China - Second National Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6842-CHA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN FOR $400 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SECOND NATIONAL HIGHWAY PROJECT November 12, 1996 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 authorizatioR. CURRENCY EQUIVALENTS (as of November 1996) Currency Unit = Yuan (Y) $1.00 = Y 8.3 Y 1.00 = $0.120 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS B-O-T - Build-Operate-Transfer EAP - Environmental Action Plan EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return GPCD - Guangdong Provincial Communications Department GTE - Gantang-Taihe Expressway HPCD - Hunan Provincial Communications Department ICB - International Competitive Bidding IRP - Interconnecting Road Program Jingzhu - Beijing-Zhuhai Expressway LLH - Loudi-Lianyuan Highway MOC - Ministry of Communication NCB - National Competitive Bidding NH - National Highway NTHS - National Trunk Highway System RAP - Resettlement Action Plan XGE - Xiaotang-Gantang Expressway XLE - Xiantang-Leiyang Expressway XZH - Xiangtan-Zhuzhou Highway FISCAL YEAR January 1 - December 31 Vice President (Acting) Nicholas C. Hope, EAP Director Nicholas C. Hope, EA2 Division Chief Richard Scurfield, EA2IN Staff Member Alfred Nickesen, EA2IN FOR OFFICIAL USE ONLY CHINA SECOND NATIONAL HIGHWAY PROJECT LOAN AND PROJECT SUMMARY Borrower: People's Republic of China Beneficiary: Hunan and Guangdong Provinces Poverty Category: Not applicable Amount: $400 million Terms: 20 years, including 5 years of grace, at the standard interest rate for LIBOR-based US dollar single currency loans Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver Financing Plan: See Schedule A Economic Rate of Return: 22.4 percent for the project overall 22.1 percent for the two Bank-financed expressway sections 19.6 percent for the Guangzhou-Changsha corridor Staff Appraisal Report Report No. 15428-CHA Maps: IBRD 27557, 27558 Project ID Number: CN-PE-3654 Ts document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed widiout World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SECOND NATIONAL HIGHWAY PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to the People's Republic of China for $400 million to help finance a Second National Highway Project. The loan would be a US dollar loan at the standard interest rate for LIBOR-based single currency loans, with a maturity of 20 years, including five years of grace. The proceeds of the Bank loan would be made available to Hunan and Guangdong Provinces on the same terms. Hunan and Guangdong Provinces would bear the foreign exchange risk. 2. Country and Sector Background. China's economic development since the opening of its economy in the late 1970s has resulted in a 9.5 percent average annual rate of economic growth. Key facets of this growth are rapidly increasing domestic and foreign trade as well as increasing personal mobility and consumption of energy. These, in turn, have caused the demand for transport to surge. Supply capacity, however, is constrained, and this is now being recognized as one of the most serious bottlenecks to future economic growth and efficiency. In particular, motorization is growing rapidly, but road transport, for historical reasons, has not been widely developed in much of China outside its cities. The road network ranks among the sparsest in the world relative to geographic area or population and is quite unsafe. 3. At the central level, the basic strategy is to develop a National Trunk Highway System (NTHS). The Ministry of Communications (MOC) is in charge of planning the NTHS, consisting of 12 interprovincial trunk expressways, with a total length of some 30,000 km and connecting 95 major Chinese cities. Initially, priority is being given to two North-South and two East-West corridors ("two verticals and two horizontals"), and the highest priority is being assigned to the Beijing-Zhuhai (Jingzhu) Expressway, one of the two vertical corridors. This expressway crosses the provinces of Hebei, Henan, Hubei, Hunan, and Guangdong over a distance of approximately 2,500 km and will connect, once completed, Beijing with Guangdong's fast growing Pearl River Delta, and Hong Kong. It is designed as a high-grade, high-performance facility, at a minimum four-lane standard, fully access-controlled, and will be operated throughout as a toll highway. Jingzhu, parts of which would be constructed under the proposed project and subsequent operations being considered, is scheduled for substantial completion by the year 2000. At the provincial/regional level, the strategy is to concentrate on network maintenance and the expansion and improvement of provincial and rural road networks currently totaling more than 1 million km, to provide greater mobility and to stimulate socioeconomic development, particularly in less developed areas. 4. In terms of highway and road transport policy, growing attention is being paid to removing administrative barriers to interprovincial trade and to redefining the Central -2- Government's role in transport, in light of rapid administrative decentralization and growing interest in private sector involvement in highway development and road transport services. Provincial and municipal governments are expected to continue mobilizing most investment resources required, including access to private investment and capital markets, and to seek greater expenditure efficiency through improved highway planning and investment strategies, as well as to modernize maintenance management and improve cost recovery from road users. Local governments are also expected to further the development of road transport services and the road construction industry through deregulation and promotion of competition, access to modern technology and improved management. The Bank has prepared a report (No. 11819- CHA dated February 1994), "CHINA: Highway Development and Management-Issues, Options and Strategies" that provides a strategic framework for action in the foregoing areas and serves as the basis for the Bank Group sector assistance strategy. 5. The Evolving Framework for Private Highway Finance. As part of their highway policy framework, the Chinese authorities are seeking to expand the scope for foreign direct investment in their efforts to remove highway bottlenecks. As the limits of the Government's budgetary resources and of domestic and foreign borrowing are becoming more recognized, China is opening the highway sector to encourage private, in particular foreign, financing to play a much larger role in its development. The participation of the private sector in highway development under Build-Operate-Transfer (B-O-T) schemes is being explored. However, foreign investors and lenders are reluctant to invest in China's highway system due to various policy, legal, regulatory, and institutional issues related to the infrastructure investment environment. The disincentives to invest include: (a) uncertain and complex local/central government approval processes and ambiguous criteria for approvals due to inexplicit policies and regulations; (b) lack of legal convertibility of Renminbi into foreign exchange; (c) the absence of automatic tariff adjustment provisions; (d) the still relatively underdeveloped legal system; (e) uncertain or insufficient creditworthiness of provincial/municipal contracting parties; (f) inexperience of provincial/municipal authorities on B-O-T highway transactions; (g) uncertain traffic volumes, especially toll road projects in inner parts of China where future traffic growth would depend heavily on the economic development of the region and associated government policy; and (h) interconnection risks, especially in relation to competition from potential parallel traffic on untolled public highway projects and other transport modes. 6. To overcome these constraints, the Central Government is formulating a provisional policy and regulatory framework for wholly-foreign-owned pilot B-O-T projects that would include, inter alia, highways up to 80 km length, as well as major highway bridges and tunnels. It intends to promulgate a Provisional Decree for Concession Projects with Foreign Investment governing such pilot B-O-T projects. The Bank is assisting the Government in this task by supporting the preparation of model bidding and standard concession documents and the formulation of procurement procedures for private toll highway projects. Private sponsors of pilot B-O-T highway projects would be selected transparently through competitive bidding. In addition, under -3- one of the future Bank-supported National Highway Projects, it has already been agreed to incorporate a large Yangtze River bridge for financing and development under a pilot B-O-T scheme. It is expected that a series of pilot B-O-T highway projects would enable China to experiment with initiatives to attract private capital, evolving over time as a policy and regulatory framework for privately-financed highways. It is important for the Government to maintain flexibility at this experimental stage in the process, adjusting as necessary the provisional decree and standard concession documents in order to make specific highway projects financeable. 7. Project Context. In highways, the key problem facing China is its comparative neglect of the sector over several decades. To address this, the Government, with Bank and other multi- and bilateral assistance, is giving high priority to developing the system of expressways forming the NTHS. Among other priority corridors, the Bank is already heavily involved in the construction of substantial sections of the Jingzhu expressway, between Beijing and Guangzhou. Under the ongoing National Highway (NH1) Project, two important sections are being built in Hebei and Henan. Under the proposed Second National Highway (NH2) Project, two priority sections in Guangdong and Hunan would be undertaken. Under a future Third National Highway (NH3) Project, now under preparation, several important expressway sections as well as a major Wuhan Yangtze River bridge under an agreed B-O-T arrangement would be undertaken in Hubei Province. A newly-proposed Fourth National Highway (NH4) Project would cover two important expressway sections in Hunan and Hubei that will be linked to the Yangtze bridge B-O-T scheme. These four National Highway Projects constitute a well thought- out and well-balanced series of investment operations that will assist the Government and the concerned provinces in the timely completion of China's highest priority expressway corridor. 8. The proposed NH2 Project is in the central and southern provinces of Guangdong and Hunan, which border the interior and developed coastal regions of China. Elements of the Jingzhu expressway in these two provinces would serve a combined population of nearly 130 million, with traffic volume and vehicle fleets which are fast-growing and with demographic features common to both provinces. The Jingzhu expressway in Hunan Province has a total length of 532 km and consists of four distinct sections: Tucheng (at Hubei border) to Changsha, 183 km, which is proposed for Bank financing under the NH4 Project; Changsha to Xiangtan, 45 km, which is presently being constructed through Asian Development Bank financing; Xiangtan to Leiyang Expressway (XLE), 169 km, which would be financed by the Bank under the NH2 Project; and Leiyang to Xiaotang Expressway at the Guangdong border, 135 km, which will be financed through a loan from the Japanese Export-Import Bank. On the Guangdong side, Bank funding of the Xiaotang-Gantang Expressway (XGE), 109 km, under the NH2 Project, and financing by Guangdong Province of the Gantang-Taihe Expressway, 199 km, would connect the Jingzhu expressway to Guangzhou's northern ringroad. From there, an expressway to Shenzhen has already been completed while an expressway to Zhuhai is under construction. -4- 9. Guangdong Province, located on the South China Sea in southeastern China, has a population of about 67 million covering an area of 178,000 km2. Topographically, Guangdong is mountainous in the north, with a plain in the south. The capital is Guangzhou. The astounding economic growth of the Province, at about 20 percent a year since 1980, is mirrored in an average 20 percent a year increase in the vehicle fleet during that period. The highway network in Guangdong comprises some 83,000 kin, of which only about 10 percent of the total include expressways, and Class I and II roads. Between 1981 and 1994, the road network grew in length by only about 3 percent per year. Hunan Province, situated in the middle reaches of the Yangtze River in south central China, has a total area of 210,000 kin2 and a population in 1995 of 63.0 million. Its capital is Changsha. The provincial economy has grown by an average 9 percent per year since 1980 while the vehicle fleet grew by an average 11 percent per year. The highway network totaling some 58,800 km largely comprises lower class, unpaved roads. 10. Project Objectives. The proposed project would be the second in the series of NH1-NH2-NH3-NH4 projects for the Jingzhu expressway in Guangdong, Hunan, Hubei, Henan, and Hebei Provinces. It would build on its predecessor NHI and would precede NH3 by about one year and NH4 by about two years. All four projects in the series would support an integrated approach to expressway corridor development, with each of the four operations contributing selected priority sections which would gradually develop into a full corridor system. The specific objectives of the NH2 project would be to: (a) relieve road transport congestion and improve the integration of interregional trade and commerce between Hunan and Guangdong by assisting in the development of two key sections of the NTHS in the principal North-South transport corridor; (b) strengthen institutional capacity at the Hunan and Guangdong Provincial Communications Departments and related institutions, through provision of training, technical assistance and equipment, in planning, design, construction, operation and maintenance of the highway networks; (c) develop a new framework for the commercialization and corporatization of provincial expressway companies, through execution of an innovative study; and (d) increase road safety, through technical assistance and black spot improvement. 11. Monitoring of Project Performance and Impact. Project performance and its impact in relation to the project's objectives would be monitored periodically. The monitoring would focus on: the progress of the project activities indicated by the short- and medium-term project targets, such as percent of the length of road constructed, institutional strengthening (training achieved), and quality (safety initiatives introduced, environmental requirements met). 12. Project Components. This two-province highway project would comprise: (a) Construction of the (i) Xiangtan to Leiyang Expressway (XLE), a 169-km divided, four-lane, access-controlled toll highway in southern Hunan, and (ii) Xiaotang to Gantang Expressway (XGE), a 109-km divided, four-lane, access-controlled toll highway in northem Guangdong. The works would include construction of administration, service and maintenance facilities -5- as well as the supply and installation of electrical, electronic and mechanical (E&M) equipment for tolling, telecommunication, traffic monitoring, and lighting of interchanges, toll plazas and service areas; (b) Interconnecting Roads Programs (IRPs) in (i) Hunan, consisting of new construction and upgrading of 5 roads, with a total length of 39 kin, including a new 16-km divided, four-lane, class I Xiangtan-Zhuzhou Highway (XZH), and in (ii) Guangdong, consisting of new construction and upgrading of 10 short roads, with a total length of 2 km; (c) Construction of the Loudi-Lianyuan Highway (LLH), an auto-only, access-controlled, class II connecting road of 60 km length; (d) Construction supervision services for the expressways and the Interconnecting Roads Programs; (e) Studies/technical assistance in (i) highway maintenance management in Hunan, (ii) expressway commercialization and corporatization in Hunan; (iii) transport and economic integration in Guangdong; and (iv) expressway safety in Guangdong and Hunan; (f) Staff training programs in Hunan and Guangdong, covering all aspects of highway planning, design, construction, operation, finance and maintenance; and (g) Equipment for: (i) control of construction quality and monitoring of the environment; (ii) operation and maintenance of XLE and XGE after their completion; (iii) maintenance of the provincial road network and road data base and pavement management system in Hunan. 13. Project Cost and Financing. The total project cost is estimated to be $1,132.8 million equivalent, excluding loan commitment charges and interest during construction. Project financing would be as follows: $155.1 million (or 14 percent of total project cost) from MOC; $202.9 million (18 percent) from Hunan; $374.9 million (or 33 percent) from Guangdong, and $400 million (or 35 percent) from the Bank. MOC's funding would be restricted to the two expressways. The Bank loan, of which $200 million would be for Hunan and $200 million for Guangdong, would finance about 93 percent of the project's foreign exchange cost. To accelerate project startup, retroactive financing in an aggregate amount of $20.4 million, or 5 percent of the loan amount, would be applied to expenditures made after June 30, 1996, for consultants for construction supervision of XLE and XGE, laboratory equipment for joint local/foreign supervision teams in Hunan and Guangdong, and construction of the Xiangtan-Leiyang expressway and Xiangtan-Zhuzhou highway. The project's cost and financing plan are shown in Schedule A. 14. Project Implementation. The Guangdong Provincial Communication Department (GPCD) and the Hunan Provincial Communication Department (HPCD) would have overall responsibilities for implementation of their respective project parts. -6- XLE, XGE and LLH would be constructed under 26 contract sections to be awarded following international competitive bidding (ICB) procedures. All contractors for these sections would be prequalified. National competitive bidding (NCB) procedures acceptable to the Bank would be used for all interconnecting roads including XZH, and for service areas, toll plazas, as well as administration and maintenance buildings along XLE and XGE. Construction supervision would be provided by two joint international/local supervision teams, independently for XLE and XGE. The project implementation arrangements as proposed in the Project Implementation Plans are satisfactory. The project would be implemented during the period 1997-2002. Amounts and methods of procurement and disbursements, and the disbursement schedule are shown in Schedule B. Project monitoring indicators and a timetable of key project processing events are provided in Schedules C and D, respectively. Schedules E and F show the status of Bank Group operations in China and "China-at-a-Glance" tables. The Staff Appraisal Report, No. 15428-CHA dated November 12, 1996, is being distributed separately. 15. Project Sustainability. China has a good record in the sustainability of its highway investments and Guangdong and Hunan Provinces are no exception to this achievement. The sustainability of the project's physical investments is dependent on the quality of the initial construction and adequate funding for future routine and periodic maintenance. The use of two independent construction supervision teams comprising international and domestic experts, combined with up-front construction supervision training and regular Bank supervision missions, will help ensure quality control. To maintain the new expressways, some of the funds collected from road users in the form of tolls will be earmarked for routine and periodic maintenance. Maintenance of other project roads would be funded by revenues from user charges (primarily road maintenance fees collected by provincial highway authorities). Institutional sustainability is also likely. Both Guangdong and Hunan have strong provincial highway organizations, which are committed to further improving the capabilities of their staff through the project's technical assistance and training programs. GPCD and HPCD took the lead in designing their programs, which should ensure the transfer of skills envisioned. 16. Rationale for Bank Involvement. The proposed project is consistent with the Bank's Country Assistance Strategy for China, presented to the Board on June 1, 1995, and the Progress Report of March 26, 1996, which supports China's need to rapidly modernize and expand its infrastructure including the highway system. By helping the Government to plan and build the NTHS, of which the Jingzhu expressway is a key element, the Bank supports this essential long-term solution to the serious transport problems facing China, removing infrastructure bottlenecks, facilitating interprovincial trade, and promoting long-distance road traffic. This would help arrest a growing regionalism while furthering the liberalization, facilitation, and cost reduction of transport-key requirements for market-oriented reforms to succeed. Early completion of the expressway corridor between Changsha and Guangzhou would be vital to the future economic development of Hunan Province since this would open up this inland province -7- for much needed increases in interprovincial trade with fast-growing Guangdong and Hong Kong and help realize the full economic benefits from large-scale expressway development. The transport and economic integration study for the Hong Kong- Guangzhou-Changsha corridor, by focusing on northern Guangdong and southern Hunan, would help integrate these yet underdeveloped rural areas into the fast-growing economies of the Pearl River Delta and Hong Kong. 17. Further to the basic objective of system integration, the Bank would also give priority to the improvement of interconnecting roads at all interchanges of the project expressways. The NH2 project would thus help to counter a tendency to confine the development of the NTHS to the expressways themselves, benefiting long-distance, end- to-end traffic and seriously limiting any sharing in the project benefits by the area alongside the expressway. Guangdong is already implementing a substantial IRP in the influence area of XGE, comprising the upgrading and improvement of 10 national, provincial and county roads, with a total length of 240 km. This IRP is in part financed by the Bank-supported Guangdong Provincial Highway Project (Loan 3530-CHA) and in part funded through Guangdong's own highway resources. The 10 roads under the IRP are already being improved for future linkage to the interchanges of XGE. 18. Bank support is also justified by project assistance to institutional development, which, besides the provision of training and equipment, would include studies on expressway commercialization and corporatization, and highway maintenance management. This would support the introduction of market principles and mechanisms in highway financing, operation, management and maintenance. Bank involvement is also expected to benefit the design and quality of construction of expressways as well as road traffic safety. NH2 would additionally foster improved practices in the areas of environment, land acquisition and resettlement of project-affected people. 19. Lessons Learned from Past Operations in the Sector. The Bank has accumulated substantial experience through the preparation and implementation of 15 highway projects in China, four of which have been closed. While the overall performance of highway projects is by and large satisfactory, some problems have occurred, including inadequate quality of construction, cost overruns and a late start in the engineering design and procurement of traffic engineering facilities, which have delayed completion of some projects. Preparation of the proposed NH2 project has specifically addressed the above issues. The detailed engineering designs and bid documents for the project expressways are being reviewed by international experts, and construction will be supervised by two joint international/local consulting teams, with the local teams receiving both formal (in China and abroad) and on-the-job training in supervision of construction activities and environmental aspects of road development. The conceptual designs of the traffic engineering facilities have already been completed and approved by MOC. 20. Several of the most important lessons learned in implementation of highway projects worldwide concern road maintenance. Bank policy papers in 1979 and 1988 underscored the fact that neglect of road maintenance can ultimately result in very high -8- costs to restore infrastructure, and that new road construction must be balanced with the need for road maintenance. Previously, this was not an issue in China-adequate funds were being set aside for this purpose and maintenance was adequately carried out. However, with the expansion of the NTHS (with its high costs), the rapid increase in traffic volumes, and the trend toward using larger trucks with heavier axle loads, concern is growing about the accelerating maintenance requirements in the future. An analysis of the sources and uses of highway funds during the next five years in Guangdong and Hunan revealed that the two project provinces would be able to meet their highway expenditure plans. 21. The Bank's recent, albeit limited, experience with the operation and management of tolled expressways in China indicates the need for improvement in this area. The proposed project therefore provides training for staff and equipment for efficient and safe operation and maintenance of the project's high-grade highways. Moreover, the project provinces would benefit from the general results of high-grade highway commercialization and corporatization studies that will be undertaken as part of the NH2 and NH3 projects in Hunan and Hubei, respectively. Limited experience with highway safety programs in China has pointed to the difficulty of their implementation due to poor coordination between the traffic police and the highway departments. The proposed project addresses this problem at least partially by focusing on expressway safety which, in view of the rapid expansion of the expressway network in Guangdong and Hunan, is becoming a serious problem. 22. Experience in the area of land acquisition and resettlement has generally been satisfactory. However, the lesson has been that the Bank should make its requirements well known to the Chinese agencies at an early stage in the preparation of a new project. Experience in the environmental area in China has generally been favorable; however, more attention should be paid to environmental supervision and monitoring during construction, and to training of personnel. The resettlement and environmental aspects of the project were properly addressed throughout preparation, resulting in specific environmental plans for the design, construction and operation phases of the project as well as in resettlement action plans. Both plans would be monitored throughout implementation. Moreover, the proposed project would provide equipment for environmental supervision and monitoring as well as training of staff. 23. Environmental Aspects. The two expressways and two major interconnecting roads are classified as category A from an environmental perspective. Their Environmental Impact Assessments (EIAs) were prepared, and together with their Environmental Action Plans (EAPs), reviewed by the Bank and found to be satisfactory. The Bank also reviewed and found satisfactory the basic policies, planning proposals and institutional arrangements used in the preparation of all EIAs and EAPs. The EIAs indicate that the proposed alignments for the high-grade highways will not adversely affect ecologically-sensitive areas and, provided that the EAPs are implemented, the construction and operation of the highways should have no adverse impacts on the environment. In both Hunan and Guangdong, major environmental impacts during construction will include noise and dust, alteration of hydrological regimes, soil erosion, -9- interference with local traffic, impact on local ecology, and irrigation systems. Of these impacts, noise, dust and soil erosion will be the most serious. 24. Traffic noise, vehicle exhaust, soil erosion and water pollution from service areas were identified as the major adverse impacts during the operation period. The EAPs specify the appropriate mitigation measures, environmental monitoring plans, institutional arrangements, training, equipment requirements and budget needs for their implementation to mitigate the environmental impacts. Major mitigation measures include selection of appropriate alignments, proper design of overpasses and underpasses to minimize local traffic and social disruptions, optimization of earth works to minimize the impacts of borrow areas and material hauling, use of water sprinklers to reduce dust, and construction of noise barriers to reduce traffic noise. The project will also strengthen vehicle emission inspection and promote better vehicle maintenance facilities to reduce air pollution. The detailed engineering design and technical specification for highways incorporate appropriate measures to protect the environment. 25. Land Acquisition and Resettlement Aspects. Resettlement Action Plans (RAPs) have been prepared for the project expressways by the resettlement offices of the Guangdong Provincial Freeway Company and Hunan Provincial Expressway Construction and Development Corporation. These RAPs are based on the National Resettlement Policy of China and the Bank's Operational Directive 4.30 on Involuntary Resettlement, and are satisfactory. The main objective of the resettlement program is to improve the standards of living of the project-affected persons above the levels before resettlement, or at least to restore them. 26. Land acquisition for the project will have an adverse effect on 39,167 persons in two provinces. Overall, 8,239 persons will need to relocate their houses, while another 30,926 will lose land only, of whom 1,433 would be transferred from agriculture to enterprise employment due to limited land availability. In Guangdong, 14 enterprises will be removed due to the project, affecting the jobs of 354 employees. The enterprises, which will be reconstructed, will continue employing their workers and the remaining workers will be placed in comparable employment by the local resettlement organizations. Lost assets, including housing, will be compensated at replacement value. Resettlement sites for housing will be provided in the same village and in a location close to the original housing sites. If arable land is available, those losing land will be compensated with equal size plots or they will be transferred to non-agricultural activities such as enterprise employment, based on their skills, and receive rehabilitation benefits during the transition. During implementation, resettlement will be monitored by independent monitoring organizations, which are already appointed and have begun their work. Standards of living of the affected population will be monitored through structured surveys after the completion of resettlement. 27. Economic Evaluation. The major quantifiable benefits of the project comprise the reductions in vehicle operating costs and time costs. The new expressways between Xiangtan and Leiyang in Hunan and Xiaotang and Gantang in Guangdong will have shorter lengths, improved pavement surface conditions and riding comfort, an improved - 10- geometry, reduced traffic interference, and better safety standards than the existing roads. Therefore, most of the long distance traffic and some of the local traffic is expected to diverge from the existing roads to the new expressways. Since many road users will choose the expressways, there will also be a reduction in congestion levels on the existing roads. Thus, those who continue to use the existing roads will also benefit in the form of time savings due to the resulting higher travel speeds allowed on the existing roads. Other quantified project benefits are traffic that will be generated on the expressways as a result of the lowering of transport costs. The estimated economic internal rate of return (EIRR) is 26.3 percent for XLE (169 km) in Hunan; 18.1 percent for XGE (110 km) in Guangdong; and 19.6 percent for the entire expressway corridor between Changsha and Guangzhou, a distance of some 659 km. Separate economic evaluations for LLH resulted in an EIRR of 20.7 percent and for XZH of 47.0 percent. The EIRR for the overall project is 22.4 percent. 28. Risks and Actions. The proposed Bank loan, together with secured funding from MOC, Hunan and Guangdong would enable the completion of two critical sections of Jingzhu expressway. There would be no major risks associated with the Bank-financed expressways. Risks related to construction quality, cost overruns, implementation delays, insufficient or untimely maintenance of highways, and ineffective highway safety programs were identified under the Lessons Learned. Project preparation has focused on the mitigation of risks specific to this project or risks identified in other Bank-financed highway projects. Project preparation has incorporated specific lessons from Bank projects in China and has involved MOC for assistance in technical matters and project formulation. International consultants have also been involved in the design of the expressways and road safety components and in the preparation of technical specifications. 29. Bank-wide experience also shows that there are risks of overly optimistic estimates of traffic growth and diversion to the project roads, key assumptions in estimating project benefits. The economic evaluation for this project has considered scenarios with low traffic growth, low diversion of traffic, and cost overruns. 30. Risk Analysis. A risk analysis for the Bank-financed expressway segments and for the entire corridor was undertaken using the @RISK software. For this analysis the uncertainty for the following inputs was defined using a triangle distribution: (a) the construction costs, (b) the diverted traffic from the existing roads to the expressways, (c) the generated traffic, and (d) the traffic growth rate. For the construction costs, the most likely value was set to the estimated construction costs, the most likely minimum value was set to be 90 percent of the estimated construction costs, and the most likely maximum value was set to be 140 percent of the estimated construction costs. For the other three traffic related inputs, the most likely value was set to be the estimated values, the most likely minimum value was set to be 60 percent of the estimated values, and the most likely maximum value was set to be 110 percent of the estimated values. 31. With this information, the @RISK software evaluated 400 what-if scenarios, varying the construction costs and traffic assumptions accordingly to the defined input - 11 - probability distributions, yielding an estimated EIRR for each what-if scenario. None of the evaluated sections obtained an EIRR below 12 percent. The mean EIRR of the segments to be financed by the Bank is 22.7 percent for the Hunan segment and 15.1 percent for the Guangdong segment yielding a combined mean EIRR of 18.9 percent. Compared with the segment in Hunan, the segment in Guangdong, has higher construction costs, lower traffic, and a lower traffic diversion rate. The mean EIRR for the entire corridor is 16.5 percent. The project thus remains economically viable over a wide variety of scenarios and with a wide range of variations in specific costs and benefits. 32. Agreed Actions. During negotiations, agreement was reached with the Borrower regarding the onlending arrangements for the proceeds of the loan to Guangdong and Hunan Provinces. Assurances were obtained from Guangdong and Hunan concerning: (a) the undertaking of studies on highway maintenance management and expressway commercialization and corporatization in Hunan, and on expressway safety and economic and transport integration in Guangdong; (b) the implementation of staff training programs in Hunan and Guangdong; (c) the execution of EAPs in Hunan and Guangdong satisfactory to the Bank; (d) the execution of RAPs in Hunan and Guangdong satisfactory to the Bank; (e) monitoring of the effectiveness and socioeconomic impact of resettlement in both provinces; (f) the submittal of annual monitoring reports by Hunan and Guangdong to ascertain conformity with the implementation and developmental impact objectives in the course of project execution and operation; (g) the auditing of project accounts and special accounts in Hunan and Guangdong, including statements of expenditures, by independent auditors; and (h) submission of recommendations regarding the rationale for setting appropriate toll levels for XLE in Hunan and XGE in Guangdong. 33. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and I recommend that the Executive Directors approve it, with retroactive financing in an aggregate amount not exceeding $20.4 million equivalent. James D. Wolfensohn President by: Gautam S. Kaji Attachments Washington, D.C. November 12, 1996 - 12 - Schedule A CHINA SECOND NATIONAL HIGHWAY PROJECT ESTIMATED COSTS AND FINANCING PLAN ($ million) Local Foreign Total Estimated Costs Expressway: Civil Works 416.5 264.7 681.2 E&M 19.6 48.2 67.8 Interconnecting Roads 12.1 10.3 22.4 Other Roads 21.2 14.1 35.3 Supervision 13.0 5.4 18.4 Equipment 4.5 14.5 19.0 Training 1.3 2.0 3.2 TA/Studies 0.7 0.7 1.3 Total Base Cost 488.8 359.9 848.6 Physical Contingencies 47.4 34.9 82.3 Price Contingencies 110.1 36.8 146.9 Land Acquisition and Resettlement 55.1 0.0 55.1 Total Financing Required 701.3 431.6 1,132.8 Financing Plan IBRD loan 0.0 400.0 400.0 Central Government 155.1 0.0 155.1 Provincial Government 546.2 31.6 577.7 Total Financing 701.3 431.6 1,132.8 Note: Columns may not add exactly due to rounding of figures. - 13 - Schedule B Page 1 of 2 CHINA SECOND NATIONAL HIGHWAY PROJECT SUMMARY OF PROPOSED PROCUREMENT ARRANGEMENTS ($.million) Procurement method ICB NCB Other /a NBF /b Total Cost Works Expressway Civil Works /d 812.0 53.2 865.2 (269.8) (17.4) (287.2) Expressway E & M Works 86.2 86.2 (56.8) (56.8) Interconnecting roads 28.4 28.4 (11.8) (11.8) Other Roads 44.7 44.7 (18.8) (18.8) Construction Supervision 23.4 23.4 (5.1) (5.1) Equipment 16.1 8.0 24.1 (11.8) (5.3) (17.1) Consultants and Training /c Training 4.1 4.1 (2.4) (2.4) Technical Assistance/Studies 1.7 1.7 (0.7) (0.7) Land Acquisition and Resettlement 55.1 55.1 (0.0) (0.0) Total 959.0 81.6 37.1 55.1 1,132.8 (357.2) (29.2) (13.5) (0.0) (400.0) /a Other includes national competitive bidding and international shopping and limited international bidding, and consultants and training. /b NBF: Not Bank-financed. /c Selection of consultants according to the Bank's guidelines. /d Expressway civil works contracts in Guangdong include several short sections of interconnecting roads totaling about 2 km in the amount of $1.3 million. Notes: (1) Figures in parentheses represent the amounts financed by the Bank Group. (2) All figures are rounded and include estimated physical and price contingencies but exclude the cost of land acquisition and resettlement, which is shown separately. - 14 - Schedule B Page 2 of 2 DISBURSEMENTS Category Amount of the Percent of Expenditures to be Financed Loan Allocated ($ million) Civil works Guangdong expressway section 129.7 34% of total expenditures Hunan expressway section 134.6 48% of total expenditures Hunan interconnecting roads 10.0 48% of total expenditures Hunan other roads 16.0 48% of total expenditures Electrical and mechanical works Guangdong E&M works 39.3 80% of total expenditures Hunan E&M works 9.0 80% of total expenditures Construction supervision Guangdong supervision 2.1 100% Hunan supervision 2.2 100% Equipment Guangdong equipment 7.7 100% of foreign expenditures for directly Hunan equipment 6.8 imported equipment or 100% of local expenditures (ex-factory) for locally manu- factured equipment and 75% of local expen- ditures for other items procured locally Guangdong training 1.0 100% Guangdong TA/Studies 0.2 100% Hunan training 1.0 100% Hunan TA/Studies 0.4 100% Guangdong unallocated 20.0 Hunan unallocated 20.0 Total 400.0 ESTIMATED DISBURSEMENTS ($ million) IBRD 1997 1998 1999 2000 2001 2002 Annual 20 60 100 100 80 40 Cumulative 20 80 180 280 360 400 -15- Schedule C Page 1 of 2 CHINA SECOND NATIONAL HIGHWAY PROJECT DEVELOPMENT INDICATORS (HUNAN COMPONENT) 2002 Benchmark Project Monitoring 1999 (1st year of 2005 Objectives Indicators 1996 Baseline Benchmark operation) Benchmark Development Reduced traffic Traffic volume of road congestion on Section A-B = 12,700 18,400 4,800 6,800 infrastructure roads parallel to Section B-C= 10,100 14,700 3,800 5,500 the proposed road Section C-D = 11,100 16,200 4,200 6,000 Section D-E = 8,900 12,900 3,300 4,800 Increased average Travel speed (km/hr) travel speed on Section A-B = 45 40 55 55 roads parallel to Section B-C = 50 45 60 60 the proposed road Section C-D = 45 40 55 55 Section D-E = 50 45 60 60 Increase Reduced number Number of accidents Number of Number of Number of highway of traffic accidents with fatalities per accidents accidents accidents safety involving number of vehicles: with with with fatalities: 20/10,000 vehicles fatalities per fatalities per fatalities per number of number of number of vehicles: vehicles: vehicles: 18/10,000 12/10,000 10/10,000 vehicles vehicles vehicles Note: A-B: Changsha-Majiahe; B-C: Majiahe-Xiantang; C-D: Xiantang-Hongshi; D-E: Hongshi-Leiyang. - 16 - Schedule C Page 2 of 2 DEVELOPMENT INDICATORS (GUANGDONG COMPONENT) 2002 Benchmark Project Monitoring 1999 (1st year of 2005 Objectives Indicators 1996 Baseline Benchmark operation) Benchmark Development Reduced traffic Traffic volume of road congestion on Section A-B = 7,500 8,000 3,000 3,000 infrastructure roads parallel to Section B-C = 7,500 8,000 2,000 2,000 the proposed road Section C-D = 7,500 8,000 1,000 1,000 Increased average Travel speed (km/hr) travel speed on Section A-B = 50 40 60 60 roads parallel to Section B-C = 40 35 50 50 the proposed road Section C-D = 40 35 50 50 Increase Reduced number Number of accidents Number of Number of Number of highway safety of traffic accidents with fatalities per accidents accidents accidents involving fatalities: number of vehicles: with with with 25/10,000 vehicles fatalities per fatalities per fatalities per number of number of number of vehicles: vehicles: vehicles: 20/10,000 10/10,000 10/10,000 vehicles vehicles vehicles Note: A-B: Xiaotang-Daqiao; B-C: Daqiao-Ruyuan, C-D: Ruyuan-Gantang. - 17 - Schedule D CHINA SECOND NATIONAL HIGHWAY PROJECT TIMETABLE OF KEY PROJECT PROCESSING EVENTS (a) Time taken to prepare: 24 months (identification to Board presentation) (b) Prepared by: Hunan and Guangdong Provincial Communications Departments (c) First Bank mission: November 1994 (d) Appraisal mission departure: April 1996 (e) Negotiations: November 1996 (f) Planned date of effectiveness: March 1997 (g) List of relevant PCRs and PPARs: PCR 10749, June 29, 1992, Highway Project, ICR 15700, May 15,1996, Shaanxi Provincial Highway Project The project was prepared and appraised by Alfred Nickesen (Transport Specialist, Task Manager), Jean-Marie Braun (Highway Engineer, Consultant), Ms. Alla Weinstein (Transport Specialist), Rodrigo Archondo (Transport Economist), Dick Jonsson (Institutional/Traffic Safety/Training Specialist, Consultant), Katsunori Suzuki and Anil Somani (Environmental Specialists) and Tosun Aricanli (Resettlement Specialist). Ms. Tomoko Matsukawa (Project Finance Specialist) and Mitchel Stanfield (Private Infrastructure Consultant) prepared the discussion of private highway finance in China. Mr. Liu E of the Bank's Resident Mission in China also contributed to the preparation of the project. The peer reviewers for the project were Jose Irigoyen (Engineering), Anttie Talvitie (Transport Economics), Stein Lundebye (Institutional Strengthening, Traffic Safety and Training), and Jeff Ruster (Private Highway Finance). Schedule E STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINA Page 1 of 3 A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1996) Loan/ Amount (US$ million) Credit (net of cancellations) Number FY Borrower Purpose Bank IDA Undisb.(a) 47 loans and 51 credits have been disbursed 4,596.8 3,432.2 of which SECAL: 2967/1932 88 PRC Rural Sector Adj. 200.0 93.2 - Active Loans 1885 88 PRC Northern Irrigation - 103.0 1.4 2951/1917 88 PRC Sichuan Highway 75.0 (50.0)(b) 0.8 2968 88 PRC Railway IV 200.0 - 2.8 1997 89 PRC Shaanxi Prov. Agriculture - 106.0 0.2 2009 89 PRC Integrated Reg. Health - 52.0 1.2 3022 89 PRC Tianjin Light Industry 154.0 - 5.6 3060/2014 89 PRC Inner Mongolia Railway 70.0 (80.0)(b) 0.8 3066 89 PRC Hubei Phosphate 137.0 - 3.3 3073/2025 89 PRC Shandong Prov Highway 60.0 (50.0)(b) 15.1 2114 90 PRC Vocational & Tech Educ. - 50.0 1.7 2145 90 PRC National Afforestation - 300.0 12.3 2159 90 PRC Hebei Agricultural Dev. - 150.0 5.3 2172 91 PRC Mid-Yangtze Agricultural Dev - 64.0 1.6 3265/2182 91 PRC Rural Credit IV 75.0 200.0 1.4 3274/2186 91 PRC Rural Indust Tech (SPARK) 50.0 64.3 4.4 3286/2201 91 PRC Medium-Sized Cities Dev. 79.4 89.0 6.0 2210 91 PRC Key Studies Development - 131.2 10.8 2219 91 PRC Liaoning Urban Infrastructure - 77.8 4.8 2242 91 PRC Henan Agricul. Dev. - 110.0 15.0 3337/2256 91 PRC Irrig. Agricul Intensif. 147.1 187.9 15.4 3387 92 PRC Ertan Hydroelectric 380.0 - 2.9 2294 92 PRC Tarim Basin - 125.0 12.2 2296 92 PRC Shanghai Metro Transport - 60.0 8.2 3406 92 PRC Railways V 330.0 - 38.3 3412/2305 92 PRC Daguangba Multipurpose 30.0 37.0 4.6 2307 92 PRC Guangdong ADP - 162.0 75.6 3415/2312 92 PRC Beijing Environment 45.0 80.0 43.7 2317 92 PRC Infectious and Endemic Disease Cont. - 129.6 74.9 3433 92 PRC Yanshi Thermal Power 180.0 - 7.5 2336 92 PRC Rural Water Supply and Sanitation - 110.0 27.7 2339 92 PRC Educ. Development in Poor Provs. - 130.0 24.0 3443 92 PRC Regional Cement Industry 82.7 - 12.3 3462 92 PRC Zouxian Thermal Power 310.0 - 37.8 3471 92 PRC Zhejiang Provincial Highway 220.0 - 84.0 2387 92 PRC Tianjin Urban Devt. & Envir. - 100.0 50.4 2391 92 PRC Ship Waste Disposal - 15.0 10.6 2411 93 PRC Sichuan Agricultural Devt. - 147.0 50.5 3515 93 PRC Shuikou Hydroelectric II 100.0 - 47.4 2423 93 PRC Financial Sector TA - 60.0 47.0 3530 93 PRC Guangdong Provincial Transport 240.0 - 57.1 3531 93 PRC Henan Provincial Transport 120.0 - 33.0 2447 93 PRC Ref. Inst'1 and Preinvest. - 50.0 29.4 3552 93 PRC Shanghai Port Rest. and Devt. 124.3 - 15.1 2457 93 PRC Changchun Water Supply & Env. - 120.0 82.7 2462 93 PRC Agriculture Support Services - 115.0 29.4 3560/2463 93 PRC Taihu Basin Flood Control 100.0 100.0 107.6 2471 93 PRC Effective Teaching Services - 100.0 57.2 3572 93 PRC Tianjin Industry II 134.0 - 110.0 3581 93 PRC Railway VI 420.0 - 215.1 3582 93 PRC South Jiangsu Envir. Prot. 250.0 - 71.5 2475 93 PRC Zhejiang Multicities Devt. - 110.0 81.3 3606 93 PRC Tianhuangping Hydroelectric 300.0 - 232.4 3624/2518 93 PRC Grain Distribution 325.0 165.0 456.2 2522 93 PRC Environmental Tech. Assist. - 50.0 30.4 2539 94 PRC Rural Health Workers Devt. - 110.0 76.9 3652 94 PRC Shanghai Metro Transport II 150.0 - 20.0 3681 94 PRC Fujian Provincial Highways 140.0 - 98.1 3687 94 PRC Telecommunications 250.0 - 179.4 2563 94 PRC Second Red Soils Area Devt. - 150.0 72.4 2571 94 PRC Songliao Plain Agric. Devt. - 205.0 113.7 3711 94 PRC Shanghai Environment 160.0 - 134.2 3716 94 PRC Sichuan Gas Devt & Conservatn. 255.0 - 182.3 Schedule E STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINA Page 2 of 3 A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1996) Loan/ Amount (US$ million) Credit (net of cancellations) Number FY Borrower Purpose Bank IDA Undisb.(a) 3718 94 PRC Yangzhou Thermal Power 350.0 - 279.7 B103 94 PRC Yangzhou Thermal Power 57.2 - 56.7 3727 94 PRC Xiaolangdi Multipurpose 460.0 - 209.5 2605 94 PRC Xiaolangdi Resettlement - 110.0 66.6 2616 94 PRC Loess Plateau Watershed Devt. - 150.0 88.7 2623 94 PRC Forest Resource Devt. & Prot. - 200.0 152.1 3748 94 PRC National Highway 380.0 - 234.4 3773/2642 95 PRC Ent. Housing/Soc Sec Reform 275.0 75.0 314.0 3781 95 PRC Liaoning Environment 110.0 - 87.4 3787 95 PRC Xinjiang Prov. Highways 150.0 - 116.4 2651 95 PRC Basic Ed for Poor/Minorities - 100.0 65.6 3788 95 PRC Shenyang Industrial Reform 175.0 - 156.8 2654 95 PRC Economic Law Reform - 10.0 8.7 2655 95 PRC Comp Maternal/Child Health - 90.0 58.1 3846 95 PRC Zhejiang Power Development 400.0 - 370.0 B105 95 PRC Zhejiang Power Development 64.3 - 62.3 3847 95 PRC Technology Development 200.0 - 195.0 3848 95 PRC Sichuan Power Transmission 270.0 - 270.0 3873/2709 95 PRC Fiscal TA 25.0 25.0 45.4 3874/2710 95 PRC Yangtze Basin Water Res Devt 100.0 110.0 146.6 3897 95 PRC Railway VII 400.0 - 400.0 3906/2744 95 PRC Southwest Poverty Reduction 47.5 200.0 215.0 3910 95 PRC Inland Waterways 210.0 - 203.4 3914/2756 95 PRC Iodine Deficiency Dis. Control 7.0 20.0 23.2 3929 96 PRC Shanghai-Zhejiang Highway 260.0 - 219.7 3933 96 PRC Ertan II Hydroelectric 400.0 - 342.0 B106 96 PRC Ertan II Hydroelectric 50.0 - 48.6 2794 96 PRC Disease Prevention - 100.0 92.7 3966/2799 96 PRC Hubei Urban Environment (c) 125.0 25.0 150.0 3967/2800 96 PRC Labor Market Development 10.0 20.0 27.4 3980 96 PRC Henan (Qinbei) Thermal (c) 440.0 - 440.0 3986 96 PRC Second Shaanxi Prov. Highways 210.0 - 210.0 3987 96 PRC Second Shanghai Sewerage 250.0 - 250.0 2831 96 PRC Third Basic Education - 100.0 92.7 2834 96 PRC Shanxi Poverty Alleviation - 100.0 97.1 4001 96 PRC Animal Feed 150.0 - 150.0 4027 96 PRC Second Henan Prov. Highway 210.0 - 210.0 4028/2870 96 PRC Gansu Hexi Corridor 60.0 90.0 149.2 4044/2886 96 PRC Seeds Sector Commercialization (c) 80.0 20.0 100.0 4045 96 PRC Chongqing Ind. Pollution Control (c) 170.0 - 170.0 4055/2892 96 PRC Yunnan Environment (c) 125.0 25.0 150.0 4063/2898 97 PRC Vocational Education Reform (c) 10.0 20.0 20.0 Total 16,395.8 8,914.9 10,014.0 of which has been repaid 1,559.0 42.8 Total now held by Bank and IDA (a) 14,836.8 8,872.1 Amount sold: Of which repaid - - Total Undisbursed 7,635.3 2,378.7 10,014.0 (a) As credits are denominated in SDRs (since IDA Replenishment VI), undisbursed SDR credit balances are converted to dollars at the current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance and total credit amount held indicate a dollar amount greater than the original principal credit amount expressed in dollars. (b) Fully disbursed. (c) Not yet effective. Schedule E Page 3 of 3 B. STATEMENT OF IFC INVESTMENTS (As of September 30, 1996) Loan Equity Syndicate Total FY Borrower Type of Business ---------- (us$ Million) ----------- 85/92 Guangzhou Peugeot Auto Automobile 2.8 4.6 - 7.4 88/ Shenzhen China Bicycle 8.5 3.4 - 11.9 92/94 Bicycles Co. Ltd. Manufacture 89 Crown Electronics Manufacturing 3.9 - - 3.9 93 Shenzhen Tai-Yang PCCP Construction Material 3.8 1.0 - 4.8 93 Yantai Mitsubishi Cement Cement 18.7 2.0 10.0 30.7 94 Dalian Glass Glass 20.5 2.4 40.5 63.4 94 China Walden Investors Venture Capital - 7.5 - 7.5 94 Dynamic Growth Fund Venture Capital - 12.4 - 12.4 94 Plantation Timber Product Timber, Pulp & Paper 10.0 1.0 20.0 31.0 95 Newbridge Investment Venture Capital - 10.0 - 10.0 95 Nantong Wanfu (EEl) Agribusiness 6.3 2.7 - 9.0 95 Dupont Suzhou Polyester Textiles 24.9 3.8 52.0 80.7 96 Nanjing Kumho Tire Co., Lt Motor Vehicles 16.0 3.8 45.5 65.3 96 Weihai Weidongri 4.9 - - 4.9 Total Gross Commitments 342.9 Total Commitments now Held by IFC 167.1 Total Undisbursed 175.8 ,xcel\schedd3 xis Schedule F Page 1 of 2 China at a glance POVERTY and SOCIAL East Low- China Asia Income Development diamond" Population mid-1995 (milons) 1.201 4 1.709 3 188 Life expectancy GNP per capita 1995 (USS) 620 830 460 GNP 1995 ifdflons USS 7449 1.418 1.466 Average annual growth, 1990-96 Poplaton %)1.1 1.3 1 8 GNPGrs Population JW ros Labor force (%e 1.1 1.3 1.9 P primary Most recent estimate (letSt year avadable since 1989) capita enrollment Poverty. headcoui index (% ofpopuldon) 11 Uroan population I% ofalpopuadwo) 30 31 28 Lle expectancy at birth (yea") 6 8 63 Infant mortafly (per 1.000 Me births) 29 36 68 Child malnutrition (% octnildren under 5) 17 17 38 Access to safe water Access to safe waler ( ofpopLdeo) 71 67 66 illiteracy (% ofpopuabon age 15") 19 17 35 Gross pnmary enrollment (% orchool-age populadionj 118 117 105 - China Male 120 120 112 -Low-income group Female 116 116 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1986 1994 1996 Economic ratios' GDP (bilions USS) 160.3 304 9 522.2 6633 Openness of economy Gross domestic investment/GDP 303 378 a2.1 405 Exports ot goods ana non-factor servcesGDP 5 2 9.2 24 0 222 Gross domestic savingaiGOP 30.6 33.1 .40 432 Gross national savingsiGDP 30.6 33 5 44.0 42 9 Current account ba1anceGDP -0 2 -3.9 1.4 2.3 Savings Investment Inirest pa2meymaGDP - 02 07 08 Total debUGOP 5.5 193 17.9 Total debt serviceispons .. 8.3 8.9 9.2 Present value of debt/GDP . 17 1 Present value of dewrlexpons .. 712 - Indebtedness 1975-84 1986-96 1994 1996 1996-04 faverage annual growth) -China GOP 7 7 9 5 11.8 10.2 8.5 GNP per capita 70 8.0 104 8.9 7.7 - Low-ncome group Exports of gooas and nhs 202 13.7 286 18.2 8.6 STRUCTURE of the ECONOMY 1975 1986 1994 1996 Growth rates of output and investeinnt(%) (% of GOP) a Agriculture 32.0 28.4 21.0 20.5 a Industry 42.8 43.1 47.2 48.0 Manufacturing 31.6 35.4 37.0 37.6 Services 25.2 28.5 31.8 31.5 1o Private consumption 61.9 53.7 42.7 47.6 go at 92 93 is General government consumption 7.6 13.2 13.2 9.2 Imports of goods and non-factor services 5.0 13.9 22.0 19.5 - -GOI -GoP (average annual grwth) 1975-84 1986-96 1994 1996 Growthrstes of exports and Imports% Agriculture 5.1 4.1 4.0 4.0 4 Industry 10.0 12.7 17.4 13.0 Manufacturing 13.1 12.3 17.2 13.0 u0 Services 8.7 9.4 8.2 10.1 1s Private consumption 7.5 8.5 5.7 18.9 General government consumption 8.5 7.7 6.6 .. 0o 52 sa *4 es Gross domestic investment 8.9 9.4 12.8 8.4 .15 Imports of goods and non-factor services 24.1 9.2 8.9 10.8 -Exports imports Gross national product 8.5 9.5 11.6 9.9 Note: 1995 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Schedule F Page 2 of 2 China PRICES and GOVERNMENT FINANCE Domestic pices 1975 1985 1994 1996 Infaon (% change) 25 Consumer prices 0.2 9.3 24.1 13.2 Implicit GOP deflator -0.9 10.1 16.6 11.0 is 10 Government finance (% of GOP) Current revenue .. 25.5 12.4 12.3 0 o 52 3 Current budget balance .. 6.7 0.4 0.3 Overall surplus/deficit .. -0.5 -1.6 -1.7 GDP def. CPI TRADE (mr/lons US$) 1976 1986 1994 1996 Export and Import levels (mill. USI) Total exports (fob) .. 27,350 121,038 148,750 iso,oco Food .. 3,803 10,017 12,828 Petroleum .. 7,132 4,061 4,152 1oo,oon Manufactures .. 13,522 101,331 127,638 Total imports (cif) .. 42.252 115,693 132,308 Food .. 1,881 4,996 6,562 s,o Fuel and energy .. 172 4,034 5,244 Capital goods .. 18,694 55,720 55,882 Export price index (1987=100) .. 92 124 130 . Import price index (1987=100) .. 78 122 128 as so a 92 s a a5 Terms of trade (1987=100) .. 117 102 102 DExpoans imports BALANCE of PAYMENTS (millions USS) 1975 1985 1994 1996 Current account balance to GOP rato (%) Exports of goods and non-factor services 7,828 28,163 118,811 147,155 4 Imports of goods and non-factor services 8,097 41,149 111,472 129,279 Resource balance -269 -12,986 7,339 17,876 2 Net factor income 0 932 -1,018 -3,866 Net current transfers 0 171 836 724 Current account balance, 00 01 92 1 4 95 before official transfers -269 -11,883 7,157 14,734 -2 Financing items (net) .. 9,443 23,370 8,266 Changes in net reserves .. 2,440 -30,527 -23,000 Memo: Reserves including gold (mill. US$) .. 16,881 57,794 76,592 Conversion rate (locaV/USS) 1.9 2.9 8.6 8.3 EXTERNAL DEBT and RESOURCE FLOWS (millions USS) 1975 1986 1994 1996 Composition of total debt, 1995 (mill. USI) Total debt outstanding and disbursed .. 16.696 100,536 110.788 G A IBRO .. 498 5,933 7.209 17333 72 IDA .. 431 6,097 7,038 7038 Total debt service .. 2,478 11,135 15,506 2455 IBRD .. 26 679 810 IDA .. 4 50 63 E Composition of net resource flows 15082 Official grants .. 117 332 296 Official creditors .. 1,117 3,117 2,789 Private creditors .. 2,867 8,853 5,394 Foreign direct investment .. 1,659 33,787 38,000 Portfolio equity .. 0 3,915 1,297 World Bank program Commitments .. 1,092 4,077 2,942 A - IBRD E - Bilateral Disbursements .. 565 2,060 2,269 8 - IDA D - oMer multilateral F - Private Principal repayments .. 0 323 364 C - IMF G - Short-term Net flows .. 565 1,736 1,905 Interest payments .. 29 406 509 Net transfers .. 536 1,331 1,396 International Economics Department 7/18/96 Note: The dollar estimates for China's GNP per capita and GOP are taken from the World Development Indicators and are preliminary figures based on an on-going World Bank study of China's GOP. They were calculated to facilitate inter-country comparisons. Official statistics are used as the basis for all other economic analysis contained in this document. IBRD 27557 RUSSIAN FEDERATION KAZAKSTAN T " UZBEKISTAN MONGOLIA sea.nh. KYRGYZ REPUBLIC --,r saa JAPAN Japan TAJIKISTAN DEM. REPsA Hobbo ndOnQOF KOREA BEIJIN D. T. s RER OF b-d- . s yo, d----- - KOREA d. --, Sec - J- p ( h..East China ' *\ 'Seo, For detai WSC seeIBRD 27558 w-. c PA CIFIC Chongln NEPAL ( OCEAN Nanch- CHINA F NATIONAL HIGHWAY I1 (Hunan-Guangdong) PROJECT South Ch,a" MAJOR HIGHWAYS: ...... s Sea Cornpleted i M or Ports en - Under Construction / 8th Five Year Plan (1991-1995) O P,nosce Cap.toIs ONG KON U.K 9th Fve Year Pla- (1996-2000) ® National Captals VIETNAM PHILIPPINES Planned Beyond 2000 Province Boundores NTHS Priority Corridors International Boundaries LAO PEOPLE'S flå --r 0 -e NTHS Longterm Corndors THA DEM. RER I1 THAILAND 1 219sf IE 5 11/15/1996 w Ø m -BIj3151CXbM, •U35T m 1 1 2 113 " 114 Il Th,vopIin2hytl i3.- 1~ C H l N A Th hmap wa- po d by te, h X nNATIONAL HIGHWAY 11 ozdH N A N (HUNAN-GUANGDONG) 2 he lgistoo ny eror y or -, PROJECT ny enore rconce oh scbnr-eHIGHWAY PROJECTS 0 20 40 60 IBRD FINANCING KItOMTERS ANHUI INTERCONNECTING ROADS * INTERCHANGES Jigo •- ADB FINANCING J e LOCAL FINANCING ----- INTERCONNECTING ROADS 31 Ychang H (J B E JEXIM BANK FINANCING H uon B E ha FUTURE 59 kRIVERS S-- MAIN ROADS ~~ 0 4 Huongzhou < aongbng +-- RAILROADS 4 6 0 SELECTED CITIES AND TOWNS O PROVINCE CAPITALS ® NATIONAL CAPITAL (INSET) -30 0 --- PROVINCE BOUNDARIES Xånnrg INTERNATIONAL BOUNDARIES JINSET) Puqi 0 Heno Pme -Dow., 30 kmrr, 3posed luture construcion, Hube t loc Wl m dBancing CL odNobonal Highwoys III, Do- - Hurong, 135 km, roposed fuure construction with World Bank . 1. 111 Nn~onal H,ghwys III, Hrong We,s, 14 5 km, Chi,ingde roposed fubure construction wth World Bank 29 1229- ri-i,ing Noional Highways III, Hurong West Yin- ng River, V5 5 km, proposed future construction with g 26zhou World Bank financing f HNabional Highwas III, Yangtze River crossing, g 5 km, proposed fture conskruchan with BOT financing SHAN U Nat H U{ LNiyang 7Noonol Highways III, Hroog East, 40 5 km, SU N Angsh roposed luture construction with World Bank 283 .S 2B- noncmg ngan I t o Existing expressway, Fu J a a sÄang Proposed fulure construction, donor not identilied oudi SHANPU ZHUNG National Highways IV. Yangtze River-Hunon, q Heninhan 115 km, proosed future contr-chon with i H-gi;I-~ World Bank fnoncmg 1 > 4 SHngshan National Hgkwys IV, HubehaCng h, aout YI"9 XLNG4TNG 180 km, pro osed Future construction with G~N N J World Bank mncmg -27 2 Chongska-Xiongton, 45 km, under construclion Hengycing with ADB finociog HONGSHI PU Notinorl Higkwayrn r , Xiongban-Leiyang, 169 km, GO6NSIHONGSHIy current project with World Book finoncing XINGSHi HOLeiyang Guangdong, 133 km, proposed ulure E8YANG construction, Jex-m Bank linonciog e yngGUANSHI National H1ghwys 1, Hon-Gantang, 110 km, current project with World Bank linancimg Yorgzho XINGSHI Gantang-Guangzhou, future construcion with local finoncimg h1EYANG j j Proposed fulure construclion, donor not ident lied L n Existig main roads g Foshan-Koiping, 80 km, under INSET A c-I-lion with World Book fioneuig GUANGX PINg H D.yu- ON MONGOLIA -'E6OE 252 - EM PLE'5 -Pf KOREA AOB os o DdNGTIANESNgaKO ESHEZHU Y elow IINSETSB S 1P11 GRPSHHIITIESI MErD -mAre,a ol 17 ammopj) East G U A N G D N G cin DONGTIAN' 9 1 3 z 3.-- 3C Th23HNG KONG, U K. < SHEZHU,- Shoog an Gu ro MACAO.,OT -''RUyU2--- 'G nionVIET NAMSut 22 21 EOPLE'S .-7maS lNST Bn TAILNDEP PHIUIPPINES  AIAG ING Report No: P- 6842 CHA Tvpe: MOP