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China Announces Withdrawal of Loan Application for Qinghai Component of China Western Poverty Reduction Project

The Government of China announces that it was withdrawing its loan application from the Bank, and would use its own resources to implement the Qinghai Component of the China Western Poverty Reduction Project. The controversial $40 million Qinghai component of a wider $160 million Western Poverty Reduction project called for the relocation of 57,000 people into historically Tibetan lands in what is now China's Qinghai province. Backers of the project said it would help impoverished people escape barren lands and would raise living standards.  Opponents claimed it would push a destructive tide of Chinese migration into the region and suffocate the Tibetan way of life there. The Bank had approved the loan in 1999, but financing was delayed until the Bank's Inspection Panel investigated objections to the project from pro-Tibetan groups.  The panel's report concluded that the Bank had violated seven of 10 internal regulations.  In response, World Bank President James Wolfensohn proposed delaying the project by at least a year to allow for deeper environmental review, and promised to spend $2.5 million over the next 15 months to address the concerns of the internal inspection panel. China decried the "politicization" of the lending process, and the Executive Director for China, Zhu Xian stated "It is unacceptable to my authorities that other Bank shareholders would insist on imposing additional conditions on management's recommendations-namely coming back to the board for approval again for a project that was already approved last year...China will therefore turn to its own resources to implement the Qinghai component of the project.  We regret that because of political opposition from some shareholders, the World Bank has lost a good opportunity to assist some of the poorest people in China."  China blamed the US for blocking the negotiations.

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