Overview Two decades of economic reform have changed the rural landscape of China, and accelerated in the last five years with dramatic changes in rural policies. Agricultural productivity has increased and many farmers have shifted into higher valued crops, making decisions increasingly on market-oriented principles.  The nation has by the far the most sophisticated agricultural biotechnology program in the developing world – many of its breakthroughs are of global importance.
About 100 million rural people have moved to urban areas for employment. Rural incomes have risen significantly and hundreds of millions of people have escaped poverty during this time. Growth in agriculture, non-farm employment and rural industry, and the transformation of domestic and international market connections have changed the face of rural China and are playing key roles in the nation’s modernization. Back to top Progress Since initiating the reforms and open policy, China has achieved tremendous economic success. Growth of about 9 percent per annum since the late 1970s has helped to lift several hundred million people out of absolute poverty, with the result that China alone accounted for over 75 percent of poverty reduction in the developing world over the last 20 years. Between 1990 and 2000 the number of people living on a dollar per day fell by 170 million, while total population rose by over 125 million.  China's market-oriented reforms over the last two decades also dramatically improved the dynamism of both the rural and urban economies and resulted in substantial improvements in human development indicators.
Official estimates of the adult illiteracy rate fell by more than half, from 37 percent in 1978 to less than 5 percent in 2002, and, indicative of health indices, the infant mortality rate fell from 41 per 1,000 live births in 1978 to 30 in 2002. China has entered the World Trade Organization, shifted its policy orientation from pure growth to overall well being (a xiaokang society), and made the historic switch from net taxation of agriculture to net subsidization. Back to top Key Issues Public Services in Rural Areas
The responsibilities for delivering important but costly items such as education, social welfare, public health, and infrastructure (roads, water, etc.) are decentralized with rural governments at the county, township, and to a certain extent village levels.  Since budget processes at these levels are weak and an effective system of intergovernmental transfer is not yet in place, there are considerable inefficiencies and financial risks associated with local government obligations and public service provisions that are far below China’s own standards in terms of quantity and quality.
The Bank has engaged with the Government on rural public finance in the form of research, policy dialogue and support to training activities. Additionally, it will also work with the Government to combine bank loans with domestic projects in programmatic support. Rural Financial Services Access to medium and long-term loans continues to be a considerable constraint for rural households and the current Bank-finance project practice, following government preferences, to channel credit to households through the public finance system is highly inefficient.  Emphasis will be placed on improving the performance of this system through enhanced credit procedures, training programs, and monitoring practices, taking into account that the shorter term Bank’s rural lending operations will have to continue to work within the framework of the current administrative system.
The medium and longer term objective would be to improve access of rural financial services and will be measured to the extent that the Bank can engage the Chinese government through sector work, policy dialog and piloting activities and begin inducing improvements in the system. Institutional Innovations for Land Land is a key factor in China’s quest for economic growth, urbanization, national food security, social harmony, and even the stability of the banking system. Effectively managing the diverse roles of land in the economy requires a comprehensive and integrated approach which poses challenges to officials at both local and national levels. Substantial progress has been made, including the recent (2003) adoption of the Rural Land Contracting Law. Agricultural Modernization and Increasing Farmers’ Incomes The government aims to improve the efficiency of agriculture to meet the increasing demand for both the quantity and quality of food.  The Bank aims to assist China by: (i) supporting industrialization of agricultural production, focusing on productivity increases, green-food, value-added processing, and improved access to markets; (ii) institutional organization of farmers’groups to improve the efficiency and effectiveness of input supply and marketing chains; (iii) supporting development of public-private partnerships in order to leverage public funding for research and technology dissemination; (iv) encouraging improved supply chain management, which includes the management of food safety and quality; (v) supporting provision of public goods in agricultural modernization, such as animal health; and (vi) integrating environmental concerns into agriculture and helping to develop economically effective conservation agriculture.
Natural Resource Management  The Bank has actively supported forest plantation and management, natural forest and biodiversity protection, watershed and grassland management in China.
Major elements of these projects have introduced diagnosis and management methods that have subsequently been adopted in a wider scale, nationwide. Good examples are the Loess Plateau Projects which have introduced integrated rural development on a small watershed basis and which address the highly interlinked environmental and socio-economic issues in an integrated manner. For the first time in the project provinces, nature reserve management plans have been formulated and executed with the active participation of local communities. Bank-funded projects have also increased forest plantation areas by hundreds of thousands of hectares, and improved the State Forestry Administration’s and provincial forest bureaus’ capacity to plan, develop, manage and protect forest resources. Planning is also underway for China’s first use of bio-carbon funds sequestering carbon through forest plantations under the proposed Guangxi Integrated Forestry Project.  Water. Water in China is scarce and poorly managed, infrastructure is aging and inefficient, and per capita water availability is only about one-third of the world average. Weak water policies, regulations, and definition of rights to water contribute to these problems: low irrigation water prices and a national policy of grain self-sufficiency encourage farmers to produce these relatively low-value, high water-using crops rather than high-value food crops. In rural areas, the Bank will give priority to financing water conservation, sustainable development, planning, management and use, including irrigation and drainage system modernization. Bank-funded projects will be designed within a basin-wide or regional water resources perspective, with emphasis on poverty reduction, improving irrigation water productivity, relying on water users association promotion and, where appropriate, on ecosystem restoration of rivers, wetlands, lakes, and coastal waters. Forestry. The Bank will continue its support for: (i) clear policies and adequate funding to improve natural resources condition and management; (ii) community participation and buy-in to facilitate improved natural resources management and erosion control; (iii) the formulation of participatory management plans for nature reserves allowed forest protection and livelihood of  neighboring communities; (iv) forest plantations using fast growing forest species have become effective tools in increasing farmers incomes in mountainous regions and other areas; (v) increasing domestic forest resources through new plantations to protect natural forests and ecosystems in China, as well as in the wider Asia region; (vi) forestry projects introducing innovative/scientific practices in afforestation activities to encourage sustainable forest resource management; (vii) financial institutions should be ensured of long-term sustainable policies to encourage them to engage in the forestry (fast growth species), where risks are moderate and benefits to poorer populations are significant; (viii) encourage private sector enterprises to engage with smallholders in forest production on mutually beneficial partnership arrangements; and (ix) greater use of bio-carbon fund resources to reduce greenhouse gas emission and improve forest production. Watershed Management. The Bank has a long and successful engagement in the area of watershed management in China. With the experiences of the Loess Plateau Projects and the additional work done under the DFID-funded China Watershed Management Technical Assistance Project, the Bank is in a very strong position to continue and further expand its engagement in watershed management and move towards renewed support in this area. A third Loess Plateau Project is proposed and in addition, the Bank is now expanding the watershed management and rehabilitation work beyond the Yellow River to two other highly eroded watersheds in the Yangtze and the Pearl Rivers while deepening the positive lessons of integrated and participatory watershed management to the upper watersheds of these rivers.  Sustainable Grassland Management. Spurred by sand-storms, the Government has revised the national Grassland Law putting in place various degrees of grazing ban, and established large national programs to fund management and establishment of natural and artificial (forage) grasslands, in Western China in particular. A large portion of this funding goes for fencing and development of forage under the “Return to Grassland” and other programs. Little cost-benefit analysis has been carried out for these programs previously, and the Bank is working with Government in this area to demonstrate practical solutions the potential for scaling up. The Bank’s Pastoral Development Project is part of the PRC-GEF Partnership Program on land degradation and aims to establish such interventions.
Back to top World Bank Program Analytical and Advisory Activities: The Bank’s current analytical engagement is broadly aligned with strategic priorities. Core areas of engagement include a DFID-funded Pro-poor Rural Water Management and China Watershed Management Projects; a study on rural public finance; a study on land policy reform; assessment of food safety issues; and work on farmer associations. Additional analytical work is being done on forestry policies, water scarcity and agricultural insurance.  Lending: The Bank’s rural development portfolio in 2006 consists of seven projects under preparation, 12 under supervision and three undergoing completion assessment. The amount committed for projects under preparation is US$750 million. The total disbursed for projects under supervision is US$778 million while the net committed for disbursement is US$1,687 million.
With the proposed projects currently in the lending pipeline in rural development it is likely that the rural portfolio will remain stable for the coming years, and discussions with counterparts are exploring the possible addition of others such as Loess Plateau III, Water Conservation II, Rural Drinking Water, and Poverty V. Partnerships: Rural development staff of the World Bank work closely with the World Bank Institute on poverty reduction, grassland management and animal husbandry and going forward, will explore new opportunities in working on water related issues.  Collaboration with external partners include with DFID in areas ranging from the co-financing of the Poverty IV Project, to technical assistance projects on watershed management and water user associations, as well as the co-financing of analytical and policy products. Partnership with the ADB include on the GEF-financed program on land degradation. The GEF Component of the Pastoral Project is part of that program and other opportunities include co-financing of Eco-farming, and possible Loess Plateau III and Poverty V.
There is also active collaboration with the EU in various areas, especially watershed management, while areas of potential cooperation being explored include agricultural trade policies, governance, and water pollution. With CIDA, agriculture-related work underway includes pastoral development, farmers’ organizations and food safety. More Information:
 China Rural Development Strategy (90kb pdf) Back to top
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