Lending Program for PRC for 2005-2007 Prioritizes Poorer Central and Western Regions

MANILA, PHILIPPINES (29 September 2004) - ADB's US$1.5 billion planned annual lending level for the People's Republic of China (PRC) for 2005-2007 will focus on projects in the poorer central and western regions, according to a Country Strategy and Program (CSP) Update endorsed today by ADB's Board of Directors.

More than 80% of the lending program is earmarked for projects in the central and western regions, home to the majority of the PRC's poor and ethnic minorities. This is a significant increase from about 59% during 1986-2004.

"The benefits of growth must be inclusive and improve the lives of most people, particularly the poor," says Bruce Murray, Country Director for ADB's Resident Mission in the PRC.

"ADB projects, particularly for improving infrastructure, will help create a climate for pro-poor economic growth in some of the poorer regions."

The transport sector will continue to dominate ADB operations, accounting for 59% of total lending. The share of lending for environmental sustainability, such as projects for improving water supply and sanitation, will increase from 5.7% 2004 to 24.4% in 2007.

Infrastructure projects will help reduce transportation costs and facilitate faster economic development in the project areas. Environmental sustainability also needs to be addressed as economic growth is contributing to worsening levels of land, air, water, and solid waste pollution.

"Substantial financial resources are needed to help the PRC restructure its economy to improve income levels, reduce poverty, and address environmental concerns. Through its knowledge-based products, ADB will bring best international practices to strengthen the enabling framework for the private sector and financial markets," adds Mr. Murray.

"The proposed level is appropriate for a large country with sound macroeconomic fundamentals, large absorptive capacity, and a good project implementation record."

The PRC's performance in managing its complex development agenda has been strong during the past 25 years. The economy grew by 9.1% in 2003, the highest annual economic growth rate since 1997. In the first half of 2004, gross domestic product grew by a faster-than-expected 9.7% and fixed asset investment increased by 28.6%.

ADB's economic assessment is that the PRC will continue macroeconomic tightening policies and achieve a soft economic landing through a judicious mix of monetary and fiscal policies and administrative measures. The good economic performance is expected to continue with the economy growing at 8.8% in 2004.

While the expected US$4.5 billion lending from 2005 to 2007 represents a significant financial transfer, ADB's strategic impact will result from its ability to provide sound policy advice. An annual technical assistance program of about US$11.4 million will support the lending program. ADB will be involved in policy work related to building an enabling environment for the private sector, improving governance and reducing poverty.

Country Strategies and Programs define ADB's medium-term development strategy as agreed with the country. A CSP update is usually prepared every year to assess the continued relevance of the CSP, its implementation, and revisions to ADB's operational program for the next three years.

Read the full CSP update

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