South-South exchanges but define goals and roles of the respective partners more clearly. (WBG, the Government of China, Chinese institutions (Eximbank, CDB, IPRCC) and third country partners and stakeholders). * Emphasize innovation through replicable pilots. China is at the forefront of many emerging issues (e.g., rapid urbanization) that will offer lessons for other MICs. Future WBG-supported programs should continue to be innovative, cutting-edge, bold experimental initiatives. * Calibrate WBG engagement in the social sectors to support China in addressing emerging issues. These not only involve social equity, but are critical to achieving a more productive economy and a sustainable growth strategy. * Continue to reduce the transaction costs of operational engagements. The WBG has intensified training for counterparts, and enhanced its field presence in safeguards, procurement and financial management. Several recent additional financing operations are proving an effective vehicle to reduce transaction costs. * Integrating different financing sources can increase the magnitude and speed of the shift to a sustainable energy path. Good examples of the value of integrated financing include the CRESP program and Energy Conservation I & II which fully blended IBRD and GEF resources. Under the programs grants from GEF and other donors are used to set up an enabling environment, introduce international experience, provide technical assistance, and build capacity, while IBRD funds are used to demonstrate innovative energy efficiency and renewable energy investments. 58 CPS Completion Report Attachment 1: Summary of China CPS (2006-2011) Programs Self Evaluation [04/16/20121 CPS Outcom CPS Outpts Status and Output Evaluation Summary MajorKey Lessons and Suggestions Non-lending Activities that Ke Lons Nd S Contributed to the Outcome Pillar 1: Integrating China into the World Economy Outcome 1.1: * Strengthened Achieved. Non-lending: Country consultations Enhanced partner-agency The Bank provided support to China on China's Development Priorities (FY07); indicate that the Bank's Chinese research and regional initiatives including the Greater Competition Provisions in Regional cross-country knowledge engagement in analytical capacity Mekong Sub-region, the Central Asia Regional Trade Agreements: Lessons for China and innovation capacities global and supporting China's Economic Cooperation (CAREC) program, and (FY09); Economic Quarterly (various are highly valued by regional participation in management of the avian flu threat, issues); China 2030 Study, Supporting Chinese counterparts and economic global and regional The Bank worked closely with Chinese Volume 5: Reaching "Win-Win" clients at the central and institutions economic research partners to gain from their local Solutions with the Rest of the World provincial levels. Such institutions, incl. knowledge and to build their analytical (FY2); China Partnership with Africa demand-driven WTO capacity. The Bank's engagement with the (cont.); WBI Programs; Support to engagements should Development Research Center of the State IPRCC and AFDC continue. Council to co-produce the China 2030 report The WBG plays a was especially significant. valuable role as an WBI has helped build the capacity of key engagement facilitator, Chinese South-South cooperation institutions, and in presenting China's most notably the Intemational Poverty development story in Reduction Center in China (IPRCC) and the publications and reports. Asia Pacific Finance and Development Center (AFDC). Outcome 1.2: * Continued analysis of Achieved. Non-lending: * WBG knowledge and China meets implications of Doha * The Bank has supported Chinese policy makers Trade and Poverty Program (FY08); capacity-building services WTO and other trade and scholars through roundtables, policy notes, WBI Programs have been valuable in commitments negotiations on and studies on the Doha Round, Free Trade supporting the and participates economy, inclwding Agreements (FTAs), the services sector, and govemment on trade f*lly in Doha services, agrichlteral the impact of liberalization on income policy. Romnd sobsidies distribution and poverty. China and Vietnam have engaged on post- WTO accession issues and_challenges.N 20 For the list of lending and non-lending activities under the CPS program, see Attachments 2 and 3, respectively. For projects, years in parentheses refer to FY of approval, and if closed, also FY of completion. For AAA, the year in parentheses refers to the FY of completion. Implementation Completion and Results (ICR) and Independent Evaluation Group (IEG) ratings are provided where available. HS: Highly Satisfactory; 5: Satisfactory; MS: Moderately Satisfactory; MU: Moderately Unsatisfactory. The most recent Inplementation Status and Results (ISR) ratings of Development Outcome (DO) and Implementation Progress (IP) for ongoing projects in the portfolio are provided in CAS Standard ATnex B8, which also lists IFC operations in China. 59 Outcome 1.3: See Output 1.2 Achieved. Lending: China * WBG delivered knowledge services and IFC: China ASEAN Infrastructure implements free capacity building support (Bank AAA on trade Fund (CAFIC) (FY11) trade impact analysis; training on trade-in-services; agreement with development of WTO-compliant policies) in Non-lending: ASEAN support of the outcome. Trade and Poverty Program (FY08); countries * IFC supported the China ASEAN Infrastructure Regional Trade Agreements (FY09); Fund (CAFIC), a fund that is expected to Competition Provisions in Regional deliver strong developmental impact as its Trade Agreements: Lessons for China investment in key infrastructure sectors will (i) (FY09); Environment Provisions in accelerate economic growth especially in the Regional Trade Agreements: Lessons countries and regions where infrastructure for China (FY09); Labor Mobility development has been further slowed down due Provisions in Regional Trade to the recent crisis, (ii) reduce inequality caused Agreements: Lessons for China (FY09) by inadequate infrastructure access and (iii) influence growth patterns to be more pro-poor. * China has signed 10 FTAs with 18 economies and more are under negotiation. Outcome 1.4: * TA to help GoC Achieved. Lending: An integrated WBG Higher volume understand and * WBG support has enhanced monitoring of debt IFC: China ASEAN Infrastructure (Bank, IFC, MIGA) and better consider subscribing and capital flows under the State Fund (CAFIC) (FY11), Vodafone- approach has been key to quality of to OECD principles Administration of Foreign Exchange (SAFE) Ghana (FY10), Commercial Building effective support. overseas for overseas Initiative. project-Tanzania (FY10) investment investment. IFC has provided financial and advisory support for China's outward investments. Non-lending: * MIGA and FIAS programs augmented Chinese MIGA/FIAS Conference on Survey of investment, built capacity, and facilitated Chinese Companies Investing knowledge sharing. Overseas; MOU between MIGA and * China EXIM (Export Import Bank of China) SinoSure; Study on CSR attitudes and and China Africa Development Fund (CADF) behavior of Chinese firms investing in have received advisory support on construction, Africa extractive industries, forest products, and infrastructure. IFC: CPDF Corporate Governance * IFC supported Chinese companies in financing Advisory (FYO2-08); E&S Standards overseas investments. Advisory (FY11) * IFC advised CBRC and Ministry of Environment Protection to develop detailed guidelines for the Green Credit Policy and to regulate outbound investment. Outcome 1.5: a sBetter Achieved. Non-lending: Higher and correspondence * China became a contributor to IDA. Support to IPRCC, AFDC; WBI 60 better quality between China's * The WBG has enhanced the dialogue on aid Programs; Joint workshop held with China economic economic assistance effectiveness through the China-DAC MOFCOM on international cooperation assistance and other ODA (Development Assistance Committee) Study (2011) providers Group and has initiated cooperation with China * Exim Bank co- EXIM. finances with IBRD * GoC contributes to multilateral development agencies Pillar 2: Reducing Poverty, Inequality, and Social Exclusion Outcome 2.1: Community-level Achieved: Lending: Direct involvement of Greater programming and Participatory approach and CDD models have Guangxi Urban Environment (FY99- senior government staff in community implementation been advanced through Bank-financed FY07, ICR=S; IEG=S); Poor Rural CDD programs has participation in capacity-building activities, including the Poor Rural Communities Development (FY05- provided the essential poverty piloted in selected Communities Development Project which FY11, ICR=S); Sustainable element of ownership. reduction villages developed and extended the participatory Development in Poor Rural Areas Limited ability for local programs approach in 18 nationally designated poor (FY10) governments and the counties. The Sustainable Development in Poor communities to finance Rural Areas project continues to advance CDD Non-lending: poverty-reduction projects approaches. Pro-Poor Rural Water Reform Project makes downward flow of * Bank TA delivered to improve efficiency and Technical Assistance (FY04-FY09, funds on a grant basis sustainability of water use associations, ICR=HS); Poverty Assessment (FY09); from the higher levels of including increasing community participation From Poor Areas to Poor People: government important. in the formation of WrUAs to ensure pro-poor China's Evolving Poverty Reduction * Effective and early focus and the inclusion of the poor, women and Agenda (FY09); Social Assistance in capacity building for disadvantaged groups. Rural China: Tracking Poverty project management is of Through Rural Dibao (FY10); CDD major importance in CDD Conference (FY09) proj ects. Outcome 2.2: 0 Options articulated Achieved. China has exceeded CPS expectations. Lending: Moving towards a Strengthened for national rural Bank work on social security programs at both Basic Health 8 (FY98-FY7; ICR=S; graduated health social insurance pension policy national and sub-national levels (e.g., pensions, IEG=S); Rural Health (FY08) insurance system will be programs 0 Options clarified for health insurance) has identified needs, provided key to increasing the (pension expanding rural valuable policy inputs, and highlighted issues Non-lending: equity of health service systems, urban health insurance with earlier pilots. This work has supported the Health Reform in China at a Crossroads provision going forward. and rural health (NCMS) and Medical government in initiating the national rural (FY07); Health Reform in Rural China: Piloting ways to insurance); Assistance, with pension scheme and urban residents' pension Where Next? (FY08); Reforming strengthen protection for reformed and fairer NCMS scheme, the Social Insurance Law, China's Rural Health System (FY08); the "near-poor" - those expanded safety financing incrementally reforming the urban pension China Health Policy Notes AAA not eligible for assistance nets program * Options identified for system, and rolling out a national rural dibao (FY10); Reducing Inequality for under the Medical (dibao) national rural safety program. Shared Growth in Guangdong Province Assistance budget but net policy framework New Cooperative Medical Schemes (NCMS) (FY09); The Well-Being of China's struggling on very low and Medical Assistance (MA) scaled up with Rural Elderly and Old Age Support incomes and often higher national coverage of NCMS at 95 percent. (FY10); ; Health Policy Notes (FY10); levels of medical need - These national programs benefitted from pilots Rural Health Reform (FY10); Social 61 under Bank-supported Basic Health VIII Assistance in Rural China: Addressing would help address project. Innovative pilots under the Rural Poverty Through Rural Dibao (FY10); remaining equity Health project are focused on integrating the Non-Communicable Diseases (FY12); challenges. MA and the NCMS. SP and Labor Market Programmatic Focusing increasingly on AAA (FYI 1-12); China 2030 Study, integration of social Supporting Volume 4: Equality of security and assistance Opportunity and Security for All systems across rural and (FY12); also see Outcome 2.1. urban areas and promoting portability of entitlements across regions. Outcome 2.3: * Financing plan Achieved. Lending: Access to education for Education options prepared for * Bank AAA contributed to the emphasis on Higher Education Reform (FY99 to children of migrants in financing free compulsory 9- issues such as equity of access in the 12th Five FY06; ICR-S; IEGS); Basic urban areas, as well as supports more year education Year Plan. Education in Western Areas (FY04- children of migrants left equitable access * Options identified for * Support to developing technical and vocational FY10; ICR-S; IEG-MS); Technical behind in rural areas, is a and higher higher education education and training (TVET) programs. The and Vocational Education & Training key issue. educational financial aid Ministry of Education (MOE) has vastly (FY09) Demand-driven models of attainment expanded student loans and grants for higher skills development are education and provides a stipend of RMB1,500 Non-lending: important to China's to eligible general secondary students and all Compulsory Education Finance Reform efforts for industrial Technical and Vocational Education and Policy Notes (FY09); Education Sector upgrading. Training (TVET) students. Review (FY09); Compulsory * Strengthening education * IFC activities expanded knowledge on how to Education for Migrant Children in services for ethnic increase access through vocational education, Guangdong (FY1 0); Policy Notes on minorities and improving and to engage the private sector in its provision Higher Education (FY1 0); Rural school infrastructure * 11 th FYP saw scaling up to national level of the Compulsory Education Reform should be a focus of government's "Two Exemptions (of (FY1 0); Early Childhood Development engagement in Western miscellaneous fees and textbook frees) and One (FY1 1); TVET chapters of Chongqing areas. Subsidy (living subsidies for boarding and Guangdong regional economic * Enhancing the focus on students)" pilot program. reports (FY10); China 2030 Study, pre-primary education and * Due to the household registration system, Supporting Volume 4: Equality of early child development. migrant children in urban areas still face Opportunity and Security for All formidable barriers due to their rural resident (FY12) status and many still attend fee-charging, private schools.IF:MngmtDelo et Program (FY05); Market survey of the private higher education sector (FY07); Nursing Training (FY07); Development of VET program-role of private sector (FY06) Outcome 2.4: * Options identified for Achieved. Lending: * Where appropriate, Health care care-based payment * Bank provided policy guidance for the Human Basic Health 8 (FY98-FYO7; ICR-S; coordinated healthcare 62 financing system Development System reform strategy for IEG-S); Rural Health (FY08); pilots integrating primary, structure * Options clarified for national and sub-national governments, Tuberculosis Control (FY02-FYI1; secondary and tertiary encourages shifting from supply including the health system reform master plan. ICR-S; IEG-S) health services should be increased and to demand subsidies * Basic Health and Rural Health pilots, Bank considered - such more * Options identified for AAA and policy recommendations, and impact Non-lending: approaches could be appropriate use financing and evaluation capacity building, have supported Health Reform in China at a Crossroads effective in the of health organizational progress in this outcome. (FY07); Health Reform in Rural China: management of NCDs service, reform of public * IFC-supported healthcare projects provide Where Next? (FY08); Reforming and other relevant especially health access and affordability to multi-specialty Chinas Rural Health System (FY08); conditions. among rural medical centers and clinics in multiple Health Policy Notes (FY10); Rural Challenges to increasing poor locations, including frontier regions, as well as Pension & Social Protection (FY10); the equity of rural health affordable and quality medical products. Rural Health Reform (FY0); Social service provision include: New Cooperative Medical Schemes (NCMS) Assistance in Rural China Tracking (i) shifting the focus and Medical Assistance Fund (MAF) scaled up Poverty Through Rural Dibao (FY0); towards improving the with national coverage of NCMS at 95 percent. China 2030 Study, Supporting Volume health care quality of These national programs benefitted from pilots 4: Equality of Opportunity and Security health and finding under Bank-supported Basic Health VIII for All (FY2) innovative ways of project. Innovative pilots under the Rural broadening access; (ii) Health project are focused on integrating the IFC: Beijing United Family Hospital- moving away from a one- MAF and the NCMS. UFH-1 (FY06); Aier Eye Hospital size-fits-all approach to (FY07); Fosun Pharma (FY07); Weigo benefits under NCMS (FY07); Chindex UFH-2 (FY08); The WBG could play a Healthway (FY10); Q&M Dental role in presenting global (FY1 1) experience as China faces the challenge of providing health services for an aging population and the children of migrant workers. 0 Enhancing focus on rural- urban integration of HI. Outcome 2.5: * Better crop, animal Achieved. Lending: * Piloting new ways to Improved varieties introduced * Bank support has focused on livestock Anning Valley Agricultural manage PPPs to agricultural * New farmers development and crop improvements, Development (FY99-FYO7; ICRS; encourage agricultural productivity cooperatives law ecological management of agricultural and IEG-S); Smallholder Cattle innovations, introducing and incomes in drafted livestock production, supply chain Development (FYOO-FYO6; ICRS; competitive processes to project areas, * Public-private development, agro-processing, rural IEG-S); Guangzhong Irrigation (FY00- funding innovative ideas, with scale-up partnership infrastructure, food safety, farmers' FY06; ICR-HS; IEG-S); Water and having public potential approaches to organizations, and a growing emphasis on Conservation (FYO1I-FYO6; ICR-HS; services delivered by the agricultural water productivity for agriculture. IEG-HS); Gansu and Xinjiang Pastoral private sector are technology piloted W IFC-supported investments improved Development Project (FY4-FY 10); important areas for livelihoods for 120,000 rural people in the rural Jiangxi Integrated Agricultural follow-up activities. provinces of Sichuan and Yunnan. Modernization (FY04 to FY10); Innovations encouraging P IFC supported agribusiness projects reached Agricultural Technology Transfer the adoption of improved 63 1.45 million farmers in 2010. (FY05); Changjiang and Pearl River technology in agriculture, * IFC AS assisted farming households in three Watershed Rehabilitation (FY06); as well as concern for nature reserves develop sustainable income Heilongjiang Dairy (FY06); Irrigated environmental impacts, generating activities as an alternative to logging Agriculture Intensification Loan III provide a good basis for and poaching. (FY06) future agricultural and * Public-Private Partnerships (PPPs) for irrigation system agricultural technology are being piloted. IFC: Muyuan Pig (FY11): Deqingyuan development. * There are still weaknesses in agricultural Egg (FY06); North Andre Juice research, extension, and training of farmers. (FY05), Century Sunshine (FY07), Xiwang Sugar (FY10); Koyo Fertilizer (FYO9/1 1); Jiuda Salt (FY08) Non-lending: China's Compliance with Food Safety Requirements for Fruits and Vegetables (FY06); Farmer's Professional Associations (FY07); Addressing China's Water Scarcity: Recommendations for Selected Water Resource Management Issues (FY09); Food Safety in China (FY09); Chongqing Urban-Rural Linkages Study (FY09); Adapting Agriculture Production Systems to Climate Change (FY10); IFC: Minshan Reserve (FYO5)Linkages for Sichuan and Yunnan Milk Farmers (FY06), North Andre Traceability and Farm Management (FY07); Changyu Grape Diseases Management Systems (FY08), Kiwi Sector Linkages (FY09) Outcome 2.6: * Projects piloted in Achieved. Lending: Implementation of rural Reduced rural and small-town WBG has supported rural road improvements, Inland Waterway I1-V (FY98-FY1 1); roads components transport, transportation and providing better access to main road networks, Wuhan Urban Transport I (FY04- requires close cooperation utilities, and communications reducing travel time and increasing mobility. FY10; ICR-S; IEGMS) & 11 (FY10); between provincial and communications infrastructure, Better road networks have also relieved traffic National Railway Project (FYO2-FYO8; local government costs, improved modeling new pressure. ICR-S; IEG-S); Hubei Shiman authorities. access to approaches WBG has supported expansion of railway Highway (FY04-FYI1; ICR-S; Ongoing work on rural relevant capacity, which has resulted in eliminating IEG-S); Third Jiangxi Highway information and information for major bottlenecks and improved access to the (FYO6-FY1 1; ICR-S) Fujian Highway communications focuses the poor in markets of eastern China for the poorest Sector and AF (FY07 & FY11); on ICT policy and selected areas provinces. Shaanxi Ankang Road Development regulations, as well as Bank projects supported institutional (FY07); Anhui Highway Rehabilitation issues related to the 64 strengthening to help improve the management (FY08); Guiyang Transport (FY08); digital divide. This work of transportation systems. ShiZheng Railway (FY08); National should underpin any * Projects were piloted in rural and small-town Railway 3 (FY08); Ningxia Highway future lending operations. transportation and communications (FY11) Experience with highway infrastructure, modeling new approaches. projects show that they * Bank-supported inland waterway projects Non-Lending: can generate important lowered transport costs. China's Information Revolution: social benefits during Managing the Economic & Social implementation through Transformation (FY07); Sustainable well-designed and Development of Inland Waterway implemented social Transport in China (FY09); Tracks policies. from the Past, Transport for the Future: * The benefits of technical China's Railway Industry 1990-2008 assistance can be (FY09); Urban Rail Development in enhanced through the China (FY09) conduct of seminars. Outcome 2.7: Options identified for Partially achieved. Lending: * The unprecedented scale More equitable reforming urban * WBG engagement on migrant worker skill Liaoning Medium Cities Infrastructure and pace of rural-urban access to social social policies to development and employment, urban transport, 2 (FY07); Rural Migrant Skills and migration poses services in reduce and the housing market has contributed to the Employment Development (FY08) opportunities and urban areas discrimination outcome. challenges, and the Bank against migrants and * AAA at the provincial level has helped to Non-lending can continue to play a role improve access to integrate and prioritize government China Urbanizes: Consequences, in supporting policies and information and interventions to address inequality through Strategies, and Policies (FY08); innovative projects and services equalization of basic public services. Chongqing-Guangdong Rural Urban pilots. * A series of Supreme Court (SC) and ministerial Integration (FY09); From Poor Areas * Stronger emphasis on documents were issued to address the issues, to Poor People: China's Evolving evaluating sub-national * The Labor Contract Law was enacted in Poverty Reduction Agenda (FY09); pilots in areas such as January 2008 which provides a stronger legal Urban Expansion, Land Conservation hukou reform would be framework for the protection of workers' & Affordable Housing (FY09); desirable. rights, including those of migrants. Reducing Inequality for Shared Growth * Increased sub-national experimentation in in Guangdong Province (FY09); integration of social security programs across Compulsory Education for Migrant rural and urban areas has special benefits for Children in Guangdong (FY1 0); Rural migrants. to Urban Migration Social Policies O Experiments are underway with hukou reforms (FY0); ESMAP Urban Accessibility with the objective of leveling the playing field Planning Wuhan Case Study (FY12); with respect to access to services for migrant SP and Labor Market Programmatic workers. AAA (FY12). Outcome 2.8: * Labor-market led Partially achieved. Lending: Greater focus on technical Better skills training Projects have supported capacity building for Rural Migrant Skills and Employment assistance and capacity employment programs employment services for migrant workers, Development (FY08); Technical and building to improve the opportunities successfully piloted worker protection activities, and pilots of Vocational Education & Training quality of skills training for migrants, and scaled-up school-based reforms and innovations to (FY09); Chongqing Urban-Rural programs is needed going 65 and protection improve TVET quality and relevance. Integration (FY10); Liaoning and forward. of their rights in However, in some projects there has been a Shandong TVET (FY10) * The basis for the next selected areas more limited engagement in technical activities CPS program should be to improve program quality or introduce new Non-lending: formed from Bank- thinking and best practice. China Urbanizes: Consequences, supported analytic work * Increased attention to market demand with Strategies, and Policies (FY08); China's on migrant workers with higher levels of employer-ordered training in Modernizing Labor Market (FY08); overviews of trends and some TVET programs Chongqing-Guangdong Rural Urban issues in social policies * Systematic and rigorous review of impact is Integration (FY09); Reducing towards migrant workers, still lacking. While there is increasing Inequality for Shared Growth in access to urban social awareness of migrant rights, the longer run Guangdong Province (FY09) security, education for approach will also require deepening reforms migrant children, and the of the hukou system, and promotion of more experience of hukou integrated rural-urban social programs. reform. Outcome 2.9: Integrated Partially achieved. Lending: Lessons for engagement Strengthened development Bank projects have helped to advance Fuzhou Nantai Island Pen-Urban under the next CPS can be urban planning strategy/plan integrated urban/municipal planning Development (FY06); Liaoning drawn from WBG- and prepared for selected approaches (Wuhan Urban Transport, Xian Medium Cities I & 11 (FY06, FY07); supported analytic work management in jurisdiction(s) Urban Development, Cultural Heritage Sichuan Urban Development (FY07); on household urban selected projects). Xian Sustainable Urban Transport services, firm jurisdictions * The Government has initiated pilot programs (FY08), Chongqing Urban-Rural competitiveness surveys, aggressively promoting integrated urban and Integrated Development (FY10); and metropolitan rural development covering regional planning, Wuhan Urban Transport I (FY0 - management, as well as infrastructure, transport, labor market and FY10; ICR-S; IEG-MS); Anhui lending operation social protection, and social services including Medium Cities Urban Transport experience, including health, education and housing. (FY1 0); Kunming Urban Rail Project multi-sectoral programs to China is trying to build the capacity of (FY1 1); Cultural Heritage Projects (see support pilot projects, infrastructure service providers in small towns Outcome 3.9) municipal and metro to support rapid urbanization. proj ects, skills Non-lending: development, and urban Building Institutions for Sustainable transport. Urban Transport (FY06); China Western provinces with Urbanizes: Consequences, Strategies, weaker planning and Policies (FY08); Improving the capacities will require Market Borrowing Practices of Urban particular attention going Development Investment Corporations forward, including (FY09); Urban Expansion, Land projects focused on multi- Conservation & Affordable Housing sector infrastructure (FY09); Urban Rail Development in interventions. China (FY09); Urban Rail Development in China: Prospects, Issues and Options (FY160); WBI programs (partnership with China Urban Planning Society) 66 Pillar 3: Managing Resource Scarcity and Environmental Challenges Outcome 3.1: Examples piloted of Partially achieved. Lending: Continued support is Opportunities integrated Under the Shanghai Urban Environment APL, Guangdong Pearl River Delta Urban needed to strengthen identified for metropolitan area the Bank has supported enhanced metro-area Environment (FYO4-FY1O); Hunan Urban Development metropolitan planning, financing, financial architecture through the District Urban Development Project (FY05); Investment Corporations areas to benefit or managing through Financing Vehicle, a new infrastructure finance Shanghai Urban Environment APL 11 (UDIC) for better from planning, transaction or new option introduced for suburban areas. (FY06) & III (FY09); Chongqing management and financing, institutional Changsha-Zhuzhou-Xiangtan triangle in Hunan Urban-Rural Integration (FY10) financing options. managing arrangements Province is a main pilot for regional scale WBG support to help investments on planning and investment approach. Non-lending: small towns through metro/regional Shared environmental infrastructure facilities Also see Outcome 2.9; Chongqing global experience sharing scale designed, constructed and operated jointly by Urban-Rural Linkages Study (FY09); is valued and should neighboring municipal districts are being Chongqing-Guangdong Rural Urban continue. piloted in the Pearl River Delta. Integration (FY09) China has been relatively slow to formally implement metropolitan-based management systems. Outcome 3.2: Clean energy and Achieved. Lending: This area will continue to More efficient renewable energy * Studies and TA strongly influenced policy Energy Conservation I (FY98-FYO6; be a key focus for China energy supply technologies piloted development, RE laws and regulations. Among ICR=S; IEG=S) ; Renewable Energy during the next CPS systems and scaled-up others, WBG supported domestic wind Development (FY99-FYO7; ICRS; period. demonstrated * More efficient ways manufacturing (as well as biomass industry) IEG=S); Renewable Energy Scale Up * Continued WBG support of supplying and and some of the first large scale on-grid wind (FYor-FYt 1); Nanjing Steel Converter on renewables should using coal power projects. Also helped introduce the Gas Recovery Project (FY06); focus on reduction of demonstrated market framework for PV sector Guangdong Huizhou CCGT CDM incremental costs, commercialization, project (FY08); GEF Thermal Power efficiency improvements, * IFC' CHUEE program facilitated $1.4 billion Efficiency (FY09); Shandong Energy and smooth grid investment for over 160 EE and RE projects Efficiency (FY1 1) integration. resulting in 17.8 million tonSe of GHG emissions avoided annually in steel, cement, IFC: Zhongda Hydro (FY06, 09, 10 & glass, and other key sectors. To date 14.4 mil 11); Beijing Shenwu (FY11); CHUEE MWH/year avoided. 1 BOB (FY07); Xinao CTC FY07 & eIFC financed renewable energy development 09); China Glass (FY08); China and the whole supply chain. Wind Power (FY10 & 11) EEC China * Demo projects supported by carbon financing CBM (FY08); Asia Environment have advanced cleaner energy supply options, Partners (FY08), Amkonzen Asia including CCGT power plants and gas recovery Water Fund (FY10); New Elements and power generation systems. (FY11); Goldwind (FY10); Suntech Projects supported household solar systems to Solar (FY09); China Environment Fund S17.3 million tons of GHG emissions achieved directly through the guarantee program and an additional 41 million tons avoided indirectly through partner financial institutions. 67 increase electricity access to poor areas of (FY09& 1) western China. * Lending and AAA supported coal bed methane Non-lending (CBM) and coal mine methane (CMM) as Sustainable Energy in China (FY07); substitutes to coal. Financing Energy Efficiency: Lessons * IFC supported projects contributed to from Brazil, China, India, and Beyond renewable energy (wind and hydro) supply and (FY08); Coal Bed Methane (CBM) and use of energy efficient technology for Coal Mine Methane (CMM) Development and Utilization (FY08); commrcil ad hosehld ppliatins.Strengthening Energy Efficiency (FY08); Economically, Socially, and Environmentally Sustainable Coal Mining Sector in China (FY09); Energy Intensity Strategy (FY1 0); IFC: FEEC China CBM; China Wind Advisory (06); China Utility Based EE Program (FY7-1 1); Yunnan Whitewater Hydro Power Study (FY06, FY07); CHUEE SME (FY1 1) Outcome 3.3: Water savings Partially Achieved Lending: nModels for water services More efficient concept piloted and M China is continuously increasing its wastewater Liao River Basin (FYOI-FY9; ICR=S; focusing on how to bring water supply scaled-up treatment capacity for urban areas, with Bank IEGS); Water Conservation (FY01- concessional finance to systems piloted; 9 Bulk water markets support in numerous projects. Recently, the FY06; ICR=HS; IEG=HS); Guangdong small towns to improve water piloted focus has shifted to secondary cities and towns. Pearl River Delta I & 11 (FY04, FY07); their financing are being productivity 0 Model urban water A Projects have helped raise productivity of water Irrigated Agriculture Intensification developed. increased in supply and use in low and medium yield farmland and Loan III (FYO6-FY1 1); Shanghai selected wastewater introduced climate-change sensitive farming Urban Environment APL S (FY06) & jurisdictions treatment facilities techniques to improve resilience to potential III (FY09); Western Provinces Rural built water supply impacts. GEF-supported project Water Supply (FY07); Bengbu components have helped enhance adaptation to Integrated Environment Improvement climate change in irrigation water management Project (FY08); Shandong practices through awareness-raising, Environmental 2 (FY08); Han River institutional and capacity strengthening, and Urban Environment Improvement demonstration activities. Climate Change Project (FY08); Xining Flood and adaptation recs have been integrated into Watershed Management (FY09). agricultural policy. 0 IFC supported investment projects provided 3.7 IFC: Asia Environment Hldgs (FY08), million customers with access to clean and Beijing Sound (FY07); Epure BOT reliable water; 198 cubic meter of water has (FY10 & 11); Amkonzen Asia Water been treated in water treatment plants. Fund (AWF) (FY0) * Activities have been scaled up by domestic programs under the ongoing National Irrigated Non-lending: Agricultural Water Savings Program. MIGA Support (including Zhenjiang 68 * Additional time is needed to pilot bulk water Golden State Water Company, Deqing markets. Darco Water Company, and Chongqing * Strengthening of water rights is underway in Water Company Guarantees); Pro-Poor preparation for market development. Rural Water Reform Project Technical Assistance (FYO4-FYO9; ICR=HS); Water Quality Management (FY07); North China Water Quality Management Study (FY07); Addressing Water Scarcity (FY09); Water Supply Pricing in China (FY09); Water Pricing & Water User Associations Sustainability (FY12); IFC: Water program (FY11) Outcome 3.4: * Roadmap identified Achieved. Lending: Bank support is shifting Viable policies for liberalizing water * EL lending program is one of the largest in the Second Beijing Environment (FY00- the focus from energy and and energy markets, World Bank, with programs in direct FY09; JCR-S); Huai River Pollution intensive, high impact technologies so prices reflect total investments, support to energy management Control (FYO2-FYO8; JCR-S; JEG-S); road projects to lower identified to marginal cost companies, and financing mechanisms for National Railway (FYO2-FYO8; energy usage systems, help reduce Appropriate energy efficiency investments. Bank-supported JCR-S; JEG-S); Energy Conservation including public transport, water and resource-use projects have played a key role in the 11 (FY03-FYI1; JCR-S); The Wuhan railways, and inland energy standards successful development of the nascent Energy Urban Transport Project (FY04- waterways. consumption articulated, with TA Management Company industry in China. FY10); GEF Heat Reform and Building * Complementary JBRD- per unit of GDP for improved The World Bank has supported Chinese cities Energy Efficiency (FY05-FY12); JFC activities provide enforcement in developing eco-friendly transport systems Liaoning Medium Cities Infrastructure strong support for energy * Approaches and low-carbon growth strategies, and has Project (FY06); Mainstreaming efficiency. identified to reducing helped local governments build knowledge on Climate Change Adaptation in Irrigated * Work building on IFC's water use in developing sustainable urban transport. Agriculture Project and Irrigated CHUEE program should: agriculture * District heating investment programs focus on Agriculture Intensification Loan III emphasize areas with high Transport, substantial EE improvements and air quality (FYO6-FY1 1); China-GEF-World Bank potential additionality urbanization options co-benefits. Urban Transport Partnership Program (small enterprises); focus identified to reduce Projects demonstrated sustainable participatory (FY08); Energy Efficiency Financing I more on activities with transport-generated rural water resources management and agro- (FY08); Xi'an Sustainable Urban greater emission reduction pollution, fuel use. ecological environmental management, Transport Project and GEF (FY08) potential (energy increasing the efficiency of on-farm irrigation efficiency for buildings); systems and boosting water and agricultural [IFC: See IFC Lending in Outcome reorient subsidies to areas productivity. County Groundwater 3.2]: of market failure. Management Plans and water use associations have also been supported. Non-lending: AAA on water resource management and See also Outcomes 3.2 and 3.3; adapting agricultural production to climate Building Institutions for Sustainable change (combined with experience gained from Urban Transport (FY06); Addressing GEF pilot programs) are shaping upcoming China's Water Scarcity: lending projects. Recommendations for Selected Water 69 * The Government has piloted a program for Resource Management Issues (FY09); water trading in Gansu. Sustainable Development of Inland Waterway Transport in China (FY09); Tracks from the Past, Transport for the Future: China's Railway Industry 1990- 2008 and its Future Plans (FY09); Policy Notes for Railway Sector (FY09); Accelerating Energy Conservation in China's Provinces (FY10); Energy Intensity Strategy (FY10); Social Analysis of Heat Reforms in Liaoning Province (FY10); Adapting Agriculture Production Systems to Climate Change (FY10) [IFC: See IFC non-Lending in Outcome 3.2] Outcome 3.5: * Strategic Achieved. Lending Future support can build Environmental environmental The Bank supported the development of pilot Liao River Basin (FYO1-FYO9; ICR-S; on Bank analytic work, concerns assessments piloted Strategic Environmental Assessments (SEA) IEG-S); Sustainable Forestry including Green mainstreamed for selected sectors and also training programs in the Ministry of Development (FY03-FYI1; ICR-S); Accounting (though there into and regions Environment Protection to help promote the Hai Basin Integrated Water and has been some reluctance development Improved application of SEA in development plans and Environment Management (FY04- to implement the system), plans and approaches to land, programs as required by the China EIA Law FY11); Shanghai Urban Environment and studies on building activities, forest, groundwater, but no systematic improvement of SEA APL 11 (FY06-FY12), III (FY09); community-based systems resource water basin, and capacity at the local level yet. Shandong Environment 11 (FY07); for natural resource management river management * Hai Basin project was highly successfully in Second Guangdong Pearl River Delta management and systems piloted in selected advancing integrated water and environment Urban Environment Project (FY07); economic empowerment. projects management approaches. Changjiang and Pearl River Watershed * Community participation S Forestry projects demonstrated new approaches Rehabilitation (FY06); GEF is crucial to the to natural forest resource management, Mainstreaming Climate Change effectiveness of protected emphasizing local community participation, Adaptation in Irrigated Agriculture area management and providing models for wider replication. Project (FYO6-FY 1); Guangxi should continue to be * China's Industrial Bank adopted the Equator Integrated Forestry Development stressed. Principles (EP) in 2008; China EXIM Bank is (FY07) * Future support can also using a PS-based internal environmental and work to address conflicts social risks review process. Non-lending: between the Circular f The Circular Economy Promotion law, drafted Pro-Poor Rural Water Reform Project Economy Promotion Law through a Bank AAA support, was passed by Technical Assistance (FYO4-FYO9; and other existing laws or the Congress in 2008 and became effective in ICRHS); Water Quality Management regulations. 2009. However, further improvement in the (FY07); Coal Bed Methane (CBM) and existing legal and legislative system including Coal Mine Methane (CMM) amending existing laws and regulations and Development and Utilization (FY08); introducing new regulations and administrative Developing a Circular Economy in 70 rules for promoting a circular economy is yet to China (FY09); Strengthening Chinas be done. Environmental Protection * Bank projects have supported County Administrative System (FY09); Forest Groundwater Management Plans and there Policy - Deepening the Transition, have been attempts to transfer major urban Broadening the Relationship (FY09); supplies from groundwater to alternative Forestry Policy Dialogue (FY10); sources (e.g., in Jiangsu). The Bank continues Water Pricing & Water User to support the development of sustainable water Associations Sustainability (FY12); use associations. China 2030 Study, Supporting Volume * Climate change adaptation measures, 3: Seizing the Opportunity of Green techniques, and activities have been Development in China. mainstreamed into agricultural development programs in project areas. JFC: Quality and Sustainability * Capacity building for Environmental Protection Performance of private enterprise Bureaus (Sichuan) and Private Sector (FY06); ES Standards in ICT (FY07); (Guangzhou Development Industry Holdings) Carbon Finance Aggregation through in cleaner production and environmental and FIs (FY08); China-Fenglin Inter Study social management. to Define Business Practices in Wood Industry (FY06); Guangzhou Development Industry Holdings CSR (FY08); Sichuan Environmental Compliance Project (FY06) Outcome 3.6: P Roadmap identified Achieved. Lending: Tackling the waste Improved waste for increasing waste The Government's thBFYP identifies solid Liao River Basin (FYO-FYO9; ICRS; separation problem facing management in removal fees waste management as a key target activity. IEG-S); Guangxi Urban Environment cities by building modern selected * Model urban solid However, the limited institutional framework (FY98-FYO7; ICRS; IEGS); solid waste management jurisdictions and liquid waste for this agenda complicates Bank engagement. Zhejiang Urban Environment Project systems and addressing removal systems * Projects have expanded wastewater treatment (FYO4-FY1 1; ICRS); Ningbo Water inadequate waste implemented capacity, reducing pollution in key bodies of (FYO5-FY1 1; ICR-S); Liuzhou collection and 0 Policies, mechanisms water. Environment Management Project I transportation to address * Water supply, wastewater collection and (FYO5-FYII); ShanghaiUrban infrastructure, and low agriculture non-point treatment, and solid waste services Environment APL (FYo6-FY12), III public awareness and pollution piloted and investments, as well as river rehabilitation (FY09); Second Guangdong Pearl participation, should be a scaled-up works have improved environmental conditions River Delta Urban Environment Project focus of WBG in project areas. (FY07); Shandong Environmental ds & engagement going * Bank TA has built capacity of national GEF (FY07); Han River Urban forward. agencies, experts and officials, as well as local Environment Improvement Project o The experience from implementing agencies, to use integrated (FY08); GEF-Ningbo Water and implementing the WBG- approaches for water management and Environment Project (FY08) financed Eco-farming pollution control in selected areas. Project, solid waste SIFC supported investment projects provided 3.7 IFC UEEV (FY08) components in urban million customers with access to clean and [IFC: See also IFC lending projects, other urban reliable water; 198 cubic meter of water has interventions in water and waste water water/sanitation projects, 71 been treated in water treatment plants. in Outcome Area 3.3] and increasing * IFC investment supports the construction and government recognition operation of medical waste facilities. Non-lending: of the severity of non- MIGA Support; Integrated Village point source pollution will Poverty Reduction Planning and guide next steps. Ecological Environment Protection (FY06); Waste Management in China: Issues and Recommendations (FY06) [IFC: See IFC Non-lending interventions in water and waste water in Outcome Area 3.3] Outcome 3.7: * Integrated land Achieved. Non-lending: Results of a pilot Model land administration and Significant progress has been made towards Chongqing Urban-Rural Linkages supporting rural land administration management system this outcome, including the revision of the Study (FY09); Urban Expansion, Land registration (Anhui) can and piloted Property Law to designate property rights, and Conservation & Affordable Housing be used to design future management * Options identified for to differentiate between resettlement for public (FY10) support. The Chongqing systems revising property law projects and others, rural-urban linkages study developed to recognize land * The Rural,[Urban Planning Law has also been has also looked at land contracting rights, revised to control transfer of rural land to issues. rural land as urban, to offer greater social protection, and to collateral rationalize transfer of land. * New land acquisition Chongqing is being piloted as a city for policy articulated urban/rural reform including land reform. * Land Acquisition regulations are implemented to strengthen control of conversion of basic farmland to other usage. * Other achievements include the piloting of pension schemes to recognize the collateral value of rural land, restructuring of the Ministry of Construction to cover both urban and rural construction, and land development. A policy announcement extends the rural 30- year lease fights to perpetual rights. The rural land registration pilot projects carried out in eight provinces will be expanded to include all provinces. Outcome 3.8: t Options identified for Achieved. Lending: i nThe WBG can continue to China continues stabilizing GUG * AAA and lending has identified options and Third ODS Phase Out (FY95-FY09, play a critical catalytic to make emissions suggested future directions for stabilizing ICR-S; IEG-S); Liaoning Medium role by facilitating the progress in p Model projects GHG, renewable energy, energy efficiency, and Cities Infrastructure (FY06); PCB exchange of global meeting its undertaken for low carbon growth. Management and Disposal knowledge and commitments phasing out selected Bank AAA and policy dialogue supported Demonstration (FY06); Shandong experience, helping China under POPs (PCBs, opening of CDM market in China. China is Environment 2 (FY07); Shandong Flue to tap available resources 72 environmental chlordane, mirex) about 70% of Bank's CDM portfolio. GEF Gas Desuifarization (FY08); Shanxi and funds (e.g., Carbon conventions * Options for programs are piloting innovative low carbon Coal Bed Methane Development and Funds), and supporting biodiversity and GHG abatement approaches. Utilization Project (FY09); Eco- lending and non-lending protection strategy * FC's CHUEE guarantee program directly Farming Project (FY09); Thermal activities. articulated avoids 17.3 million tons of GHG emissions Power Efficiency (FY09); GEF Programs should build on * Model projects annually via implementation of multiple EL/RE programs and Carbon Finance projects; the experience of Bank- implemented for projects and an additional 41 million tons supported work in the reducing land-based indirectly through partner financial institutions. [See also JFC Lending in Outcome area of climate change pollution in coastal The PCB program has been successful and is Area 3.2] issues, CDM transactions, areas now moving on to the termite irradiation the development of the chemical program and other programs. SEPA Non-lending: Carbon Investment Fund, (China's Environment Protection Agency) has National Climate Change Strategy and the Climate Partnership developed the biodiversity strategy supported Program (on-going); Sustainable Fund, and programs for by UNDP. Energy in China (FY07); Shanghai: implementation support ODS 3 phased out a total of 19 T Ozone Developing a Green Electricity Scheme for biogas and JGCC. Depleting Potential through 87 subprojects. (FY07); Meeting the Challenges of With the combined ODS I- IV projects, China Offshore and Large Scale Wind Power met its 5000 reduction target for CFCs and (FY09); Clean Development halons, and its 850% reduction target for CFCs - Mechanism in China: Five Years of fully compliant with its international Experience (FY09); China's Envisaged obligations under the Montreal Protocol. Renewable Energy Target (FY11) * There has been a major increase in land-based pollution control in coastal cities and full JFC: See also JFC non-lending participation in regional cooperation efforts interventions in Outcome Areas 3.2 and such as Partnerships in Environmental 3.5] Management for the Seas of East Asia Performance Standards for Banking (PEMSEA). Sector (FY1), China Utility-Based bChina's Industrial Bank adopted the Equator Energy Efficiency Finance Program Principles (EP) in 2008; China EXIM Bank is (FY07) using a PS-based internal environmental and social risks review process; the ICBC is applying the EP in its overseas investment activities. Outcome 3.9: Listed heritage sites Achieved. Lending: * Strengthening the Model heritage piloted, with * Bank-supported projects integrated cultural Zhejiang Urban Environment Project integration of cultural and tourism environmental heritage into urban development. These (FYO4-FY1 1; ICR-S); Gansu Cultural heritage conservation and projects protection in place projects strengthened wastewater collection and and Natural Heritage Project (FY08); tourism development is an developed urban infrastructure, and also upgraded historic Guizhou Cultural and Natural Heritage area that can be improved residences. Protection (FY09); Shandong on in fture projects. China-World Bank partnership has focused on Confucius and Mencius Culture Helping local supporting conservation institutions and Heritage Protection (FY11) communities capture the specialists through the development of such economic benefits of tools as provincial cultural heritage strategies cultural heritage projects and digital archives. The partnership has also should be a focus going 73 focused on more sustainable financial planning, forward, as the quality of operation, and maintenance of heritage sites. locally-provided tourism products and services are low and generate only small incomes. Pillar 4: Financinr Sustained and Efficient Growth Outcome 4.1: * Barriers to Achieved. Lending: Joint approach by the Access to commercial small- 0 The MSE Finance Project supported by the Micro and Small Enterprise Finance Bank and IFC has worked selected scale finance WBG demonstrated that MSE lending can be (FY07) well and should be the financial identified commercially sustainable in China and led to preferred modality going services (rural . Market-oriented more MSE lending by banks. IFC: Zhong An Credit (FY08); forward. credit, small- rural finance scheme 9 WBG policy dialogues contributed to MicroCred (FY08); IMMC (FY08); Lack of capacity at all scale credit, piloted liberalization of lending interest rates and CFPA (FY10); Renshou VTB (FY09); levels of banks, including housing 0 PSRB Financing to regulatory changes to promote MSE lending. Shenzhen VTB (FY10); Beichuan VTB management and credit finance) rural small Most lending interest rates were liberalized (FY10); Chengdu Small Enterprise officers, stands out as a expanded in businesses piloted except those set by RCCs and UCCs (Rural and Credit Guarantee (FY09); Puhui major impediment, calling selected 0 Secondary mortgage Urban Credit Cooperatives). Guarantee (FY11); Deyang Bank, for a systematic approach jurisdictions markets expanded in * IFC supported establishment of nation-wide Binhai Rural Commercial Bank to training and advisory pilot jurisdictions credit reporting system covering 792 million (FY08); United Rural Commercial services. 0 Pilot microfinance individuals and 17.9 million legal entities. The Bank (FY06) * Vast and growing demand financing-only cumulative number of inquires by the end of for MSE finance suggests institutions 2010 has reached 812 million. The system Non-lending: the need for innovative 0 Pilot credit supports lending of about $ 1.4 trillion per year IFC: SME Access to Finance (FY06); approaches that take hold information systems * IFC has invested a total of $18.7 million in 9 China Microfinance Pilots (FY07); and spread faster. established (inc. for microfinance institutions in this period. China Housing Finance Advisory * Unraveling of subprime consumer credit) Included the creation of the first foreign- (FY07); TA to NCCM for small mortgages has revealed invested micro-credit company, the first Sino- business lending (FY07); China deep-rooted problems. foreign joint venture village bank, and the first Microfinance advisory program 1 and Continued work should NGO transformation company. 11 (FY09; FY10); TA to CFPA address standardization * $900 million mobilized for Banks serving Microfinance Transformation (FY 10); and regulation of primary MSMEs while Advisory Service TA has Credit Reporting System Development housing finance reached hundreds of thousands of SMEs. (FY07);TA (Beichuan (FY1 1), Accion instruments. M oDeveloped the landmark Low-Income Housi (FY08), Renzhou (FY10), Harbin Policy in 2008, allowing Central Government (FY10), Zhong An FY08), MC and Regional Governments to increase low- Nanchong (FY08)); Credit Reporting rental housing development by 5- 10 times in System Development (FY07);Chifeng 20 1 comaredto 207.MFI -Inner Mongolia (FY08); 2010compredto 207.Shenzhen VTB (FY 10) WBI programs including the Microfinance Training of Trainers course 74 Outcome 4.2: * Options prudent Achieved. Lending: Going forward, a Enabling investor protection JFC worked with the government and the JFC: ANCHENG (Non-Life Ins) continued joint Bank-IFC environment for scheme articulated People's Bank of China (PBOC) to develop and (FY11); New China Life 2 (FY11) approach is preferred. IFC capital markets with view to adoption roll-out a secured transactions system to enable investments and TA and insurance by 2010 and promote the use of movable assets as Non-lending: provided support to Non- industry Legal framework and collateral. According to a recent independent IFC: Promoting Enterprise-Led Bank Financial improved appropriate evaluation, as of June 2011 more than $3 Innovation in China; Secured Institutions (NBFI) and regulatory trillion in credit had been distributed through Transactions Reform ( FYO4-06); assisted in addressing institutions developed more than 385,000 loans to businesses, Jiangsu Financial Leasing Co., Ltd. distressed assets markets in areas such as (e.g.) including many small enterprises. Advisory Services (FY09); China while the Bank provided securities law, * The successful reform of non-tradable shares Personal Bankruptcy Law Phase I and TA support to selected secured Financing paved the way for further deepening of stock 11 (FY0 8, FY1 1); Credit reporting regulatory bodies (CSRC, law, futures law, markets and enhanced investor confidence, system Development in China (FY07) CIRC, PBoC). leasing law, * The strategic vision of the capital market in the securitization law medium to long-term was formulated by China Securities Regulatory Commission (CSRC) and a securities investor protection scheme was created. 0 The legal framework is being strengthened (Securities Law was amended; the Real Rights Law was enacted, providing the foundation for modern secured transactions framework; a Leasing Law is in the legislation pipeline). Outcome 4.3: Municipal and Achieved. Non-lending: IBRD projects should More developed enterprise bond Corporate bond market regulations were IFC Panda Bond (FY06 and FY07); continue to support the infrastructure markets developed in streamlined with CSRC given a more dominant IFC Dim Sum Bond (FY1 0) development of finance selected jurisdictions role, However, municipal debt issuance still municipal/enterprise or lines of business remains undeveloped, infrastructure bond i In FY07, IFC issued its second Panda Bond in markets and the Chinese domestic market for RMB 870 securitization. million (approximately $110 million * The IFC ("Panda Bonds") equivalent); the bonds were placed with has supported bond issues institutional investors in the national interbank in local currency to market. The transaction followed the RMB enhance private 1.13 billion first Panda Bond issue in FY06 and companies access to marked the first time a multilateral organization financing. has issued a follow-up bond in China. It builds on the success of IFC's first Panda bond by providing a model for future high-grade issuers, helping deepen the capital markets and supporting long-term local currency financing for a number of Chinese companies engaged in sectors including agribusiness, health care, and small and medium enterprise finance. 75 Outcome 4.4: * Steps taken to Partially achieved. Lending: China will likely continue Strengthened strengthen corporate 49 project-trained professional institutions Accounting Reform & Development to look to its international corporate governance provided corporate governance consulting (FY99-FY1O; ICR=HS; IEGHS) partners, including the governance, framework in line services to 148 client companies, reviewed 172 WBG, for support and including with OECD corporate governance procedures for Non-lending: expertise in strengthening improving principles improvement, and facilitated investments of Promoting Enterprise-Led Innovation private sector practices transparency $50 million into companies with improved CG. in China (FY09); China ROSC and regulatory oversight. and * All three financial regulators promulgated Accounting and Auditing Review accountability guidelines on corporate governance of financial (FY10) institutions in their jurisdiction in line with OECD principles and best practice IFC: Strengthening of Lotus Corporate recommended by international regulatory Governance and Retail and SME bodies. Corporate governance m Financial Finance (FY06); Environmental and Institutions (FI) has taken shape, even though Corporate Governance Support effectiveness remains to be improved. Program (FY06); China Corporate Governance Project (FY09); TB - Corp Gov Outcome 4.5: Options identified for Achieved. Lending: In the financial sector, the PBoC capacity reforming Thee of the four state-owned banks completed IFC: UBS Securities (FY06); Rongde WBG can continue to be to identify, ownership, recapitalization and ownership transformation Asset Management (FY06); Cinda an effective partner in assess and governance and also made improvements in corporate (FY08); Orient Fortune (FY08) coordination with others mitigate structures of SCBs governance, by transferring knowledge systemic risks (incl. sale of strategic i Consensus was reached on creating and Non-lending: and international best strengthened stakes) installing a deposit insurance scheme, Bank TA practice in areas such as Options for bank * Financial stability function is still to be depositor protection, failure resolution improved, with legislation and regulatory IFC: Technical Assistance Programme bailout policies, bank policies and frameworks lagging behind rapidly increasing for Leshan City Commercial Bank ownership and associated integration of financial services, especially (FY06); Establishment of NCSSF governance, exchange institutional capacity mixed financial conglomerates led by industrial Internal Risk Management System; rate risk, and financial identified firms. SFMF CBA CHINA; City Commercial vulnerability. * PBoC financial * IFC AS interventions supported the China Bank (FY06) stability functions Banking Association development of improved to certification programs, which certified 632,000 international professionals. IFC developed training modules standards in 14 banking areas, including loan risk pricing, credit analysis, SME banking diagnostics, and microfinance, sustainable banking, student loans, syndications, etc. Pillar 5: Strengthening Public and Market Institutions ________________ Outcome 5.1: Model SOE Achieved. Lending: oSupreme Court China privatization * IFC Advisory Services assisted in IFC: Changyu Group (FY06), Yaohua interpretations cleared implements transactions strengthening insolvency reforms with a joint Glass (FY09) way for enforcement of 1999 GoC completed CBRC workshop in on issues related to private new Enterprise 76 decision to 'let * Enterprise sector stakeholders. Studies have also Non-lending: Bankruptcy Law, but go' of small and bankruptcy law addressed bankruptcy/exit of financial SOE Dividends: How Much and to further actions are still medium-sized options articulated institutions, state asset management reform, Whom (FY06); China 2030 study needed. SOEs and social protection. (FY12) * Central State-Owned Assets Supervision and Administration Commission (SASAC) IFC: China Personal Bankruptcy Law strengthened regulations covering privatization Phase I and II (Fy08, FY11); CBRC transactions, largely in line with the 2002 Bank workshop policy note. * IFC investments supported the privatization, restructuring and consolidation of three state- owned enterprises (Changyu Group,Yaohua Glass, and Beifang Glass). Outcome 5.2: * Actions taken to Achieved. Lending: Selected strengthen SOEs' WBG (IFC in particular) support helped [All IFC Lending during the CPS publicly listed focus on efficiency of companies improve standards in corporate period; All IFC investment services SOEs and large using capital governance and in social and environmental operations require compliance with private . Approaches practices. TA was provided to SEPA, PBoC, IFC's Performance Standards on corporations identified for helping CBRC, select corporate directors and to IFC Environmental and Social adopt SOEs to establish clients to meet performance standards. Sustainability] international boards with IFC projects have enhanced the financial best practice in independent outside sustainability of its partners. Non-lending: corporate directors The Bank was invited to advise the National SOL Dividend Policy (FY10); China governance and Assistance provided Peoples' Congress (NPC) on performance 2030 study (FY12) corporate social to selected listed issues of large SOEs. responsibility companies to * SASAC is committed to implementing IFC Operations, Advisory Services and implement CSR code Economic Value-Added (EVA)-based TA: Strengthening of Lotus Corporate performance evaluations, and information Governance and Retail and SME disclosure standards in all SOEs (consistent Finance (06); Environmental and with 2002 Bank policy note). Corporate Governance Support * Implementation underway of new (2008) Program (FY06); China Corporate SASAC and Ministry of Finance policies for Governance Project (FY09); IB - Corp SOE dividend collection. Gov Limited success in the central SASAC experiment in 19 SOEs, with difficulties in SI-China Green Securities (FyI 1) identifying qualified directors. Quality and Sustainability Performance of private enterprise (FY06); ES Standards in ICT (FY07); Carbon Finance Aggregation through FIs (FY08); China-Fenglin Inter Study to Define Business Practices in Wood Industry (FY06) CBRC,selectcorporateGDIH-AS-Corporate Social 77 Responsibility Demonstration / Cumulative Risk Assessment Outcome 5.3: * Options identified for Achieved. Lending: Simplified simplifying business * JFCs financing of local projects (covering 29 JFC investments in frontier regions business entry entry (including provinces) addressed constraints of starting (totaling 47) during the CPS period. and regulation, licensing, access to businesses, with financing and supporting TA particularly in land) available for the poorer areas. Non-lending: the western and . Options identified for Bank-supported firm surveys provide ratings, Governance, Investment Climate, and northeastern simplifying, revising promote awareness of competitiveness, and Harmonious Society: Competitiveness provinces selected business support reforms to improve the investment in 120 Cities (FY07) regulations to climate. prohibit * The 120-city Investment Climate Assessment JFC: China Subnatl DB (07); TA to monopolization, (ICA) Report raised awareness nationally about NCCB Small Business Lending restraints on trade, improving the investment climate. and practices that * The Anti-Monopoly Law was adopted (SOEs unreasonably limit were not excluded). competition * The Government appointed special task forces iMeans to improving to review approval requirements and hundreds firm-level innovation were abolished. identified Outcome 5.4: Investment Achieved. Lending: Joint efforts provide a Increased FsI promotion agencies IFC has supported this objective with a IFC: investments in frontier regions viable approach in inflows in west strengthened in growing share of investments going to frontier (totaling 42)during the CPS period support of this outcome. and northeast lagging provinces regions and an SME fund for equity regions Approaches investments in high growth private companies Non-lending: identified to realizing in the west. FIAS/MIGA Programs; A Market- higher FBI inflows in * FIAS and MIGA are supporting the Ministry of Oriented Approach to Northeast west and Commerce to assist in the central and western Revitalization(FY06); Revitalizing the northeastern regions to attract more investment, and at the Northeast Towards a Development provinces (as % of provincial level, through Private Enterprise Strategy (FY06); Foreign Capital total F I) Partnership (PEP) - China collaboration for Utilization in China (FY06); Capacity workshops for provincial and municipal Building of Sichuan Investment investment promotion agencies in Sichuani Promotion Bureaus (FY04-FY08); * IAS has undertaken IPP capacity diagnosis MOFCOM Investment Promotion across 13 provinces. Support for lesser-developed regions Ongoing program with Ministry of Commerce (FY06) to develop Independent Power Producer (IPP) strategies for the central and western provinces IFC: Study on Private Sector Financing with implementation aimed for the next phase and External Borrowing in China of the Ministry of Commerce/China Investment (FY07) Promotion Agency (CIPA) program, including improvin_the_inin the North-East. 78 * IFC established 2 pilot investor-focused institutions (Industry Transfer Center and Yinchuan Investment Promotion Office) and facilitated $43 billion of new investment into central and western provinces in 2010. Outcome 5.5: * Categorization of Achieved. Non-lending: Improved PSUs initiated, * The Bank followed up on the 2005 PSU report Governance, Investment Climate, and accountability according to to strengthen reforms. Other WBG activities Harmonious Society: Competitiveness in model PSUs type/level of GoC included support for local e-government, and in 120 Cities (FY07) involvement private health and education service providers. Policy actions to * There was some success in local experiments IFC: UFH1 (FY06); UHF2(FYO8); privatize PSUs (Wuxi, Chongqing) on demand-side financing Aier Eye (FY07), Bioveda I and 11 articulated and purchases of services from non-public (FY08); Healthway (FY10); Q&M * Reform options providers. (FY11) articulated for * IFC-supported investments in health and allowing not-for- education demonstrated efficient private sector profit private entities participation in the provision of healthcare and to be public service education. providers. Outcome 5.6: **Expenditure Partially achieved. Lending: The next CPS can build Better assignments clarified * The Bank has supported a sub-provincial pilot on WBG's strong alignment across levels of on intergovernmental fiscal system, learning on Non-lending: engagements with between fiscal government fiscal management, and public sector Public Finance in China: Reform and decentralized entities to responsibilities * New local revenue performance (with WBI). Growth for a Harmonious Society further support center- and revenue sources (e.g., * Health policy notes were completed on health (FY08); TA on Intergovernmental subnational relations. assignments at property, local insurance flow-offunds and a study on Rural Fiscal System; Bank TAs; WBI sub-national personal income tax) Compulsory Education Reform assesses the Programs; Health Policy Notes (FY10); levels, including identified, selected initial effects of central fiscal transfer on Rural Compulsory Education Reform improved piloting county and school-level finance. (FYI0); China 2030 study (FY12) equity and AOptions for new The central government has taken some efficiency in transfer law responsibility for specific spending public funding identified; assignments (e.g., compulsory education) but consolidating little progress or reforms in overall changes in transfer programs revenue policy. with improved Government transfers to poor provinces equalization impact increased significantly during the five-year plan period, including progressive weighting of transfers for new Health Insurance and Social Protection (SP) initiatives on social insurance and assistance. 79 Outcome 5.7: * Appropriate Partially achieved. Lending: * WBG is well-positioned Improved link revisions to the * The Bank has supported the development of the Economic Reform Implementation to continue to respond to between budget law M&E framework for the 11h FYP, studies on (FY06); Macro-Fiscal Policy Notes client requests in these planning, articulated sub-national finance and rural public finance, (FY10) areas. budget, service . Measures identified and also conducted a mid-term review of delivery for expanding China's 1 Ith FYP and provided inputs to Non-lending: demonstrated in national treasury to China's 12th FYP. JDF on M&E Framework; Mid-Term selected areas; subnational level * Progress was made in classifying fiscal Evaluation of the Implementation of greater budget . Broader use of spending. Chinas 11th Five Year Plan (FY09); transparency performance M&E for the teth Five Year Program indicators (FY09); Public Services for Building encouraged in M&E the New Socialist Countryside (FY08) of public programs 80 CPS Completion Report Attachment 2 Planned Lending Program and Actual Deliveries (FYO6-FY11) CPS PLANS (May 2006) CPS PROGRESS REPORT (2008) IBRD Board IBRD Projects US$M Projects Date US$M FY06 Program 1,455 FY06 Actual Total 1,454.3 Shanghai Urban APL 2 180 Delivered as Shanghai Urban Environment APL Phase 2 7/5/05 180.0 Inland Waterways 5 100 Delivered 10/11/05 100.0 Integrated Agricultural Irrigation 3 200 Delivered as Irrigated Agriculture Intensification Loan 3 10/11/05 200.0 Fuzhou Urban Transport 100 Delivered as Fuzhou Nantai Island Per-Urban Development 12/15/05 100.0 Renewable Energy Scale-up 2 87 Delivered 2/7/06 86.3 Heilongliang Dairy 100 Delivered 1/24/06 100.0 Economic Reform Implementation 20 Delivered 4/11/06 20.0 Henan Towns Water 150 Delivered as Henan Towns Water Supply & Sanitation 6/27/06 150.0 Liaoning Urban Infrastructure I (transport) 218 Delivered as Liaoning Medium Cities Infrastructure 6/27/06 218.0 Jiangxi Highway 3 200 Delivered 6/27/06 200.0 Changiang/Pearl River Watershed Rehabilitatiion 100 Delivered 6/27/06 100.0 FY07 Actual Total 1,641.0 FY07 Program 1,475 FY07 Program Delivery 1,468.0 National Railway 3 200 Delivered 1/23/07 200.0 Sichuan Urban Development 2 180 Delivered as Sichuan Urban Environment 9/7/06 180.0 Guanxi Integrated Forestry 100 Delivered 12/14/06 100.0 Fujan Transport SWAp 320 Delivered as Fujan Highway Sector Investment 10/12/06 320.0 Shaanxi Highway 3 300 Delivered as Shanxi Ankang Road Development 3/13/07 300.0 Western Rural Water 25 Delivered as Western Provinces Rural Water Supply 6/26/07 25.0 Shandong Urban Environment 2 150 Delivered as Shandong Environment 2 2/27/07 147.0 Guangdong Pearl River Delta (Foshan) 100 Delivered as Guangdong Pearl River Delta Urban 3/21/07 96.0 Micro and Small Enterprises 100 Delivered as Micro and Small Enterprise Finance 6/19/07 100.0 Standby Standby subtotal 173 0 Liaoning Cities Urban Infrastructure 2 200 Delivered as Liaoning Medium Cities Infrastructure 2 6/26/07 173.0 Shandong Flue Gas Desulfurization 60 Postponed to FY08 Eco-Farming 120 Postponed to FY09 FY08 Actual Total 1,513.4 FY08 Program 1,490 FY08 Program Delivery 922.4 Rural Health 50 Delivered 6/25/08 50.0 Huai River Basin 150 Postponed to FY 10 Gansu Cultural Heritage 40 Delivered as Gansu Cultural and Natural Heritage 3/20/08 38.4 Xan Urban Transport 150 Delivered as Xfan Sustainable Urban Transport 6/25/08 150.0 Jilin Food Safety 100 Postponed to FY10 Guiyang Urban-Rural Highway 100 Delivered as Guryang Transport 1/8/08 100.0 National Railway 4 300 Delivered as Shizheng Railway 6/25/08 300.0 Anhui Provincial Highway Network 200 Delivered as Anhui Highway Rehabilitation & Improvement 4/22/08 200.0 Guizhou Cultural Heritage 60 Postponed to FY09 Yunnan Urban Environment 150 Postponed to FY09 Hubei Han River Environment 100 Delivered as Han River Urban Environment 4/29/08 84.0 Shanxi Coal-bed Methane Development 90 Postponed to FY09 Standby Standby subtotal 250 0 Taryuan Urban Transport 150 Postponed to FY10 Migrant Skills and Employment 50 Delivered as Rural Migrant Skills Development 6/25/08 50.0 Energy Efficiency and Development 200 Delivered as Energy Efficiency Financing 5/27/08 200.0 Additional deliveries 341 0 Shandong Flue Gas Desulfurization 5/27/08 50.0 Liaoning Medium Cities Infrastructure 3 5/27/08 191.0 3engbu Integrated Env. Improvement 3/11/08 100.0 81 Planned Lending Program and Actual Deliveries (FYO6-FY11), continued CPS PROGRESS REPORT FY09 Actual Total 2,360.0 FY09 Program 2,130 FY09 Program Delivery 1,760.0 Xining Flood and Watershed Management 100 Delivered 6/2/09 100.0 2nd Yunnan Urban Environment 90 Delivered as Yunnan Urban Environmental 5/5/09 90.0 Eco-Farming 120 Delivered 12/2/08 120.0 Guihou Cultural and Natural Heritage Protection 60 Delivered 5/5/09 60.0 Huai River Basin Flood Management 200 Postponed to FY10 Hubei Yiba Highway 150 Delivered 5/31/09 150.0 Jiangsu Water and Wastewater 150 Delivered 6/2/09 130.0 Jiangxi Inland Waterways 100 Delivered as Jiangxi Shihutang Navigation & Hydro 9/25/08 100.0 Shanghai APL 3 200 Delivered as Shanghai Urban Environment 6/25/09 200.0 Shanxi Coal Bed Methane 80 Delivered as Shanxi Coal Bed Methane Dev. and Util. 5/19/09 80.0 Taryuan Urban Transport Project 150 Postponed to FY10 Technical and Vocational Education & Training 20 Delivered 6/2/09 20.0 Wenchuan Earthquake Recovery 710 Delivered 12/12/08 710.0 Standby Standby subtotal 300 0 Guliguang Railway 300 Delivered 4/16/09 300.0 Jilin Food Safety 100 Postponed to FY10 Additional deliveries 300 0 Nanguang Railway 6/25/09 300.0 CPS PROGRESS REPORT FYI0 Actual Total 1,414.0 FYIO Program 1,214 FYIO Program Delivery 1,024.0 Nanning Urban Environment 100 Delivered 6/1/10 100.0 Small Town Development in Ningbo 50 Delivered as Ningbo New Countryside Development 2/25/10 50.0 Shandong Ecological Afforestation 60 Delivered 5/6/10 60.0 Anhui Medium Cities Urban Transport 100 Delivered 5/20/10 100.0 Chongqing Urban-Rural Integrated Development 84 Delivered 6/3/10 84.0 Henan Yellow River Eco-Livestock Production 80 Delivered as Henan Ecological Livestock 5/27/10 80.0 Forestry Development 100 Postponed to FY 11 Ningxia Highway 250 Delivered 5/13/10 250.0 Shanxi Saline Land Improvement 90 Name changed to Shanxi Saline Alkali Land Improvement Sustainable Development in Poor Rural Areas 100 Delivered 6/10/10 100.0 Wuhan Second Urban Transport 100 Delivered 3/30/10 100.0 Xingiang Water Conservation 100 Delivered as Ximiang Turfan Water Conservation 6/17/10 100.0 Additional deliveries 390 0 Jilin Agricultural Product Safety & Quality 5/13/10 100.0 Liaoning and Shandong TVET 6/1/10 40.0 Taiyuaan Urban Transport 6/10/10 150.0 Energy Efficiency Financing 11 6/22/10 100.0 FYI1 Actual Total 1,740.0 Huai River Basin Flood Management and Drainage Improvement 7/6/10 200.0 Integrated Forestry Development Project 7/6/10 100.0 Yunnan Urban Environment Phase 11 AF 7/6/10 60.0 Zhejang Qiantang River Basin Small Town Environmental 1/20/11 100.0 Liuzhou Environment Management Project Phase 11 3/10/11 150.0 Anhui Shaying River Channel Improvement Project 4/12/11 100.0 Kunming Urban Rail Project 5/10/11 300.0 Sichuan Small Town Development 5/10/11 100.0 Unimqi Ditsrict Heating Project 5/17/11 100.0 Fujan Highway Sector Investment Project AF 5/19/11 50.0 Shandong Confucius and Mencius Culture Heritage Protection 5/24/11 50.0 JiTuHan Railway 5/24/11 200.0 Bayannaoer Water Reclamationand Environment Improvement 5/24/11 80.0 Shandong Energy Efficiency Project 6/9/11 150.0 82 CPS Completion Report Attachment 3 Major Non-Lending Services Product Status Access to Finance FY06 Completed: FY06 Urban Transport Policy Guidance Completed: FY06 China's Compliance with Food Safety Requirements for Fruits and Vegetables Completed: FY06 Environmental Concerns in Poverty Alleviation Projects - the Guidebook for Poverty Reduction Staff Completed: FY06 Evaluation of Liaoling Social Security Pilot Completed: FY06 NE China Invest. Climate Completed: FY06 Foreign Capital Utilization in China: Prospects and Future Strategy Completed: FY06 Railway Restructuring Completed: FY06 SOE Dividends: How Much and to Whom Completed: FY06 Waste Management in China: Issues and Recommendations Completed: FY06 China Water Quality Management: Policy and Institutional Considerations Completed: FY07 China: Farmer's Professional Associations: Review and Policy Recommendations Completed: FY07 China: Research Report on Gender Gaps and Poverty Reduction Completed: FY07 China's Development Priorities Completed: FY07 China's Information Revolution: Managing the Economic & Social Transformation Completed: FY07 Enhancing China's Competitiveness through Lifelong Learning Completed: FY07 Cities Completed: FY07 Study of Capacity Building of the Electricity Regulatory Agency (SERC) Completed: FY07 Sustainable Energy in China: The Closing Window of Opportunity Completed: FY07 Access to Finance FY08 Completed: FY08 China Urbanizes: Consequences, Strategies, and Policies Completed: FY08 China: Public Services for Building the New Socialist Countryside Completed: FY08 Social/Eco Impacts of HIV/AIDS Completed: FY08 China's Modernizing Labor Market: Trends and Emerging Challenges Completed: FY08 Financing Energy Efficiency: Lessons from Brazil, China, India, and Beyond Completed: FY08 Health Reform in Rural China: Where Next? Completed: FY08 Public Finance in China: Reform and Growth for a Harmonious Society Completed: FY08 Strengthening Energy Efficiency Completed FY08 Promoting Circular Economy Completed FY08 Trade and Poverty Completed: FY08 Affordability Completed: FY08 Addressing China's Water Scarcity: Recommendations for Selected Water Resource Management Issues Completed: FY09 China and the World Bank: A Partnership for Innovation Completed: FY09 China Road Traffic Safety Completed: FY09 Chongqing-Guangdong Rural Urban Integration Completed: FY09 Clean Development Mechanism in China: Five Years of Experience (2004-2009) Completed: FY09 83 Major Non-Lending Services, continued Competition Provisions in Regional Trade Agreements: Lessons for China Completed: FY09 Compulsory Education Finance Reform Policy Notes Completed FY09 Economically, Socially, and Environmentally Sustainable Coal Mining Sector in China Completed: FY09 Education Sector Review Completed FY09 Food Safety in China Completed: FY09 Forest Policy - Deepening the Transition, Broadening the Relationship Completed: FY09 From Poor Areas to Poor People: China's Evolving Poverty Reduction Agenda Completed: FY09 Growth through Innovation: An Industrial Strategy for Shanghai Completed: FY09 Corporations Completed: FY09 Labor Mobility Provisions in Regional Trade Agreements: Lessons for China Completed: FY09 Meeting the Unprecedented Challenge for Wind Power Scale-up in China Completed: FY09 Mid-Term Evaluation of the Implementation ofChina's 11th Five Year Plan Completed: FY09 National Investment Policy for Railway Construction Completed: FY09 Outsourcing Social Services to CSOs: Lessons fromAbroad Completed: FY09 Promoting Enterprise-Led Innovation in China Completed: FY09 Public Services in Rural Areas Completed: FY09 Sino-Singapore Tianjin Eco-City Completed: FY09 Strengthening China's Environmental Protection Administrative System Analysis and Recommendations Completed: FY09 Sustainable Development of Inland Waterway Transport in China Completed: FY09 Tracks from the Past, Transport for the Future: China's Railway Industry 1990-2008 and its Future Plans Completed: FY09 Urban Rail Development in China: Prospects, Issues and Options Completed: FY09 Access to Finance FY10 Completed FY10 Adapting Agricultural Production System to Climate Change Completed FY10 China ROSC Accounting and Auditing Review Completed FY10 Compulsory Education for Migrant Children in Guangdong Completed: FY10 Energy Intensity Strategy Completed FY10 Forest Policy Dialogue Completed FY10 Health Policy Notes Completed: FY10 Macro-Fiscal Policy Notes Completed FY10 Market-Based Railway Pricing Policies Completed FY10 Policy Notes on Higher Education Completed: FY10 Rural Compulsory Education Reform (formerly Promoting Basic Education) Completed: FY10 Reforming China's Rural Health System Completed FY10 Rural Pension and SSN Completed FY10 Rural to Urban Migration Social Policies Completed: FY10 Social Assistance in Rural China: Tackling Poverty Through Rural Dibao Completed: FY10 SOE Dividend Policy Completed FY10 84 Major Non-Lending Services, continued Access to Finance FY11 Completed FY11 China PSD Program Completed FY11 Early Childhood Development Completed FY11 Ensuring Financial Stability FY10 Completed FY11 FSAP China Completed FY11 Integrated Flood Risk Management: Key Lessons Completed FY11 Land Transfer and Registration TA Completed FY11 Local Government Finance and Debt Completed FY11 Macro-Fiscal Policy Notes FY11 Completed FY11 Ningbo: China Climate Resilient City Program Completed FY11 Non-Communicable Diseases TA Completed FY11 Policy and Institutional Reforms for thel2th Five Year Plan Completed FY11 Reaping Benefits of FDI in Shanghai Completed FY11 Rural Wastewater Management Study Completed FY11 Study on State-owned Financial Assets Administration Systemin China Completed FY11 WaterPricing& Water User Associations Sustainability Completed FY11 China Partnership with Africa Continuous Policy Notes Continuous Quarterly Updates Continuous South-South Learning Continuous 85 CPS Completion Report Attachment 4 Clean Development Mechanism (CDM) Projects Undertaken During the CPS Period Jiangxi Shihutang Navigation and Hydropower Complex FY10 Dashiqiao Central Heating Supply FY10 Yingkou Economic Dev Zone Heating FY10 Reforestation on Degraded Lands in Northwest Guangxi FY09 Baotou Iron & Steel Energy Efficiency FY08 Hubei Eco-Farming Biogas FY08 Huizhou Combined Cycle Gas Turbine Thermal Power FY08 Shandong Minhe Poultry Manure Biogas FY08 Hubei Guangrun Hydropower Development FY07 Tianjin Landfill Gas Recovery FY07 Facilitating Afforestation Program FY06 Nanjing Steel Convertor Gas Recovery FY06 China GEF Projects Undertaken During the CPS Period Approval Closing Grant Focal Area PROJECTNAME FY FY Amt Climate Change China Energy Efficiency Promotion in Industry FY11 FY15 4.0 Climate Change Guangdong Green Freight Demonstration Project FY11 FY15 4.2 Climate Change Provincial Energy Efficiency Scale-up Program FY11 FY16 13.4 Climate Change Sino-Singapore Tianjin Eco-City FY11 FY16 6.2 Multi Focal Area Sustainable Management and Biodiversity Conservation of the Lake Aibi FY11 FY16 3.0 Basin International Shanghai Agricultural and Non-point Pollution Reduction Project FY10 FY14 4.8 Waters Multi Focal Area Sustainable Development in Poor Rural Communities (GEF) FY10 FY16 4.3 Climate Change Thermal Power Efficiency FY09 FY13 19.7 POPs Rapid Assessment of Chemical Contamination of the Wenchuan Earthquake FY09 FY10 1.0 Climate Change China-GEF-World Bank Urban Transport Partnership Program Project FY08 FY13 21.0 Climate Change China Energy Efficiency Financing FY08 13.5 Climate Change Mainstreaming Climate Change Adaptation in Irrigated Agriculture Project FY08 5.0 Biodiversity Guangxi Integrated Forestry Development and Conservation Project FY07 FY13 5.3 International Second Shandong Environment Project FY06 FY14 5.0 Waters International Ningbo Water and Environment Project FY06 FY12 5.0 Waters POPs Demonstration of alternatives to Chlordane and Mirex in Termite Control FY06 FY12 14.4 Project POPs PCB Management and Disposal Demonstration Project FY06 FY13 18.3 Climate Change China - Renewable Energy Scale-up Program (CRESP) FY05 FY11 40.2 Climate Change Heat Reform and Building Energy Efficiency Project FY05 FY13 18.0 International China-GEF-Liaoning Medium Cities Infrastructure FY05 5.0 Waters International Hai River Basin Integrated Water Resources Management FY05 FY11 33.3 Waters International Guangdong - Pearl River Delta Urban Environment FY04 FY12 10.0 Waters Multi Focal Area Gansu and Xinjiang Pastoral Development Project FY04 FY10 12.5 Biodiversity Lake Dianchi Freshwater Biodiversity Restoration Project FY03 FY08 0.8 Climate Change Energy Conservation Project, Phase II FY03 FY10 26.0 Biodiversity Sustainable Forestry Development Project FY02 FY11 16.0 Climate Change Second Beijing Environment Project FY00 FY11 25.0 Climate Change Renewable Energy Development FY99 FY08 35.0 Climate Change Energy Conservation FY98 FY07 22.0 86 CPS Completion Repor Attachment 5 DOTSDevelopmnent OutcomeScore FY07 -FYI1 80% China,EAPand IFC 77% 75% 6% 70% '-m,-::-:s67 .65% % 1 63% -60% ,55% 54% 50% -~IFC -~China -~EAP 45% 43% 40% F,a07 FV08 F,s09 FY10 F,a11 Developmrent Reach by WFC's Insaestment Clernts. IFc EaP Chn ~CKa/F Employment(mlllionsotjobs) 2A1 0.655 05572% MWME N,mber(,,mln 9.70 2.GN5 0531 5% Amoun($bilions)140A 22.8 21.a 15% Pc,serdiatrbution{fmlisans) 31.99 lk.85 f waterdistribution(mllfions)"*ý 20.13 1003 3. 69118 Gas distrfbution{llns 17.24 1m.5 16.0 9m ph~one ..nneconsimlli.ns) 179.72 19.192/ Patient~r Inche imlns 7.51 1.9 L227s6 studentgsetshed (milllnns) 0.98 0.00~5 Farm.ersrea~Grhed(miln) 2.31 1.453 L45918 Pamnlt~ ~p,irsarl~ ~mnss Ds'tkep,rlhas...ogpod .andserukäces5$b,illns 29.31 1I.719 100113 25% Contritont g,sve mmentmve nuasawrsavings $ýbilons) 20.28 1.5%4 0916 a& 87 Annex 4: Country Partnership Strategy Consultations From July 3-11, 2012, the World Bank Group discussed a draft CPS document with a wide range of government counterparts: the Ministry of Finance (MOF), the National Development Reform Commission (NDRC), 24 additional ministries and agencies, and local officials from Guangdong, Beijing, Hubei, Anhui, Jiangxi, Yunnan, Sichuan, and Gansu. Consultations were also held with academia, non-governmental organizations (NGOs), and development partners. Comments from participants included the following: * Agreement with CPS themes. Participants unanimously supported the proposed CPS themes and outcomes, noting their close alignment with China's own priorities as articulated in the 12th Five-Year Plan. * Strong demand for continued World Bank Group engagement. The consultations revealed an ongoing high level of demand for both financial and non-financial services from both provinces and central ministries and agencies. Participants noted the importance of pilots and demonstration projects, and that Bank-financed projects have also helped improve project management techniques, such as project appraisal and performance evaluation. Projects can also help promote reforms. * Increasing importance of knowledge cooperation. Many participants pointed out that non- financial services will be increasingly important. They noted and agreed with the intention to strengthen knowledge cooperation during the CPS period. Knowledge cooperation should take place at both the provincial and national levels. * Shift to interior provinces. Participants noted that the Bank Group's increased emphasis on central and western China and the old industrial bases in the northeast is consistent with China's Western Region Development Strategy. Some participants pointed out that coastal provinces are best suited to be testing grounds for innovative demonstration projects. * Need to simplify operational procedures. NDRC and provincial representatives acknowledged some improvement in operational processes, such as shorter project preparation time, but emphasized the need for the Bank to further simplify operational procedures to improve efficiency and address hidden transaction costs. They called for a wider application of streamlined processes and use of national systems. There should be better communication and coordination regarding problem projects. Concern was expressed about the turnover of Bank staff, noting that staff need to be familiar with the Chinese context. Ministries and agencies asked to be better informed about projects at the provincial level. * Give more attention to dissemination. Many participants highlighted the importance of disseminating the findings of projects and studies. The annual Innovation Workshops are thought provoking. Provincial finance bureaus noted that they could play a role in disseminating within provinces. Line ministries noted that they could help disseminate project experiences if they are kept better informed. Consultations were also held in July 2010 in Beijing, Kunming, and Hangzhou with central line ministries (except NDRC) and provincial finance bureaus to discuss the impact of the 2006 CPS and provide early input for the new CPS. 88 Annex 5: Standard Country Assistance Strategy Annexes Standard CAS Annex A2: China at a Glance China at a glance 927/12 East Upper Key Development Indicators Asia& middle Agedistribution, 2010 China Pacific income (2011) Male Female Population, mid-year (millions) 1,344.1 1962 2,452 Tnz Surface area (thousand sq. km) 9,600 16,302 59,328 n Population growth (%) 0.4 0.7 0.7 Urban population (% of total population) 51 46 57 * GNI (Atlas method, US$ billions) 6,644.3 7,249 14,429 11 GNI per capita (Alas method, US$) 4,940 3,696 5,884 GNI per capita (PPP, intemational $) 7,640 6,657 9,970 -0 GDP growth (%) 9.3 9.7 7.8 percentoftotalpopulatin GDP per capita growth (%) 8.8 8.9 7.1 (most recent estimate, 2005-2011) Povertyheadcountratioat$1.25aday(PPP, %) 13 14 Under-5mortalityrate(perl,000) Poverty headcount ratio at $2.00 a day (PPP, %) 30 33 Life expectancy at birth (years) 73 72 73 Infant mortality (per 1,000 live births) 16 20 17 Child malnutrition (%of children under 5) 3 6 3 m Adult literacy, mate (% of ages 15 and older) 97 96 96 Adult literacy, female (% of ages 15and older) 91 91 91 w Gross primary enrollment, male (% of age group) 110 111 111 w0 Gross primary enrollment, female (% of age group) 113 112 111 10 Access to an improved water source (% of population) 91 90 93 o I Access to improved sanitation facilities (% of population) 64 66 73 190 000 2=010 Net Aid Flows 1980 1990 2000 2011 (US$ millions) Net ODA and official aid 66 2,032 1712 648 GrowthofGDP and GDP per capita(%) Top 3 donors (in 201V): Germany 7 229 213 322 1o France 0 88 46 317 14 United Kingdom 0 33 83 87 12 Aid (% of GNI) 0.0 0.6 0.1 0.0 8 Aid per capita (US$) 0 2 1 0 2 Long-Term Economic Trends o Consumer prices (annual % change) 6.0 3.1 0.4 5.4 GDP implicit deflator (annual %change) 3.8 5.8 2.1 7.8 Exchange rate (annual average, local per US$) 2.4 5.2 8.3 6.5 Terms of trade index (2000 = 130) 69 94 100 78 1980-90 1990-2000 2000-11 (average annual growth %) Population, mid-year (millions) 981.2 1,135.2 1,262.6 1,344.1 15 11 0.6 GDP (US$ millions) 139,400 356,937 1,158,475 6,650,942 ID.3 ID.6 15.8 (% of GDP) Agriculture 30.2 27.1 15.1 15.0 5.9 4.1 4.4 Industry 48.2 41.3 45.9 46.6 111 13.7 117 Manufacturing 40.2 32.7 32.1 32.1 13.8 12.9 112 Services 21.6 31.5 39.0 43.3 14.0 110 114 Household final consumption expenditure 50.3 46.7 46.7 34.9 12.1 15.3 5.3 General gov'tfinal consumption expenditure 14.9 14.1 15.8 13.3 7.3 9.1 9.0 Gross capital formation 35.2 36.1 35.1 49.2 12.9 12.0 13.5 Exports of goods and services 10.6 13.1 23.3 314 2.2 15.5 15.0 Imports of goods and services 11.0 13.1 20.9 27.3 6.5 15.7 15.3 Gross savings 33.8 35.6 37.3 52.7 Note: Figures in italics are for years other than those specified. 2011data are preliminary. .. indicates data are not available. 'a. Aid data are for 2010. Development Economics, Development Data Group (DECDG). 89 China Balance of Payments and Trade 2000 2011 Governance indicators,2000 and 2010 (US$ millions) Total merchandise exports (fob) 249,210 1,898,600 Total merchandise imports (cif) 225,097 1,743,460 Voice and accountability Net trade in goods and services 28,873 270,641 Political stability and absence of violence Current account balance 20,519 201,714 as a % of GDP 1.7 3.0 Regulatory quality Ruleof law Workers' remittances and compensation of employees (receipts) 202 16,600 Control ofcorruption Reserves, including gold 171753 3,254,674 0 25 50 75 100 Central Government Finance Countrys percentile rank 10-100) (% of GDP) Current revenue (including grants) 13.8 20.7 Sorce: WoridwideGovernancelndicators (www.govindicators.org) Tax revenue 12.7 16.9 Current expenditure 13.3 16.8 Technology and Infrastructure 2000 2010 Overall surplus/deficit -3.3 -1.1 Paved roads (% of total) .. 53.5 Highest marginal tax rate (%) Fixed line and mobile phone Individual 45 45 subscribers (per 100 people) 18 86 Corporate 33 25 High technology exports (% of manufactured exports) 19.0 27.5 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 145,648 685,418 Agricultural land (%of land area) 57 56 Total debt service 26,607 78,049 Forest area (% of land area) 19.0 22.2 Debt relief (HIPC, MDRI) - - Terrestrial protected areas (% of land area) 15.5 16.6 Total debt (% of GDP) 12.2 10.3 Freshwater resources per capita (cu. meters) 2,197 2,113 Total debt service (% of exports) 9.1 3.5 Freshwater withdrawal (billion cubic meters) Foreign direct investment (net inflows) 38,399 170,449 C02 emissions per capita (mt) 2.7 5.3 Portfolio equity (net inflows) 6,912 19,639 GDP per unit of energy use Composition of total external debt, 2011 (2005 PPP $ per kg of oil equivalent) 3.1 3.7 Energy use per capita (kg of oil equivalent) 867 1695 IDA, Odhe mult- R dter4, 14,129 Bileral, 32,202 World Bank Group portfolio 2000 2010 Pive., 130,935 (US$ millions) IBRD Total debt outstanding and disbursed 11,118 12,962 S Iern, Disbursements 1528 1,282 Principal repayments 578 1,086 Interest payments 713 143 US$ millions IDA Total debt outstanding and disbursed 8,771 9,000 Disbursements 379 0 Private Sector Development 2000 2011 Total debt service 131 416 Time required to start a business (days) - 38 IFC (fiscal year) Cost to start a business (% of GNI per capita) - 4.5 Total disbursed and outstanding portfolio 565 2,014 Time required to register property (days) - 29 of which IFC own account 274 1,721 Disbursements for IFC own account 55 278 Ranked as a major constraint to business 2000 2010 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 38 139 ' Tax rates 36.8 r Economic and regulatory policy uncertainty 32.9 .. MIGA Gross exposure 113 223 Stock market capitalization (% of GDP) 48.5 83.6 New guarantees 0 24 Bank capital to asset ratio (%) 4.1 6.1 Note: Figures in italics are for years other than those specified. 2011 data are preliminary. 97/12 .. indicates data are not available. - indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 90 7 Millennium Development Goals China With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) China Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2010 Poverty headcount ratio at $125 a day (PPP, % of population) 60.2 47.8 35.6 13.1 Poverty headcount ratio at national poverty line (% of population) .. 6.0 4.6 Share of income or consumption to the poorest qunitile (%) 8.0 7.2 6.4 5.0 Prevalence of malnutrition (%of children under 5) 12.6 10.7 7.4 3.4 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 97 92 Primary completion rate (% of relevant age group) 104 98 Secondary school enrollment (gross, %) 38 52 62 81 Youth literacy rate (% of people ages 15-24) 94 .. 99 99 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 85 92 99 103 Women employed in the nonagricultural sector (% of nonagricultural employment) 38 39 39 Proportion of seats held by women in national parliament (%) 21 21 22 21 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 48 43 33 18 Infant mortality rate (per 1,000 live births) 38 34 27 16 Measles immunization (proportion of one-year olds immunized, %) 98 80 84 99 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 10,000 live births) 120 84 61 37 Births attended by skilled health staff (% of total) 94 89 97 99 Contraceptive prevalence (% of women ages 15-49) 85 90 87 85 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (% of population ages 15-49) .. 0.1 Incidence of tuberculosis (per 10,000 people) 153 129 109 78 Tuberculosis case detection rate (%, all forms) 21 33 33 87 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 67 74 80 91 Access to improved sanitation facilities (% of population) 24 34 44 64 Forest area (% of land area) 16.8 .. 19.0 22.2 Terrestrial protected areas (% of land area) 13.5 14.0 15.5 16.6 C02 emissions (metric tons per capita) 2.2 2.8 2.7 5.3 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 14 2.1 3.1 3.7 Goal 8: develop a global partnership for development Telephone mainlines (per 10 people) 0.6 3.4 11.5 22.0 Mobile phone subscribers (per 100 people) 0.0 0.3 6.8 64.2 Internet users (per 10 people) 0.0 0.0 1.8 34.4 Computer users (per 10 people) Education indicators (%) Measles immunization (%of 1-year olds) ICT indicators (per 100 people) 125 100 L. 100 75 75 70 60 50 Jfl 20 25 25 30 n 2000 2005 2010 0 4 .i.1..J.L1I[ 2010 1990 1995 2000 2010 2000 20D5 2010 Note: Figures in italics are for years other than those specified. .. indicates data are not available. 9/27/12 Development Economics, Development Data Group (DECDG). 91 Standard CAS Annex B2 Selected Indicators* of Bank Portfolio Performance and Management As of end of FY2012 Indicator 2009 2010 2011 2012 Portfolio Assessment Number of Projects Under Implementation a 78 79 84 89 Average Implementation Period (years) b 3.7 3.4 3.2 3.2 Percent of Problem Projects by Number a, c 5.1 15.2 15.5 12.4 Percent of Problem Projects by Amount a, c 3.4 11.6 9.4 7.1 Percent of Projects at Risk by Number a, d 6.4 17.7 19.0 13.5 Percent of Projects at Risk by Amount a, d 5.1 14.4 17.9 7.9 Disbursement Ratio (%) e 28.2 21.0 18.9 20.1 Portfolio Management CPPR during the year (yes/no) No No No No Supervision Resourcesf (total US$) 6313.0 7267.0 7517.0 7442.0 Average Supervisionf (US$/project) 68 74 77 77 Memorandum Item Since FY80 FYO8-12 Proj Eval by IEG (Number) 253 31 Proj Eval by IEG (Amount, US$ millions) 33,790.0 3,693.1 % of IEG Projects Rated U or HU (Number) 8.0 3.2 % of IEG Projects Rated U or HU (Amount) 7.4 1.8 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. f. Includes all sources of funds (BB, GEF, CF, MP, CBF, FAO, etc) * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 92 Standard CAS Annex B3: Indicative 1BR) Financing FYI3-15 (as of September 2012) Strategic Theme 1: Supporting Greener Growth Strategic Theme 2: Promoting More Equitable Development Fiscal Amt Amt Year Outcomes Project Names ($m) Outcomes Project Names ($m) Q3-Q4 1.2 Energy Efficiency Phase III with EximBank 100 2.1 Second Chongqing Urban-Rural Integration - Health 100 FY12 1.2/1.6 Gansu Qingyang Urban Infrastructure Improvement 100 2.2 Yunnan Technical and Vocational Education and Training 50 1.3 Changzhi Sustainable Urban Transport 100 2.3 Integrated Economic Development of Small Towns 150 1.3 Hubei Xiangyang Urban Transport 100 2.4 ZhangHu Railway 200 1.3 Xinjiang Yining Urban Transport 100 1.4 Sichuan Wudu Irrigated Agriculture Developnent 100 1.5 Second Water Conservation 80 1.5 Ningxia Desertification Control and Ecological Protection 80 Total Number of Projects: 12 Total Loan Amount in US$ million (Actual): 1260 FY13 1.1/1.6 Beijing Energy Efficiency and Emission Reduction Demonstration 120 2.1/2.2 Guangdong Urban-Rural Social Security Integration & Migrant Workers 80 Training 1.1 Shandong Renewable Energy 100 2.4 Fujian Meizhou Bay Waterways 50 1.1 Shanghai Building Energy Efficiency and Low Carbon District 100 2.4 Harbin-Jiamusi Railway 300 1.2 Liaoning Coastal Economic Belt Infrastructure and Environment 150 2.4 Jiangxi Shangrao Sanqingshan Airport Development 50 1.2 Jiangxi Small Towns Infrastructure Development Domenstration 150 1.2/1.5 Shaanxi Yan'an Water Supply 60 1.2/1.6 Ningbo Donestic Waste Collection and Recycling Demonstration 80 1.4 Integrated Modem Agriculture Developnent (SOCAD) 200 1.5 Hunan Forest Ecosystem Restoration and Development 80 1.5 Anhui Ma'anshan Cihu River Basin Environment 100 Total Number of Projects: 14 Total Loan Amount in US$ million (including standby operations): 1620 FY14 1.1 Concentrated SolarPower 80 2.3 AnhuiXuancheng Infrastructure forIndustrialRelocation fromCoastalArea 150 1.3 Jiangxi NanChang Urban Rail 250 2.3 Anhui Yellow Mountain New Countryside Demonstration 100 1.3 Qinghai Xining Urban Transport 120 2.3 Guiyang Rural Roads 150 1.3 Zhengzhou Urban Rail 250 2.4 Fujian Fishing Ports Denonstration 60 1.3 Yunnan Honghe Prefecture Urban Transport 150 2.4 Yinchuan-Xi'an Railway 200 1.4/1.6 Guangdong Non-point Source Agricultural Pollution Cleanup 100 1.5 Jiangxi Jingdezhen Wuxikou Integrated Water Scheme 100 1.5 Guangxi Laibin Water & Environment Management 80 Total Number of Projects: 13 Total Loan Amount in US$ million (including standby operations): 1790 FY15 1.1 Shanxi Coal-bed Methane Utilization 100 2.2/2.3 Industry-based Poverty Alleviation Demonstration 150 1.1 Hebei New Energy Developnent in Rural Areas 100 2.2/2.3 Economic ReformPromotion and Capacity Strengthening 35 1.2 Qinghai Xining Integrated Environment Managenint 150 2.3 Guizhou Rural Development 100 1.2 Guilin Integrated Environment Management 100 2.3 Sichuan-Chongqing (GuangAn) Cooperation Demonstration Zone Infrastructure 100 1.2 Shaanxi Small Towns Infrastructure 150 2.4 Hubei XiaoGan Logistic Infrastructure 100 1.2/2.3 Zhejiang Rural Area Wastewater Management 200 2.4 Yunnan Highway Assets Management 150 1.3/2.4 Jiaozuo Safe and Green Transport Dev. in Transforming Economy 100 2.4 Heilongjiang Cold Weather Smart Public Transportation System 200 1.5 Chongqing Small Towns Water Resources Integrated Management 100 2.4 Gansu Rural-Urban Integration Infrastructure 150 1.5/1.6 Huainan Coal Mining Subsidence Area Rehabilitation 100 Total Number of Projects: 17 Total Loan Amount in US$ million (including standby operations): 2085 93 Standard CAS Annex B3: Global Environment Facility (GEF) Pipeline and Active Portfolio (as of September 2012) GEF Pipeline (US$m) Biodiversity Landscape Approach to Wildlife Conservation in Northeast China 3.0 Climate Change China Renewable Energy Scale-up Program (CRESP) Phase II 27.3 Climate Smart Agriculture: Low Emission Technologies for Foodgrain Crop Production (proposed) 5.1 Green Energy Schemes for Low-carbon City in Shanghai 4.6 Large-City Congestion and Carbon Reduction 18.2 Monitoring, Verification and Reporting in Energy Efficiency 17.8 Urban Scale Building Energy Efficiency and Renewable Energy 13.2 Persistent Organic Pollutants (POPs) Contaminated Site Remediation and Redevelopment (under discussion) - Reducing POPs from Municipal Solid Wastes 20.0 International Waters Guangdong Non-Point Pollution Control 5.1 Total 114.3 GEF Active Portfolio (US$m) Biodiversity Guangxi Integrated Forestry Development and Conservation 5.3 Sustainable Management and Biodiversity Conservation of the Lake Aibi Basin 3.0 Climate Change China-GEF-World Bank Urban Transport Partnership Program 21.0 City Cluster Eco-Transport 5.0 Energy Efficiency Financing 13.5 Energy Efficiency Promotion in Industry 4.0 Green Freight Demonstration 4.2 Heat Reform and Building Energy Efficiency 18.0 Provincial Energy Efficiency 13.4 Sino-Singapore Tianjin Eco-City 6.2 Sustainable Development in Poor Rural Communities 4.3 Thermal Power Efficiency 19.7 Technology Needs Assessment 5.0 Persistent Organic Pollutants (POPs) Dioxins Reduction from the Pulp and Paper Industry 15.0 PCB Management and Disposal 18.3 International Waters Huai River Basin Marine Pollution Reduction 5.0 Liaoning Bohai Sea Pollution 5.0 Second Shandong Environment 5.0 Shanghai Agricultural and Non-point Pollution Reduction 4.8 Total 175.7 94 Annex B3 China: IFC Investment Operations (as of September 2012) 2009 2010 2011 2012 Original Commitment (US$m) IFC Own Account 278 447 448 577 IFC Own Account and Mobilization 406 546 671 637 Original Commitments by Sector (%), IFC Own Account only Finance & Insurance 11% 42% 42% 61% Education Services 0% 0% 0% 9% Chemicals 14% 0% 2% 8% Collective Investment Vehicles 10% 4% 4% 8% Health Care 0% 6% 4% 6% Agriculture and Forestry 0% 0% 2% 3% Utilities 0% 8% 8% 3% Transportation and Warehousing 0% 0% 0% 1% Electric Power 2% 18% 1% 1% Industrial & Consumer Products 40% 4% 21% 0% Food & Beverages 0% 9% 0% 0% Nonmetallic Mineral Product Manufacturing 16% 7% 0% 0% Pulp & Paper 0% 0% 3% 0% Professional, Scientific and Technical Services 7% 2% 13% 0% Total 100% 100% 100% 100% Original Commitments by Investment Instrument (%), IFC Own Account only Equity 39% 58% 63% 16% Quasi-Loan 18% 1% 1% 3% Quasi-Equity 7% 0% 0% 0% Loan 31% 41% 15% 29% Guarantee 5% 0% 20% 51% Total 100% 100% 100% 100% 95 CAS Standard Annex B4 - China Non-Lending Services As of September 2012 Product Completion FY Completed China's Challenge: Building a Modern, Harmonious, and Creative High-income Society (China 2030) FY12 Country Water Resources Partnership Strategy FY12 Design of Water Consumption-based Water Rights Administration System for Turpan Prefecture FY12 Development Impacts of Climate-Induced Changes in China's Water Resources FY12 Economic, Financial, and Commercial Review of Urban Water Supply Utilities FY12 Energy Efficiency & Climate Change Management Agenda in the Urban Transport Sector FY12 Evaluate the Incentive Mechanism for Wind Power in China FY12 Government Facilities Energy Efficiency FY12 Health System Reform Programmatic AAA on Implementation, M&E FY12 High Speed Rail System Integration FY12 Promoting Access to Finance FY12 Quarterly Update and Macro-fiscal Policy Notes FY12 Review and Upgrade National Design Codes of Urban Water and Supply Drainage FY12 Revision of National Guidelines on Dam Safety Mgmt and Risk Informed Dam Safety Mgmt FY12 Social Protection and Labor Market Programmatic AAA FY12 Urban Transport Climate Change Strategy FY12 Water and Wastewater Sector from Middle Income Country to High Income Country FY12 FY13 Capacity Building for Smart Grid Development in China Carbon Capture and Sequestration (CCS) Capacity Building Technical Assistance FY13 Clean Stove Initiative FY13 Collective Property Institutions and Policies Reform Options FY13 Food Safety Engagement FY13 Green Energy Scheme for Low-Carbon City in Shanghai FY13 Financial Consumer Protection and Financial Literacy in China FY13 Financial Sector Activities FY13 Financial Sector Reform Roundtable FY13 Financial Sector Reform Strategy FY13 Heat Regulation Phase II FY13 Housing Policies, Urban Planning and Integration in China FY13 Inclusive Finance Academy in China (IFA) FY13 Innovation Model of Affordable Housing Investment and Financing FY13 Municipal Financing and Debt Management FY13 Promoting Inclusive Innovation in China FY13 Provincial Energy Efficiency Practitioners Forum FY13 Rail Financial Futures Analysis FY13 Risk Assessment of China's Agriculture Product Quality and Safety FY13 Skills Development in Four Economic Sectors in Yunnan Province FY13 State Forest Reform FY13 Sub-national Public Finance and Debt Management FY13 Support Chinese Participation in the 2011 WB-Singapore Infrastructure Finance Summit FY13 Sustainable Financing Mechanism for Small Town Infrastructure Development FY13 The Mortgage of the Right to Contract for Management in Rural Area FY13 Transport System Safety FY13 Trial Conservation of Cultural Heritage Assets in the Shandong Province FY13 FY14 (indicative) Demand Analysis of Old Age Health Services in Both Demand and Supply Sides FY14 Developing and Improving China's Pension System FY14 Early Child Development FY14 Electricity Regulation to Integrate Climate Change Considerations FY14 Establishing a Comprehensive Financial Statistics Information Platform FY14 Health and Medicine System Reform FY14 Improving China's Social Assistance System FY14 Issues and Options in Monitoring, Verification and Reporting in Energy Efficiency FY14 Low-carbon Eco-city Financing Models and Low-carbon Industry Development FY14 Modeling Regional Economic Benefits of Railway Projects FY14 Urban Transport Programmatic Knowledge Management Platform FY14 96 Standard CAS Annex B6 China: Key Economic Indicators Actual Estimate Projected Inidicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 11 11 10 10 10 10 9 9 9 Industry 47 47 46 47 47 44 44 43 43 Services 42 42 43 43 43 46 47 48 48 Total Consumption 49 47 47 48 47 49 49 50 50 Gross domestic fixed investment 39 41 46 46 46 46 46 45 45 Government investment 2 3 4 4 3 3 3 3 3 Private investment 37 38 42 42 43 43 42 41 41 Exports (GNFS)b 41 39 28 31 31 27 26 25 24 Imports (GNFS) 32 31 23 27 27 25 24 23 23 Gross domestic savings 51 53 53 52 53 51 51 50 50 Gross national savingsc 53 55 53 52 53 48 48 49 49 Memorandum items Gross domestic product 3255086 4015926 4815692 5695217 6650942 7529478 8511561 9451875 10436095 (US$ million at current prices) GNIper capita (US$, Atlas method) 2480 3050 3610 4240 4940 5570 6250 6900 7570 rReal annual growth rates (%, calculated from 90 prices) Gross domestic product at market pric 14.2 9.6 9.2 10.4 9.3 7.7 8.1 7.5 7.0 Gross Domestic Income 13.5 7.0 13.8 5.3 7.8 .. rReal annual per capita growth rates (%, calculated from 90 prices) Gross domestic product at market pric 13.6 9.0 8.6 9.8 8.8 7.0 7.4 6.8 6.3 Total consumption 10.3 7.8 8.3 7.3 9.0 7.8 7.9 7.3 6.9 Private consumption 10.0 7.6 8.3 7.7 8.9 7.3 7.4 7.5 6.8 Balance of Payments (US$) Exports (GNFS)b 1342206 1581713 1333300 1743565 2086660 2241380 2406635 2581000 2742560 Merchandise FOB 1220000 1434601 1203800 1581400 1899340 2038750 2189620 2348700 2493800 Imports (GNFS)b 1034729 1232843 1113200 1520538 1898300 1933760 2085000 2274000 2452500 Merchandise FOB 904618 1073919 954300 1327238 1660272 1747200 1865500 2017900 2158000 Resource balance 307477 348870 220100 223027 188400 307620 321610 307000 290000 Net current transfers 38634 45781 33700 42900 78400 49820 54800 49800 39800 Current account balance 353183 420569 243257 237810 201714 215000 229456 222915 209010 Net private foreign direct investment 143100 121700 70300 185750 170449 141400 113500 90000 55000 Change inreservesd -464804 -440860 -380557 -464998 -359839 -327600 -413397 -321581 -290143 Memorandum items Resource balance (% of GDP) 9.4 8.7 4.6 3.9 4.1 2.4 2.2 1.7 1.3 FReal annual growth rates ( YR90 prices) Merchandise exports (FOB) 19.1 7.9 -10.5 28.2 9.4 4.2 5.3 5.2 4.2 Merchandise imports (CIF) 13.4 3.3 2.4 22.0 9.7 6.0 6.4 5.0 3.9 (Continued) 97 Standard CAS Annex B6 China: Key Economic Indicators, continued Actual Estimate Projected lIdicator PF2007 '~2008 '1 2009 2010 2011 2012 2013 ' 2014 2015 Public finance (as % of GDP at market prices)e Current revenues 19.4 19.6 20.1 20.7 21.9 22.1 21.9 21.6 21.1 Current expenditures 15.7 16.5 19.0 20.2 19.4 21.0 21.7 21.1 20.5 Current account surplus (+) or deficit( 3.7 3.1 1.1 0.5 2.5 1.1 0.2 0.5 0.6 Capital expenditure 3.0 3.4 3.5 3.2 3.0 3.0 2.9 2.8 2.8 Foreign financing 0.0 0.0 0.0 0.1 0.1 0.1 0.0 0.0 0.0 Monetary indicators M2/GDP 151.8 151.3 179.0 180.8 175.5 186.5 191.5 196.6 201.2 Growth ofM2 (%) 16.6 17.8 28.4 18.9 14.3 14.6 15.0 14.0 13.0 rPrice indices( YR90 =100) Merchandise export price index 126.7 137.7 129.4 132.5 145.8 150.2 153.2 156.2 159.2 Merchandise import price index 129.6 148.8 129.0 146.6 167.1 167.9 168.8 173.9 179.0 Merchandise terms of trade index 97.7 92.6 100.3 90.4 87.2 89.4 90.7 89.8 88.9 Real exchange rate (US$/LCU)f 117.1 127.1 120.7 .. .. .. Real interest rates Consumer price index (% change) 4.8 5.9 -0.7 3.3 5.4 2.8 3.3 3.0 3.0 GDP deflator (% change) 7.6 7.8 -0.6 6.7 7.8 3.0 3.6 3.3 3.2 a. GDP at market prices b. 'VNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes 'local currency units." An increase in US$/LCU denotes appreciation. 98 Standard CAS Annex B7 China: Key Exposure Indicators Actual 2007-2011 Pmeced Indicator '2007 200 209 '2010 2011 2012 21 '2014 '2015 Total debt outstanding and 373,457 380,165 443,155 558,344 685,418 644,785 617,958 disbursed (TDO) (US$m) Short-termdebt (USSm) 203,698 187,188 240,509 347,524 476,911 451,550 432,646 Net disbursements (USSm)n 46,823 (2,280) 43,521 119,928 126,951 129,014 123,614 Total debt service (TDS) 31,823 33,259 39,804 63,638 78,049 73,538 70,460 (US$m)a Debt and debt service indicators (%) TDO/XGSb 26.1 22.3 30.5 29.4 30.5 28.9 25.8 TDO/GDP 11.5 9.5 9.2 9.8 10.3 7.8 6.6 TDS/XGS 2.2 2.0 2.7 3.4 3.5 3.3 2.9 Concessional/TDO 10.1 10.8 9.8 7.0 5.6 5.3 4.9 IBRD exposure indicators (%) IBRD DS/public DS 18.2 16.3 15.7 9.9 8.3 13.6 16.3 Preferred creditor DS/public 29.3 27.1 27.4 18.9 24.5 28.7 34.9 DS (%)c IBRD DS/XGS 0.1 0.1 0.1 0.1 0.1 0.1 0.1 IBRD TDO (US$m)d 11,762 12,464 12,756 12,962 13,026 12,930 13,215 Ofwhich present value of guarantees (US$m) Share ofIBRD portfolio(%) 11.7 12.2 10.7 9.5 9.5 8.8 8.4 IDA TDO (US$m)d 10,151 9,786 9,521 9,000 7,489 6,712 5,953 IFC (US$m) Loans 694 930 920 994 1,038 1,067 1,105 1,145 1,186 Equity and quasi-equity /c 493 589 527 727 793 746 756 766 776 MIGA MIGA guarantees (US$m) 49 0 75 24 0 57 67 50 50 a. Includes public and publicly guaranteed debt, private nonguaranteed, use ofIMF credits and net short- term capital. b. "XGS" denotes exports ofgoods and services, including workers'remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 99 CAS Annex B8- China Operations Portfolio (IBRDIIDAand Grants) As Of Date 912712012 Closed Projects 281 IBRDlDA* Total Disbursed (Actim) 3,599.53 of which has been repaid 77.42 Total Disbursed (Closed) 9,891.01 of which has been repaid 16,368.59 Total Disbursed (Actiw + Closed) 13,490.53 of which has been repaid 16,446.01 Total Undisbursed (Active) 6,371.24 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 6,371.24 Active Projects Last PSR Supervision Rating Original Amount in US$ Millions Project ID Project Nam Developient Implementation Fiscal Year IBRD IDA GRANT Cancel. Undisb. gURectives Progress P121263 China GEF City Cluster EccS S 2012 5 P120932 China Technology Needs A# # 2012 5 5 P096707 CN - GD Tech&Vocational IS S 2009 20 7.875348 P118597 CN - Integrated Eco. Devol# # 2012 150 150 P112626 CN - Liuzhou Environment IS S 2011 150 141.2564 P108627 CN - Nanning Urban Enviro S S 2010 100 40.26359 P106956 CN - Ningbo New Countrysi MS MS 2010 50 32.32303 P110632 CN - Sichuan Small Towns S S 2011 100 99.75 P114138 CN - Water Conservation IS S 2012 80 80 P039838 CN ODS IV PHASE OUT PIS S 1998 440.35 0.1 16.70079 P101829 CN Xining Flood and Water S S 2009 100 52.85294 P096925 CN- Bengbu Integrated EnvS S 2008 100 55.04541 P084874 CN- Energy Efficiency Fine S S 2008 300 134.63 P098654 CN- GEF-Thermal Power El MS MU 2009 19.7 9.322856 P087318 CN--GEF-Guangd IntegrateS S 2007 5.25 0.936507 P086515 CN-3rd National Railway S S 2007 200 8.860376 P111421 CN-Anhui Medium Cities Ur MS MS 2010 100 92.13486 P118647 CN-Anhui Shaying River CtS S 2011 100 99.75 P115695 CN-Bayannaoer Water Re,S S 2011 80 79.8 P124978 CN-Changzhi Urban TranspS S 2012 100 99.75 P126210 CN-Chongqing Urban Rural# # 2012 100 100 P086446 CN-Chongqing Urban-Rural MS MS 2010 84 75.79 P125528 CN-DioAns Reduc. from Pi S S 2012 15 15 P096556 CN-Eco-Farming S MS 2009 120 60.86104 P085124 CN-Economic Reform ImplES S 2006 20 9.745718 P113766 CN-Energy Efficiency FinaiS MS 2010 100 79.75 P091020 CN-Fujian Highway Sector IS S 2007 370 65.01369 P070519 CN-Fuzhou Nantai Island PS MS 2006 100 17.16157 P091949 CN-Gansu Cultural & Natur, S MS 2008 38.4 12.76325 P123133 CN-Gansu Qingyang Urban # # 2012 100 100 P119357 CN-GEF Egy Efficiency Pr S S 2011 4 3.6 P098916 CN-GEF Energy Efficiency S S 2008 13.5 10.45957 P119654 CN-GEF Green Freight DerS S 2011 4.2 3.4 P114182 CN-GEF Povincial Energy ES S 2011 13.386363 12.1327 P098915 CN-GEF Sino-Singapore Ti MS MS 2011 6.16 3.509188 P072721 CN-GEF-Heat Reform & Bic S S 2005 18 7.985694 P108592 CN-GEF-IF Huai Rver BasiS S 2012 5 P090375 CN-GEF-IF-LIAONING MS MS 2007 5 5 P090377 CN-GEF-IF-SHANDONG El MS S 2007 5 0.713208 P090376 CN-GEF-IF-Shanghai Agric MU U 2010 4.788 4.066578 P082993 CN-GEF-PCB Mgnt & Dispt MU MS 2006 18.34 6.054178 P101844 CN-GEF-Sust Dev in Poor I MS MS 2010 4.265 3.925 P090335 CN-GEF-WB Urban Transp MS U 2008 21 16.48252 P081776 CN-GUANGDONG/PRD2 MS MS 2007 96 41.79198 100 Active Projects Last PSR Supervision Rating Original Amount in US$ Millions Project ID Project Nam Developrent Imementation Fiscal Year IBRD IDA GRANT Cancel. Undisb. Objectives Progress P088964 CN-Guangxi Integrated Fort S S 2007 100 0.832668 P093963 CN-Guiyang Transport S MS 2008 100 14.75572 P091950 CN-Guizhou Cultural and N; MU U 2009 60 52.7567 P107559 CN-Guizhou-Guangzhou Re MS MS 2009 300 299.25 P087224 CN-Han River Urban Eniro MS MS 2008 84 41.81108 P100455 CN-Henan Ecological LivesiS S 2010 80 71.8 P081348 CN-HENAN TOWNS WATE U U 2006 150 79.36204 P098078 CN-Huai River Basin Flood S S 2011 200 152.9813 P119071 CN-Hubei Xiangyang Urbar S S 2012 100 100 P101258 CN-Hubei Yiba Highway S S 2009 150 76.89612 P075730 CN-HUNAN URBAN DEV MS MS 2005 172 23.91556 P105872 CN-Integrated Forestry DevS S 2011 100 68.45613 P096926 CN-Jiangsu Water and Wa S S 2009 130 50.70131 P101988 CN-Jiangxi Shihutang Navi S S 2009 100 17.48871 P101716 CN-Jilin Food Safety S S 2010 100 91.71174 P122321 CN-Jilin-Hunchun Railway S S 2011 200 196.089 P117656 CN-Kunming Urban Rail S S 2011 300 283.25 P110661 CN-Lake Aibi Conservation S S 2011 2.976 2.976 P092618 CN-LIAONING MED CITIEf MS MS 2007 173 113.407 P099224 CN-Liaoning Med. Cities (LI MS MU 2008 191 134.7551 P099992 CN-Liaoning Medium Cities S MS 2006 218 79.45495 P085376 CN-Migrant Skills Dev. and S MS 2008 50 35.32778 P112359 CN-NanGuang Railway S S 2009 300 243.1787 P121289 CN-Ningda Desertification (S S 2012 80 80 P096920 CN-Ningda Highway S HS 2010 250 33.64597 P084437 CN-Rural Health S S 2008 50 19.43038 P120234 CN-Shandong Confucius & S S 2011 50 44.875 P112759 CN-Shandong Ecological AS S 2010 60 39.40839 P114069 CN-Shandong Energy Effic S S 2011 150 134.625 P077752 CN-SHANDONG ENVIVIT 2 S S 2007 147 28.42343 P096923 CN-Shanghai APL Ill MS MS 2009 200 115.6321 P075732 CN-SHANGHAI URBAN AP MS MS 2006 180 53.15108 P100968 CN-Shansi Coal Bed Metha MU U 2009 80 71.8 P099062 CN-ShiZheng Railway HS S 2008 300 125.5142 P083322 CN-SICHUAN URBAN DEV MS MS 2007 180 11.05083 P121414 CN-Sichuan Wudu Irrigatec S S 2012 100 99.75 P099751 CN-Sustainable Dev. in Poc MS MS 2010 100 82.29009 P081615 CN-Taiyuan Urban Transpo MU U 2010 150 149.625 P117107 CN-Tech Vocational Ed MU MU 2010 40 33.9 P120664 CN-Urumqi District Heating S S 2011 100 89.75 P095315 CN-W. Region Rural Water U U 2007 25 5.793495 P114107 CN-Wenchuan Earthquake MS MS 2009 710 351.6121 P112838 CN-Wuhan Second Urban S MS 2010 100 81.93402 P092631 CN-Xi'an Sustainable Urbar S MS 2008 150 113.3563 P111163 CN-Xinjiang Water Conser S MS 2010 100 89.75 P122008 CN-Yunnan Tech Voc Ed # # 2012 50 50 P096812 CN-Yunnan Urban Env S S 2009 150 120.041 P122319 CN-Zhangjiakou-Hohhot Rai S S 2012 200 199.5 P116656 CN-Zhejiang Qiantang River S S 2011 100 81.28121 P126454 Xinjiang Yining Urban Trant # # 2012 100 99.75 Overall Result 10118.4 615.915363 0.1 6498.505 101  \ äO-E 90°E 100°E 110°E 120T 130°E RUSSIAN FEDE RATION \ TO - -- Chit. KAZAKHSTAN CHINA .-' HELOÑFGJI N, Harbin.. S MONGOLIA ....Bisåkek 40-i• . i1 TO Chan hun KYRGYZ REP. . Urumqi. U L T. Bishkek . ?Du honbe ~ a MAON s n p Sea of G X I N Jl A N G gO Ba touHhhot B/lGO a AFGHANISTAN >gHe BElJN 8/ ffi O jianjin Hai Dalian M rdanH E7BJ E TIANJIN ar on Yinchuan Taiyuan •shilizh.y ang REP. 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