Announcement of Bank-IDA Project to Strengthen China's Industrial Sector on March 5, 1987

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 87/41 Contact: P. B. Sison IDA NEWS RELEASE NO. 87/43 (202)-477-3573 BANK-IDA PROJECT TO STRENGTHEN CHINA'S INDUSTRIAL SECTOR WASHINGTON, March 5 -- China will strengthen its small- and medium-sized light industries with a project supported by a $250 million World Bank loan and an SDR 40.9 million ($50 million) International Development Association (IDA) credit. IDA is the World Bank's concessionary lending affiliate. The project aims at increasing the institutional capacity of the China Investment Bank (CIB), the country's only development finance institution in the industrial sector that bases its investment decisions on comprehensive project appraisals. Measures to strengthen the CIB, which was established in 1981 with World Bank assistance, are being taken in response to the organization's recent rapid growth. The project would improve CIB's ability to mobilize foreign currency from international capital markets to provide financing for the industrial sector, which employs about 63 million people, or 13 percent of China's total labor force. About 175 state and collective enterprises are expected to receive subloans from the CIB for modernization and expansion. China is one of the world's 10 leading industrial producers and the world's largest provider of full-time industrial employment. The industrial sector, which comprises 437,200 enterprises, is the country's most productive sector and represents over a third of total gross domestic product. Growth of China's industrial sector, however, has been constrained by obsolete fixed assets that lead to technical inefficiencies and heavy consumption of raw materials and energy. The project will help the country import new technologies that will make better use of existing natural and financial resources. The World Bank loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.92 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balances. The IDA credit is for SO years, including 10 years of grace; it carries no interest but has annual charges (O.S percent on the undisbursed balances and 0.75 percent on the disbursed balances). NOTE: Money figures are in U.S. dollar equivalents. IDA credits are denominated in SDRs (Special Drawing Rights), which are valued on the basis of a "basket" of currencies. The U.S. dollar equivalent of the SDR amount of the IDA credit reflects the exchange rates existing at the time of the negotiation of the credit.