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Countries and Regions Country Partnership Strategies Document
I. Development SituationA. Recent Developments1. The People's Republic of China (PRC) adopted its Tenth Five-Year Plan (TFYP) 2001-2004 in March 2001. Unlike previous plans, the TFYP does not focus on physical or output targets but on quality of growth and sustainable development. This, in part, also reflects the greater role of markets in the economy. In addition, public opinion was sought when drafting the TFYP through various communication channels, including the Internet, indicating an increasing willingness to mainstream participatory mechanisms in development planning. Key strategic themes of the TFYP include (i) continued reliance on market-oriented reforms and innovations; (ii) promoting nonstate sector development; (iii) intensified protection of the environment; and (iv) improving the quality of life for all, including programs to reduce poverty, develop human resources, and strengthen social safety nets. 2. The PRC’s population was 1.265 billion in 2000, of which 36 percent lived in urban areas. The annual population growth rate during the 1990s (1.07 percent) was lower than the 1.47 percent recorded in the 1980s. The number of people aged 65 and above is growing rapidly (7 percent of the population in 2000 compared with 5.6 percent in 1990). Changing demographics will increase pressures on the health care, social security, and pension systems. 3. The Government has been pursuing social security reforms to support its restructuring of state-owned enterprises (SOEs) and reduce urban poverty. Social security reforms are being pilot tested in Liaoning Province, which has one of the largest concentrations of SOEs in the country. The National Social Security Fund was established in 2000 and a social security law is now being drafted with Asian Development Bank (ADB) assistance. A new medical insurance policy introduced in 2001 in most cities will benefit 80 million citizens. Conceptual planning for extending social protection measures to rural areas has also started with ADB assistance. In May 2001, the PRC adopted its new ten-year poverty strategy (2001-2010) with a focus on poor household and village activities. Key counties that will be eligible for national poverty funding will be selected on the basis of income, social and physical conditions. Priority will be given to remote and mountainous areas and minority areas. County poverty offices will use participatory approaches to ensure farmers' involvement in project planning and implementation. B. Economic Assessment and Outlook4. Despite the slower growth in world economy, the PRC’s real gross domestic product (GDP) grew by 8.0 percent in the first half of 2001 mainly due to strong domestic consumption and investment. Exports grew by 11 percent in the first five months of 2001 and imports at 16.3 percent. The external current account surplus is projected at 1.2 percent of GDP, lower than the 1.9 percent in 2000. The exchange rate has remained stable and official foreign exchange reserves reached $175.6 billion in March 2001. The PRC’s economic indicators are given in Appendix 1. 5. Domestic demand, a key to sustained long-term growth, is being stimulated through an expansionary public investment program. Strong consumption demand will also be supported by rising incomes, including an increase in civil servant salaries. Along with foreign direct investment, which rose by 12 percent during the first five months of 2001, consumption demand and public investment will offset slower export growth. Current expenditures are growing more slowly than revenue collection. The consumer price index, which has risen by 0.9 percent in the first four months of 2001, is projected to increase by 2.0 percent for the whole of 2001. ADB has revised its GDP growth forecast in 2001 from 7.3 percent to 7.5 percent based on the PRC’s economic performance in the first half of 2001. 6. Strengthening of the financial system, dealing with its sizable nonperforming loans, further SOE restructuring, developing legal and regulatory framework for a market economy and promoting the role of private sector are PRC's key challenges that have to be tackled in the coming years. Growing regional disparities also need to be addressed. Per capita GDP in western region is about two-thirds of the national average and only one-third of that in the eastern region. The regional disparities are also reflected in such indicators as poverty incidence, primary school enrollment rate, health care facilities, physical infrastructure and ecological aspects. Accordingly, the development of the western region will be promoted during the TFYP. C. Implications for the Country Strategy and Program7. ADB's current operational strategy for the PRC was discussed with ADB’s Board of Directors in 1997 after approval of the Ninth Five-Year Plan. The TFYP and the Ten-Year Poverty Reduction Plan have been adopted and there have been significant country, regional, and global developments. ADB has adopted several major new policies, including making poverty reduction its overarching objective. Because of these factors, and in view of the PRC’s rapid economic growth, deepening of market-based reforms, and the PRC’s imminent accession to the World Trade Organization (WTO), work has begun to revise the country strategy. Most other funding agencies are also revising their strategies. The new strategy, to be completed in 2002, will address the strategic objectives and crosscutting themes in support of the poverty reduction strategy as highlighted in ADB's long-term strategic framework.
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