China - Growth and development in Gansu province (Vol. 1 of 4) : Main report

Report No. 60-CHA China Growth and Development in Gansu Province The Main Report November 20, 1986 East Asia and Pacific Regional Office FOR OFFICIAL USE ONLY Docurnent of the WorlId Bank -This report has a restricted distribution and may be. usod by recipientts ,onlyin the performance.of their official duties. itscontents may noto oterws be disclosed without World Bank authotization.  CURRENCY EQUIVALENTS The Chinese currency is called Renminbi (RMB). It is denominated in Yuan (Y). Each Yuan is 1 Yuan 10 jiao = 100 fen Calendar 1985 October 1986 US$1.00 = Y 2.94 US$1.00 = Y 3.69 Y 1.00 = US$0.34 Y 1.00 = US$0.27 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System TRANSLITERATION The Pinyin system is used in this report. ABBREVIATIONS ABC - Agricultural Bank of China CDP - Gross Domestic Product GITC - Gansu Investment and Trust Corporation GVAO - Gross Value of Agricultural Output GVIAO - Gross Value of Industrial and Agricultural Output GVIO - Gross Value of Industrial Output ICBC - Industrial and Commercial Bank of China -ICOR - Incremental Capital Output Ratio ICT - 'Industrial and Commercial Tax MOPH - Ministry of Public Health NMP - Net Material Output NVAO - Net Value of Agricultural Output PCBC - People's Construction Bank of China  FOR OFFIUCIL USE ONLY Preface As preliminary background for World Bank assistance to the province of Gansu, it was agreed in February 1985 tnat the Bank would undertake a review of development issues and options in the key sectors of agriculture, industry and human development. To this end, three missions visited Gansu in April/May,, May/June and October/November 1985. Each mission traveled extensively in Gansu and saw agricultural projectst industrial enterprises, schools and health facilities. The missions also had numerous discussions and received helpful suggestions and much valuable information from government officials at central, provincial, prefectural and county levels. The support and contribution of all these people made possible the preparation of this report. The first mission covered issues in education and health. It was led by G.B. Baldwin and included I. Porter (senior economist), R. Drysdale (senior education economist), B. Searle (general educator), N. Prescott (health economist), S. Scheyer (public health specialist), J.C. Wang (consultant on education management), and W. P. Chang (consultant on public health). The second mission studied agricultural development. It was led by D.C. Pickering and included T. J. Goering (senior agricultural economist), J.B. Doolette (agriculturalist), R. Ng (agricultural institutions specialist), A. Piazza (agricultural economics consultant), C. Pereira (consultant on land management) and P. Shallow (consultant on irrigation). The third mission conducted further work in agriculture and human development and covered issues in industry and public-finance. It was led by I. Porter and included R. Drysdale, J.B. Doolette, A. Piazza, C. Pohl (serior economist), J. Brown (agroindustries adviser), J. Chanmugam (senior industrial engineer), W. Byrd (economist), A. Kumar (economist) and U.-Sae-Hau (research assistant). The following also contributed to the study: K. Hill (consultant on demography), Cai Jinyong (researcher), T. Bassler (editor), M. Cassidy (secretary). The report includes three annexes (agriculture, industry and education) as well as a main report which summarizes the findings on specific sectors and highlights some of the development options facing Gansu. The report is selective in its coverage of sectors and topics and a number of issues of potentially major importance to Gansu (e.g., interprovincial transport) have not been addressed. The report should therefore be viewed primarily as input into the central and provincial government's thinking about future policies and programs for Gansu. Drafts of the main report and the annexes were discussed with the central and provincial governments in April/May 1986 and have been revised to take account of their comments. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CHINA GROWTH AND DEVELOPMENT IN CANUW PROVINCE The Main Report Table of Contents Pae No. I. PROVINCIAL SETTING ....................................... . 1I A. Growth and Development... ..... . .......... ... .. ..... 2 Employment, Productivity and Incomes.................... 2 Agricultural Resources and Production..duction00....... 3 Mineral Resources and industrial Concentration.......... 6 Social Service Development and Financing 9 Public Expenditures and Finance na.....e..c..e.e........ 14 B. Regional Development Strategy in International Perspective0.... ... l............. ... 1 International Experience .............. 16 Issues and Options for Ga n s u 11 II. PROSPECTS FOR AGRICULTURE.,........... e e*ee..e a... e .. 22 A. Loess Hills Rehabilitation.............................-.. 22 Carrying Capacities 22 Rehabilitation Programs and Farming Systems..tems...... 23 Economic Returns..................... 25 Implementation Schedule.. ......................*....... 26 B. Irrigation Developmente................ . ,a.. ...... e .. 27 Development Program........... -.-.-............. 27 Farming Systems ............. . . 28 Economic Returns ............. . . 29 C. .............. *.** . 30 D. Agricultural Managements........ ........... ,...,.e ...a.,* 31 E. Investment Costs and Financing Arrangements............... 34 III. INDUSTRIAL POTENTIAL................................... 36 A. Rural Industries and Services............................e 36 Gansu in National and International Perspective.*..***** 36 Composition of Rural Industries and Servicesvic....o.es 37 B. Urban Industry............................ e........ 40 Heavy Industry. ............ 40 Light Industry ...... 41  - ii - Page No. C. Industrial Organization and Management.................... 42 Ownership and Control................... .................... 42 Prices and Wages.............. * . .. 44 Technology Transfer and Development..................... 46 Role of Financial Institutions.......................... 47 Role of Industrial Burea! ............................ 48 D. Investment Costs and Financing........................ 49 IV. HUMAN DEVELOP4ENIT..................... ...... 51 A. Education ........... Q - ~~~~~51 Basic Education ..... 51 Upper Secondary Educationu. c a t i on,........ 53 B . Healeth.............alah..................... ........... 55 Child Development ..... 56 Chronic Diseases ......57 C. Organization and Management of Social Services .... 58 Role of the Governmentv er.*.********.................... 58 Decentralizationtotot.to.*...o..o..**oo 59 Accuntabiiityb i liotoy.o ........ 0*00#000040 ..... 0.0 ..... 59 D. Alternative Financing Arrangements for Social Services........ ..........*.. . 60 V. MANAGEMENT AND FINANCE ......... . .... .. ....... .. 64 A. Scope and Allocation of Government Responsibilities. 64 B. Revenue Risn... 66 Forms of Taxationon .............0 ....66 User Chargesh..... 67 C Revenue Sharing ..oo..o..... ........... .. 68 Forms of Transfer................ ................. 69 Institutional Arrangements**e....n.s........... 0... 70 D. Other Resource Fllows**.- ... ....... 71 TABLES IN TEXT 1.1 Employment and Productivity, 1982 ............................. 2 1.2 Income Disparities and Poverty, 1982. 982.......00......... 3 1.3 Rural Per Capita Incomes, l978-84... ............... 009 4 1.4 Agricultural Resources, Output and Incomes, 198 3 5 1.5 Fixed Assets, Employment and Output of State Industry, 1982 ...... .....0 .................. 0 ....8 1.6 Industrial Concentration, 1983..*4..... . .... ..0 ...