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Annual Report 2002 : East and Central Asia

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People’s Republic of China

Economic performance

Real GDP growth in the PRC accelerated from 7.3% in 2001 to 8.0% in 2002, mainly from the industry sector. The industry’s value added increased by 9.9%, compared with 8.7% in 2001. Investments grew by 16.1% in 2002, compared with a 13.0% increase in 2001, because of fiscal policy stimulus. Retail sales rose by 8.8% in 2002. Inflation turned into deflation due mainly to excess domestic supply of many agricultural and manufactured goods and tariff reductions related to the country’s accession to the WTO. The CPI fell by 0.8% in 2002, following a 0.7% increase in 2001.

Merchandise exports increased to 22.3% in 2002 from 6.8% in 2001. Imports rose by 21.0%, compared with 8.1% in 2001. The trade surplus expanded to $44.6 billion. With foreign investor confidence strengthening after WTO accession, FDI inflow continued to rise. Actual FDI increased by 12.5% in 2002 and reached $52.7 billion. Foreign exchange reserves were $286.4 billion by the end of 2002. The fiscal deficit was 3.0% of GDP in 2002, widening from 2.6% in 2001, owing to moderate revenue growth. Official urban unemployment in 2002 was 4.0%.

ADB operations

Operational strategy: Work on a CSP was begun in 2002. Reflecting recent economic and social developments, the CSP will focus on providing policy support for the PRC’s evolving market economy and business environment, reducing regional disparities and inequalities, and ensuring socially and environmentally sustainable growth. The CSP will emphasize increased assistance to the central and western regions and will strengthen the economic, thematic, and sector work.

The thrust of the proposed CSP and future poverty reduction activities was endorsed at a meeting of 14 poverty and ethnic affairs offices mainly from the west and northeast provinces. Consultations with more than 350 villagers in 10 provinces, and local and international NGOs also provided input into the CSP.

Policy dialogue: As an active member of the international advisory board of the China Council for International Cooperation on Environment and Development, a high-level advisory body to the Government, ADB emphasized the importance of evaluating the income distribution impact of environmental policies, and adopting pricing policies for natural resources to reflect underlying environmental costs. Policy discussions also focused on developing mechanisms to address transjurisdiction and nonpoint pollution sources, and to promote market-based instruments such as emissions trading and clean development mechanisms. Previous policy support resulted in two major outputs in 2002—passage of the Clean Production Law, and forging of the PRC-Global Environment Facility (GEF) partnership.

A study completed in 2002 on governance issues (see http://www.adb.org/Documents/Reports/Devt_Mgt_PRC/) was the basis of a policy dialogue on improving the institutional and legislative infrastructure for building a market economy. Support continued for private sector development, focusing on small-and medium-sized enterprise development.

At the sector level, ADB assisted the Government in restructuring the power sector and discussed enhancing the poverty orientation of road projects.

Loans, technical assistance, equity investments, and grants: Seven loans—six public sector and one private sector, totaling $868.5 million—were approved in 2002 to help improve water facilities (private sector), develop the Southern Sichuan roads, mitigate floods at the Songhua River, build the Hebei Zhanghewan pumped storage, promote the efficient use of agricultural waste, construct and upgrade the Shanxi Road, and improve wastewater management in Hebei Province. Twenty-six technical assistance totaling $13.2 million were approved. ADB also approved an equity investment of $10 million in the China Environment Fund 2002, LP. This is the first private sector fund dedicated to addressing environmental issues in the PRC. The PRC also received in 2002 a $6.4 million grant for the efficient use of agricultural wastes (see tables 1, 6, 7, 10, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1986, the PRC has received 98 loans totaling $12,163 million, of which 50 were active at the end of 2002. Contract awards totaled $672.7 million, bringing the cumulative figure to $7,563.2 million. The contract awards ratio for 2002 was 26.0%—higher than ADB’s average of 22.6%. Disbursements in 2002 totaled $781.6 million, bringing cumulative disbursements to $7,687.3 million. The disbursement ratio was 25.9%—higher than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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