An evaluation of World Bank assistance to China for poverty reduction in the 1990s

32904 THE WORLD BANK OPERATIONS EVALUATION DEPARTMENT An Evaluation of World Bank Assistance to China For Poverty Reduction in the 1990s A. R. Khan Director-General, Operations Evaluation: Gregory K. Ingram Director: Ajay Chhibber Manager: R. Kyle Peters Task Manager: Gene Tidrick This paper is available upon request from OED. It was prepared in 2002 as 2005 a background paper for the China Country Assistance Evaluation. The World Bank Washington, D.C.  ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. OED Working Papers are an informal series to disseminate the findings of work in progress to encourage the exchange of ideas about development effectiveness through evaluation. The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. Contact: Operations Evaluation Department Knowledge and Evaluation Capacity Development (OEDKE) e-mail: eline@worldbank.org Telephone: 202-458-4497 Facsimile: 202-522-3125 http:/www.worldbank.org/oed  Acknowledgments The author is grateful for the help that he has received from many members of the World Bank staff in Washington D.C. and Beijing; officials of the Government of the PRC and the Ningxia Provincial Government; and professional colleagues both in and outside China. In particular he would like to acknowledge the help received from Tamar Manuelyan Atinc, who provided help at the preparatory stage and sent comments on an earlier draft; Athar Hussain, who gave valuable suggestions on the draft as a peer reviewer; Alan Piazza, who gave many useful suggestions both during the preparatory stage and on the penultimate draft; Carl Riskin, who generously provided comments, suggestions and background material; and Gene Tidrick, whose invaluable help at every stage made the report possible. Deepak Bhattasali, Shahoua Chen, Qiang Cui, Uma Lele, Martin Ravallion, Geoffrey Read, Supee Teravaninthorn, Wang Sangui, Zhao Renwei, Zhu Ling and several members of the China Country Assistance Evaluation Team not mentioned above provided valuable comments and help. For all remaining errors and inadequacies the author alone is responsible.   ACRONYMS CAE Country Assistance Evaluation CPI Consumer Price Index ESW Economic and Sector Work FAO Food and Agriculture Organization GDP Gross Domestic Product MLSS Minimum Living Standard Scheme NBS National Bureau of Statistics NGO Non governmental organization PRC People's Republic of China PTI Poverty-targeted Intervention TVE Township and Village Enterprises WTO World Trade Organization   Table of Contents 1 Introduction................................................................................................................1 2. China's Performance in Poverty Reduction in the 1990s..........................................1 3. Why was Poverty Reduction in the 1990s not Faster? ..............................................7 Increase in inter-regional inequality ..........................................................................8 Slow and disequalizing rural income growth.............................................................8 Regressive transfer to households and reduced transfer from rich to poor provinces..................................................................................10 Slow employment growth..........................................................................................10 Discriminatory treatment of migrants........................................................................11 4. Response by the Government of PRC .......................................................................12 5. Bank Response to China's Poverty Problem .............................................................16 Economic and sector work.........................................................................................16 Poverty monitoring ....................................................................................................16 Poverty-reduction strategy.........................................................................................17 Analytical research on poverty ..................................................................................18 Issues that remain to be dealt with.............................................................................18 The lending program..................................................................................................19 Are there enough best-practice projects for poverty reduction in the Bank portfolio............................................................................24 The looming danger...................................................................................................26 Conclusions................................................................................................................26 6. Future Priorities .........................................................................................................27 Poverty monitoring ....................................................................................................27 Adjustments in the poverty-reduction strategy..........................................................27 Economic and sector work.........................................................................................28 The lending program..................................................................................................29 Tables 2.1 Selected Indices of Poverty Headcount .....................................................................2 2.2 Income Indicators during the 1990s...........................................................................4 2.3 Comparison of Poverty Using PPP$ Per Day............................................................4 5.1 Bank Lending in China Since 1990 ..........................................................................21 5.2 Sectoral Composition of Lending..............................................................................22 Annex 1: Poverty Related Economic and Sector Work since 1990......................................30   1 1. Introduction 1.1 This paper attempts an evaluation of World Bank's assistance to China for poverty reduction during the 1990s. It begins with a summary of China's performance in poverty reduction during the decade as a backdrop to the subject (Section II). This is followed, in Section III, by an analysis of the causes why China's performance in poverty reduction was not faster during this decade of extraordinarily rapid growth. Section IV briefly considers the evolution of China's strategy for poverty reduction. Section V, the central section of the paper, discusses the role of the Bank's main instruments - economic and sector work; and lending operations