Announcement of China~^!!^s Grain Distribution Takes a Leap Forward on June 18, 1993

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 NEWS RELEASE NO. 931106EAP Contact: Erin Burns IANEWS RELEASE NO. 93/110EAP External Affairs - EAPVP Tel: (202) 458-2210 CHINA'S GRAIN DISTRIBUTION TAKES A LEAP FORWARD Washington, D.C., June 18, 1993 --- A $990 million program will considerably improve China's grain distribution system. The program will also accelerate policy reforms in the grain sector, especially those promoting price liberal- ization and market responsiveness. The World Bank yesterday approved $490 million in financing to support the initiative, with the rest being provided by China's central and local Government. The grain distribution and marketing project will revolutionize the transport of grain in China by shifting from bag to bulk handling. World Bank support consists of a $325 million loan and an International Development Association (IDA) credit of $165 million. IDA is the Bank affiliate for concessionary lending. Agricultural reform in China since 1978 has caused grain production to increase at twice the rate of population growth. But the rising productivity has not been matched by improvements in distribution and marketing and the grain distribution system, which relies on out-moded equipment and packaging, is being overwhelmed by supply. A large share of China's surplus grain is stored on open platforms and covered only with tarpaulins, in some cases spoiling before it reaches its destination. According to project task manager Alan Piazza, of the World Bank, about six percent of grain production is lost each year in shipping between production areas and consumers. The Bank supported project aims to cut this loss by up to half, saving half a million tons of grain a year. What normally takes decades will happen in six years Investments in distribution and transport infrastructure will be made in the Northeast and Southwest of China and in the Yangtze River and Beijing areas, all of which are important grain production and/or consumption centers. Five major grain port terminals and about 60 intermediate and 300 primary grain depots will be upgraded and equipped. The project will also provide over 2,400 bulk rail wagons and bulk trucks. According to Mr. Piazza, these improvements will accomplish for a large share of China's grain trade, in six years "what takes most countries decades and decades' to achieve. In,all, the project will increase the amount of grain moved in bulk from about 5 million tons today, to 19 million tons in 2000. A National Grain Economic Information Center will also be established to monitor grain information country-wide so that distribution can be tailored to meet regional shortages or surpluses. -2- The second major thrust of the project is to support continuing policy reform in the grain sector through technical assistance, with the aim of promoting its commercialization. In the last two years, China has implemented dramatic reforms in the sector, increasing the price of urban retail grain for the first time in three decades to roughly free market prices. In April, 1993, near complete grain price deregulation was extended to four-fifths of the country. As part of this effort, two wholesale grain markets will be developed into futures markets with prices determined by market forces. Bank financing will provide computer and telecommunications equipment, allowing instant communication of price and quantity information in other grain markets. The Government is providing $300 million in project financing, while provincial and local governments and enterprises are providing the rest. The Bank loan is extended for 20 years, with five years of grace, at the Bank's standard variable interest rate, currently 7.43 percent. The IDA credit is on standard IDA terms. Note: Money figures are expressed in U.S. dollar equivalent.