China - North China Plain Agriculture Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3815-CHA STAFF APPRAISAL REPORT CHINA NORTH CHINA PLAIN AGRICULTURE PROJECT May 26, 1982 Projects Department East Asia and Pacific Regional Office 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.  CURRENCY EQUIVALENTS Currency Unit - Yuan (Y) US$1.00 = Y 1.7 (October 1981) Y 1.00 = US$0.59 WEIGHTS AND MEASURES (METRIC SYSTEM) 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 million cubic meters = 810 acre-feet 1 ton = 1,000 kilograms (kg) = 2,205 pounds 1 kilogram (kg) = 2.2 pounds ABBREVIATIONS ABC - Agricultural Bank of China CAAS - Chinese Academy of Agricultural Sciences MCM - Million Cubic Meters MOA - Ministry of Agriculture MWC - Ministry of Water Conservancy PMO - Project Management Office FISCAL YE.AR January 1 - December 31  FOR OFFICIAL USE ONLY CHINA APPRAISAL OF THE NORTH CHINA PLAIN AGRICULTURE PROJECT Table of Contents Page No. 1. BACKGROUND .... . . . . . . . . . . . . . . . . . . . . . . . I Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Agriculture Sector ..e. ..................... . 1 Irrigated Agriculture .... . . . . . . ....... . 4 Support Services ... . . . . . . . . . . . . . ... 4 Past Developments . . . . . . . . . . . . . . . . . . . . . . 7 Development Plan for the 1980s ... . . . . . . . . . . . . . 8 Project Formulation . ...... .. ............. 8 2. THE PROJECT AREAS . . . . . . . . . . . . . . . . . . . . . . . 10 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Climate ..... 10 Soils and Topography 12 Population, Farm Size and Land Tenure . . . . . . . . . . . . 12 Present Status of Irrigation and Drainage . . . . . . . . . . 12 Groundwater . . . . . . . . . . . . . . . 13 Pilot Projects ...14 3. THE PROJECT.. . . . . . ... . 15 Project Description. . . .. 15 Project Works . . . . . . . . . . . . . . . 16 Agricultural Development ....19 Soil and Water Studies . . . . . . . .. . . . . . . . . . . . . 21 North China Plain Agricultural Study . . . . . . . . . . . . . 22 Water Supply and Demand ... .22 Status of Design . .. . . . . . . . . . . . . 24 Implementation Schedule ....24 Cost Estimates ....25 Financing .... .. . . . . . 26 Procurement . . ... ..26 Disbursements ....28 Accounts and Audits.... . .29 Environmental Effects ... . .29 This report is based on the findings of an appraisal mission to China in October 1981. Mission members included W.P. Ting (Mission Leader), S.J. Khoo and V. Li (IDA) and C. Houston and T.B. Wiens (Consultants). 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.  -2- Page No. 4. ORGANIZATION AND MANAGEMENT . . . . . . . . . . . . . . . . . . 29 Agency Reponsibilities . . . . . . . . . . . . . . . . . . . . 29 Project Management and Coordination . . . . . . . . . . . . . 31 Monitoring and Evaluation . . . . . . . . . . . . . . . . . . 32 Agricultural Support Services. . . . . . . . . . . . . . . . . 33 Consulting Services . . . . . . . . . . . . . . . . . . . . . 35 Operation and Maintenance . . . . . . . . . . . . . . . . . . 35 5. AGRICULTURAL PRODUCTION . . . . . . . . . . . . . . . . . . . . 36 Present Cropping Patterns ........ ... ... .. . 36 Future Cropping Patterns . . . . . . . . . . . . . . . . . . . 36 Yields and Production . . . . . . . . . . . . . . . . . . . . 38 Subsidiary Production ....... . ........... . 38 Drying, Storage and Processing . . . . . . ... . . . . . . . . 39 6. MARKETS, PRICES, FARM INCOMES AND PROJECT CHARGES . . . . . . . 39 Market Prospects ......... . . 39 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Farm Incomes . . . . . . . . . . . . . . . . . . . . . . . . . 41 Project Charges . . .I. . . . . . . . . . . . . . . . . . . . 41 7. BENEFITS, JUSTIFICATION AND RISKS . . . . . . . . . . . . . . . 44 8. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . 48 LIST OF TABLES IN THE MAIN TEXT 2.1 County and Project Area Data . . . . . . . . . . . . . . . . . 11 2.2 Climate in the Nine Counties . . . . . . . . . . . . . . . . . 11 3.1 Drainage System . . . . . . . . . . . . . . . . . . . . . . . . 18 3.2 Tubewells . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.3 Water Supply and Demand . . . . . . . . . . . . . . . . . . . . 23 3.4 Cost Summary . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.5 Financing Plan.27 3.5 inaning lan . .. .. . . . . . . . . . . . . . . . . .. 2 3.6 Proposed Allocation of Credit Proceeds . . . . . . . . . . . . 28 5.1 Cropping Pattern, Crop Yields and Production . . . . . . . . . 37 5.2 Present and Future Land Use . . . . . . . . . . . . . . . . . . 38 6.1 Crop Prices . . . . . . . . . . . . . . . . . . . . . . . . . . 42 6.2 Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.1 Summary of Economic Benefits . . . . . . . . . . . . . . . . 46  -3- ANNEXES 1. Cost Estimates 2. Climatic Data and Crop Water Requirements 3. Crop and Farm Budgets 4. Economic Analysis 5. Consulting Services 6. North China Plain Agricultural Study 7. Schedule of Early Events 8. Project Progress Report 9. Accounting and Disbursement Procedures for Works Executed by Force Account 10. Related Documents and Data Available in Project File LIST OF FIGURES 3.1 Implementation Schedule 4.1 Project Organization Chart 4.2 Ministry of Agriculture Organization Chart 5.1 Proposed Cropping Calendar MAP IBRD 16135 - Project Area IBRD 16375 - Yucheng Project Area   CHINA NORTH CHINA PLAIN AGRICULTURE PROJECT 1. BACKGROUND Introduction 1.01 The project would be the first integrated large-scale attack on soil salinity and waterlogging in China. It would serve as a model for future agricultural developments in the North China Plain where crop production is affected by salinity and waterlogging. The project would provide drainage and irrigation for about 200,000 ha, covering parts of nine counties, and would also include agricultural inputs and support services to increase productivity. A population of over 1.2 million, or about 280,000 farm families, would benefit directly from the project through increased production of crops such as wheat, corn, cotton, oilseeds, rice, and earnings from tree planting. The project would also lead to annual foreign exchange savings of about US$70 million. 1.02 This report is based on the findings of a preparation mission which visited China in November 1980 comprising W.T. Smith, T. Daves, R.C.Y. Ng, W.P. Ting (IDA), M. Fireman, and K. Anderson (Consultants); a preappraisal mission in May/June 1981, comprising W.P. Ting, S.J. Khoo, V. Li (IDA), K. Anderson, J.K. Wang and T.B. Wiens (Consultants); and an appraisal mission in October 1981 comprising W.P. Ting, S.J. Khoo, V. Li (IDA), C. Houston, and T.B. Wiens (Consultants). The Agriculture Sector /1 1.03 Agriculture, including livestock, forestry and fisheries is one of the most important economic sectors in China. It provides sustenance to nearly 1 billion people and is the main source of livelihood for a rural population of some 800 million, and accounts for over 30% of the country's GDP. Agricultural production is carried out by farmers organized into collective units under the commune system and on state farms. Part of the production also comes from privately-controlled household plots. 1.04 Agriculture in China is dominated by foodgrain production, which accounts for some 65% of total agricultural output, and 80% of its cropland. /1 For more details on China's agriculture sector, see China: Socialist Economic Development, Annex C: Agricultural Development, Report No. 3391-CHA.  - 2 - Despite the country's vast land area of about 960 million ha, only about 10.4% or 100 million ha are arable. The ratio of population to ha of arable land is just under 10. Thus farming is intensive, with very high inputs of labor, extensive use of chemical and organic fertilizers, and considerable development of irrigation and drainage. Just under half of the arable land is irrigated. China accounts for less than 8% of the world's arable land but provides food for about 22% of the world's population. This has been made possible because of the generally high standards of crop production. 1.05 Foodgrains. The major foodgrains are rice, maize and wheat, which accounted for about 45%, 18% and 17% respectively of total foodgrain produc- tion during 1977-79. Soybean, sorghum and millet, which are foodgrains of lesser importance, together accounted for about 7% of total foodgrain output. Foodgrain production during the 1970s increased at an average of more than 3% p.a. from 240 million tons in 1970 to 332 million tons in 1979. The increase resulted mainly from changes in the cropping pattern in favor of the foodgrains which have relatively higher yields, the significant expansion of pump irrigation in the Chang Jiang Basin and North China Plain, and increased use of chemical fertilizers. Foodgrain production was further boosted in 1978 and 1979 by policy changes which provided increased incentives for producers (para. 1.27) and favorable weather conditions, so that output in those years increased by an average annual rate of over 8%. However, production in 1980 declined to 318 million tons from the record 1979 crop of 332 million tons due to poor weather conditions. In recent years, gains in food output have not kept pace with the increase in demand due to growth in population and incomes and increased feedgrain requirements for livestock. The country imported 10.5 million tons of foodgrains in 1979 (1.2 million tons over 1978) or about 3% of total consumption. Grain agreements with major supplier countries indicate that grain imports will range from 12-16 million tons for the next few years. 1.06 Oilseeds. Among the more important oilseeds in China are ground- nuts, rapeseed, sesame seed, sunflower seed, and linseed./l The area sown to oilseeds increased from 4.5 million ha in 1970 to 8.0 million ha in 1980 and production increased from 3.8 to 7.7 million.tons during the period. Despite this growth, China imported 0.8 million tons of oilseeds in 1979 and levels of per capita oil availability remain low relative to requirements. 1.07 Cash Crops. These crops include cotton, jute, sugarcane, tea, mul- berry (for sericulture), fruits, vegetables and tobacco. Cotton, the most important, accounted for 4.9 million ha or 38% of the area sown to cash crops in 1980. The 1980 crop of 2.7 million tons of lint was a new record. However, production has been insufficient to meet domestic demand as reflected in the increasing levels of cotton imports in recent years. Imports in 1979 /1 Soybeans in China are not included among the oil-bearing crops but among foodgrains.  - 3 - amounted to 480,000 tons. China is now the world's largest importer of cotton. 1.08 Livestock. Animal husbandry accounts for about 13% of the value of agricultural output. Meat production, largely pork, increased by about 16% p.a. in 1977-80, compared with 3.4% p.a. in 1957-77. Reasons for the rapid increase were higher feedgrain allocations and improved producer incentives. The country's livestock production is dominated by pigs and poultry reared in private plots under intensive systems, integrated with crop production and concentrated in regions with dense population and easy access to markets. With 320 million head in 1979, the country's pig population is the largest in the world. Other livestock includes sheep, goats, cattle and camels, which are found largely on the extensive grasslands in the north and western border regions. 1.09 Fisheries. Total fisheries production increased from 3.2 million tons in 1970 to 4.3 million tons in 1979 or about 3% p.a. Production in recent years, however, has declined, due to a decrease in capture fishery production. Marine fisheries accounted for about 76% and inland fisheries 24% of total production during 1977-79. About three-fourths of the production from inland waters is derived from the culture of fisheries in ponds. This kind of fish culture has a long tradition in China and has developed as an integral part of the farming system. 1.10 Forestry. The forest cover in China increased from 8.6% of the total land area in the early 1950s, to 12.7% at present, or about 120 million ha, located mainly in the northeastern and southwestern parts of the country. So far 28 million ha have been afforested. However, prime timber areas are exploited more rapidly than regrowth occurs. Timber output in 1979 totalled 54 million cu m, compared with 5 million cu m in the early 1950s. Annual fuel-wood utilization amounts to 120 million cu m, roughly two thirds of which is collected by the people. Wood still serves as an important energy source and timber products generally are in short supply. 1.11 Marketing and Pricing. The Government controls the marketing and pricing of agricultural products and inputs . It fixes production quotas for the major crops: grains, oilseeds, cotton and sugar, which are purchased and distributed by state-managed procurement agencies at pre-determined prices. A portion of the production in excess of the quotas, amounts of which are determined before each harvest according to projected yields, are sold to the Government at above-quota prices which are also pre-determined. The rest of the surplus production can be sold to the Government at negotiated prices or on the free market. Production quotas are also established for a range of cash crops and livestock products. Minor crops, such as vegetables and other products produced in household plots, are sold in rural markets at prices regulated either by the provinces or counties. This marketing and pricing system has been broadly maintained since the 1950s, although the importance and scope of free markets have varied over time. Policy reforms since 1976 have expanded the operation of free markets.  - 4 - The two most important marketing agencies for agriculture are the Ministry of Food, which procures and distributes grain and oilseed crops, and the All China Federation of Supply and Marketing Cooperatives, which purchases most cash crops and distributes some agricultural inputs and tools, as well as consumer goods, in the rural areas. Some products, such as sugar, rubber and pigs for slaughter, are purchased by specialized branches of the Ministry of Commerce. Irrigated Agriculture 1.12 Major efforts to develop China's land and water resources were begun in the 1950s and were the main focus of rural investment during that decade. Huge projects for flood control, drainage and irrigation employing hundreds of thousands of workers were undertaken on the North China Plain and in other areas. Since 1949, protection from flooding along the major rivers, especial- ly the Yellow River, has been greatly improved. The Ministry of Water Conservancy estimates that nearly a third of the arable land amounting to some 32 million ha of formerly flood-prone lands are now protected by dikes. 1.13 Since 1949 some 86,000 reservoirs have been constructed, with a total storage capacity estimated at about 400 billion cu m. The large reser- voirs (320) are used for multiple purposes, flood protection, irrigation and hydropower, while medium-size (2,200) and small facilities (more than 80,000) are usually constructed for irrigation. Individual storage capacities of the large reservoirs exceed 100 million cu m and those of the medium size facilities range from 10-100 million cu m. Total irrigation development is now estimated at some 45 million ha versus about 16 million ha in 1949. This represents some 45% of the total arable area, in contrast to an estimated 17% for other developing countries. About 30 million ha are irrigated by pumping, of which some 11 million ha are irrigated by 2.1 million tubewells, 80% of them in northern China. Support Services 1.14 Agricultural Research and Extension. The Chinese Academy of Agri- cultural Sciences (CAAS) is the principal organization for agricultural research work. Subordinate to the Ministry of Agriculture, it has responsi- bilities for a network of national research institutes and for technical oversight and coordination of provincial research programs. Currently, there are some 31 national research institutes in this Academy, focussing mainly on applied research. Each province also has a local research network with a provincial academy of agriculture as the lead institution. Below the provincial level are prefecture and county-level institutes which have programs of research, demonstration and extension. Other agriculture- related ministries or specialized agencies, including those responsible for forestry, fisheries and irrigation, also sponsor and coordinate research work. Considerable success has been achieved in developing improved rice, wheat and maize varieties that are high yielding, early maturing and resistant to major diseases. The Chinese have also developed and planted on some 5.9 million ha, a hybrid rice that gives 20-30% higher yields than conventional varieties.  -5- 1.15 The importance of close coordination between research work and extension activities was recognized early in China. The linkages were further reinforced in recent years, giving rise to a seven-level research and extension network. The three higher levels -- national, provincial and prefectural -are operated by the central and provincial governments and are concerned mostly with research; the four lower levels -- county, commune, brigade and team -- deal mainly with the demonstration and popularization of improved technologies and techniques, training and other extension-related activities. Linkages are maintained through regular meetings of technical staff at different levels, staff exchanges between scientists and skilled farmers, and through bases established by research institutes at the commune and brigade levels. However, the numbers of qualified staff, especially at the middle and senior levels, are severely limited and facilities and equipment are generally lacking. These problems stem from the disruption of scientific research and training during the Cultural Revolution. The authorities are now re-establishing the education system to increase the number of technicians, but with many extension workers near or past normal retirement age, the build-up will take several years to accomplish. A Bank Group-supported project is being prepared to strengthen education and research in the agricultural sciences by providing facilities and technical assistance for selected agricultural colleges and research institutes. 1.16 Training. Responsibility for the management of agricultural educa- tion is vested in both the Ministry of Education and ministries responsible for agriculture, water conservancy, forestry, etc. The Ministry of Agricul- ture is responsible for most of the educational facilities; it supervises seven colleges at the national level and 38 institutions at the provincial level. The Ministry also supports 214 senior secondary schools for agriculture. The agricultural education system is still recovering from the long period of closure and anti-professional bias of the Cultural Revolution. The first graduates from the newly re-established education system will be available in 1982, and a scheme of post-graduate education has only recently been formulated. Critical shortages of staff exist at all levels. This problem is being addressed by a Bank Group-financed project (Ln/Cr-2021/1167) which would strengthen higher education by helping to increase the output and quality of education and research in the disciplines of science and engineering. 1.17 Seed Production. A comprehensive system has been developed for producing seed, especially for cereals. Breeder seeds from colleges, academies, counties or research stations are multiplied by county-managed seed farms. Some communes also operate their own seed breeding and multiplication farms. The seed farms are responsible for purification, storage and testing of seeds. Stock seeds produced by these farms are sold to seed companies for the multiplication of certified seeds. The system is now suffering from poor management and lack of proper drying, processing and storage facilities. The technical supervision given to the collectives responsible for seed multiplication is inadequate, resulting in the production of inferior seeds. The central government has recently embarked on a program to improve the facilities, management and quality control in the production of certified seeds.  - 6 - 1.18 Agrochemicals. Chinese agriculture has long depended on organic fertilizer, particularly pig manure, as the main source of plant nutrients. Chemical fertilizer has also grown in importance and its production reached 52 million tons (gross weight) in 1979, a 24% increase over the level in 1978 and almost double that of 1976. Annual application of chemical fertilizer exceeds 125 kg (nutrient weight), a level more than twice that for all developing countries. Nitrogenous fertilizer accounts for 80% of total production, followed by phosphate (19%) and potassium (1%). The production of the latter nutrients is inadequate and with limited imports, there is a considerable shortage of phosphatic and to a lesser extent, potassic fertilizer. Studies based on soil analysis show that phosphate may now be one of the major limiting factors in increasing crop yields in some of the areas in southern China, where use of chemical nitrogen is heavy. 1.19 To reduce crop losses (estimated at 5-20% in China) due to pests, pesticide application rates have grown rapidly since the mid-1950s. Total production of pesticides in 1979 was 522,000 tons, with insecticides making up the bulk. In the past, more than 120 individual compounds were produced commercially, including some organochlorines like DDT and BHC, which have been banned in many countries. The Government is aware of the problems associated with the use of organochlorines and is shifting to organophos- phates, carbamates and other safer pesticides. Fungicides are also widely used for seed treatment and control of foliar diseases. Significant quantities of modern pesticides are imported. 1.20 Agricultural Credit. The Agricultural Bank of China (ABC) is responsible for the provision of credit for agriculture and rural development in China. Established in 1951, the Bank has operated as a separate institu- tion only during 1955-57, 1963-65, and from March 1979 onwards. In the intervening years, rural credit operations were handled by the People's Bank of China, the country's central bank. The ABC continues to be under the overall supervision and jurisdiction of the People's Bank. At the end of 1980 it had a head office in Beijing, 27 branch offices-one in each of the provinces and the three municipalities of Beijing, Tianjin, and Shanghai, 374 central subbranch offices in the prefectures, 2,211 subbranch offices in the counties, 24,803 offices in the communes and 403 offices in the state farms. The bank's work, especially the loan and deposit operations, is complemented by some 59,000 local credit cooperatives organized at state farms and at the commune and brigade levels. Although they are separate entities, the credit cooperatives in practice function as the smallest operating units of the bank. They play a major role in the bank's credit operations at the commune and lower levels. The cooperatives act as the bank's agents in channelling short-term and small loans to farmers and the collectives. The larger and longer-term loans are provided directly by the bank. 1.21 In conjunction with the central and local governments, the ABC exercises general responsibility for the planning, allocation and distribu- tion of credit funds, including Government grants and subsidies, for agri- culture and related activities. The subsidies and grants are provided  - 7 - through the bank to the collectives, mainly communes, in support of invest- ments which the Government considers are of high priority. Major recipients of the bank's credit funds are individual farmers, collectives, state farms and certain state-owned enterprises which supply agricultural inputs and procure or process farm products. The bank also promotes, and provides a channel for rural savings as well as banking services, and supervises the management and operations of the credit cooperatives. It had an outstanding loan portfolio of Y 47.6 billion at the end of 1980. About three quarters of the loans are short-term (less than one year) and the remaining medium- term (mostly 1-5 years). The present interest rate charged for short-term loans, mainly for production credit and working capital, is 0.48% per month (5.76% p.a.). Longer-term loans, mainly for agricultural equipment and machinery, are charged at the preferential rate of 4.32% p.a. These interest rates reflect an upward adjustment of about a third in early 1982. A small element in the loan portfolio consists of relief loans at zero interest. Past Developments 1.22 When the People's Republic was founded in 1949, the agriculture sector was suffering from severe dislocations associated with decades of war- fare and civil disturbance. Destruction and deterioration of economic infra- structure were widespread and the institutional framework for production, marketing and technical services was in near total disarray. As a first task in agricultural development, efforts were made to reconstruct the economic infrastructure and restore the institutional framework. Despite limited capital and technical resources, recovery was rapid and pre-war levels of production were attained by 1952/53. Development efforts during the First Five-Year Plan period (1953-57), which concentrated largely on land develop- ment and irrigation facilities, raised agricultural production to new record levels. However, production during the next several years was adversely affected by bad weather and the disruptions of the Great Leap Forward move- ment to an extent that crop output did not recover to 1957/58 levels until about 1964. 1.23 Several measures were taken during the 1960s to revive agricultural production: raising of procurement prices, intensification of research and expansion of input supplies to producer goods industries to increase the production of chemical fertilizer, tractors, irrigation pumps and other equipment. The research effort resulted in the development of many new and improved high-yielding varieties, especially rice and wheat. 1.24 During 1966-76, achieving self-sufficiency in foodgrain production was the focus of agricultural policies. However, progress was slow because of the effects of the Cultural Revolution, which disrupted production and scientific research and training. Cotton and oilseeds production was depressed, and grain output fell short of the full potential. Although there were substantial increases in the availability of such modern inputs as agricultural machinery, irrigation and chemical fertilizers, the growth of agricultural production during the period was only 2.9% p.a., slightly below the long-term trend.  -8- 1.25 Since 1977 a number of policy changes have been introduced that are aimed at boosting agricultural production. These have included improved producer incentives, greater autonomy to the collectives and state farms in production and planning decisions and expansion of private plots. These changes, coupled with a large increase in the supply of chemical fertilizer, and favorable weather conditions in 1978-79, resulted in a growth of more than 8% p.a. in agricultural output over these two years. Cash crop production (cotton, oilseeds) recovered sharply and growth of animal husbandry was also rapid. Agricultural ouput in 1980 was checked by poor weather conditions. However an increase in cash crop and meat production helped raise overall agricultural output by 2.7%, so that the average growth (plus sideline industries) over the three-year period 1978-80 was 6.7% p.a. Development Plan for the 1980s 1.26 The development of agriculture has been accorded high priority by the Government as reflected in its post-1978 statements on economic policy. Thus, the share of agriculture in the state capital construction budget, the source of financing for large schemes and investments, is planned to increase from 14% in 1979 to 18% during 1980-82. Funding for agricultural support services, including research and extension, would also increase from 6.3% to 8% of total plan expenditures during the same period, while annual credit for agriculture is planned to increase from Y 13 billion in 1978 to about Y 26 billion by 1985. 1.27 The basic long-term objective for the agricultural sector is to increase the production of food crops and economic (industrial) crops to meet requirements created by population and income growth. Achievement of this objective will help realize other sector goals of expanding rural employ- ment and minimizing the use of foreign exchange for food and fiber imports. In land-scarce China, attainment of the production objective requires increased productivity from existing cropped areas. Improved incentives to producers are essential in this regard and have been at the heart of recent policy reforms. These incentives include: (a) encouragement of household agricultural activities and individual enterprises through expanding the area of private plots, lifting restrictions on free markets, and widening the range of commodities for local trade; (b) encouragement of larger allocations to individuals out of the collective income; and (c) creation of subcontracting systems within collective agriculture and state farms which permit small production groups or households to retain production in excess of some agreed norm. By increasing yields of food crops and cotton on already-cropped lands, the proposed project would contribute to achievement of Government's objectives for the agricultural sector. The recently improved incentives for producers are expected to contribute to the success- ful implementation of the project. Project Formulation 1.28 The Government estimates that some 6 million ha of land in the North China Plain are affected by varying degrees of salinity and waterlogging.  -9- The soils in this area are basically good and, where adequate irrigation and drainage have been provided, crop yields are high. Because of the land constraint in China, the Government objectives are to raise yields on these saline areas as well as reclaim large tracts of saline wasteland. With improved drainage and irrigation. the potential of these lands for increased production is considerable 1.29 Despite considerable progress in water resource development, large areas of the North China Plain still suffer from waterlogging, salinity, and drought. Waterlogging is a condition in which the water table rises so high that it saturates the root zone and damages the crop. It can arise in a variety of situations: in poorly drained, low-lying land; in areas where irrigation has been introduced without adequate drainage; or where the natural drainage systems are impeded by flood embankments, roads, etc. Water tables tend to rise in the rainy season and fall in the dry season and, in the absence of irrigation and drainage, crops can suffer from drought for much of the year and can then be damaged by waterlogging when it rains. Soil salinity occurs, or pre-existing soil salinity is worsened, where a high water table prevents downward percolation and water-borne salts become concentrated in the soil through evaporation. The Government estimates that some 6 million ha of land in the North China Plain are affected in varying degrees by salinity and waterlogging. With irrigation and drainage, these lands can be reclaimed and become highly productive for a wide range of crops. 1.30 The nine counties included in the project were chosen primarily because each one has a large pilot project where irrigation and drainage techniques have been tested to form a basis for large-scale developments. Each county also has a well designed and maintained main drainage system capable of disposing of runoff from the drains in the project areas. Six of the nine counties have waterlogging and salinity problems. The other three counties suffer from widespread waterlogging and drought but soil salinity is not present. The project also includes areas in danger of becoming saline because of inadequate drainage, especially the lateral and sublateral drains needed to carry runoff to the main drains and control the water table. 1.31 The project was prepared by the engineering and agricultural staff in the counties with help from the provincial Land Utilization Bureaus, the Chinese Academy of Agricultural Sciences, and the Land Utilization Bureau of the Ministry of Agriculture. Preparation of the project began in August 1980, and each county prepared detailed project proposals consisting of thematic maps together with detailed quantity and cost estimates. The proposals put forward by the counties included some longstanding plans for river improve- ment, enlargement of main drains and drainage pumping stations. The proposals for water table control and irrigation systems are based on recent experience in the pilot projects. The depth and spacing of drains and the number and depth of tubewells will vary from place to place according to soil types, the severity of salinity and waterlogging, and aquifer characteristics.  - 10 - 1.32 The proposals were reviewed by a Bank mission in October/November 1980. This mission found the basic concept of the proposed project sound and there was ample evidence of the capability of the counties to implement the project. The mission recommended, however, that the counties and central government agencies develop a consistent set of design criteria for drainage systems, and this was noted by the Government. The Government subsequently revised the project proposal by increasing the number of counties from five to nine. The total project area, was reduced to concentrate on land where the need for salinity control and drainage is most urgent. 1.33 In addition to the construction of drainage and irrigation works, the project would include components designed to enhance the project contri- bution to land and water development in the North China Plain. A compre- hensive soil and water studies would be carried out in each of the project areas to observe the project's impact on soils, water tables, water quality etc. The studies should produce results of value to the future operation of the project and the planning of future projects. At the same time a program to monitor and evaluate the project's agricultural, economic and social effects would be carried out. The project also includes the North China Plain Agricultural Study. The objectives of the study would be to identify the main constraints to higher crop production in selected areas of the North China Plain; to formulate agricultural development plans to overcome these constraints; and to identify and prepare future agricultural projects. Lessons may also be learned which are applicable to the land areas which are already irrigated in the North China Plain. 2. THE PROJECT AREAS Location 2.01 The project would be located in nine counties: Qihe, Lingxian and Yucheng counties in Shandong province north of the Yellow River, Guoyang, Suixi and Mengcheng (Anhui Province) and Shangqiu, Ningling and Minquan (Henan Province), all south of the Yellow River (see Map IBRD 16135). Lingxian, 300 km southeast of Beijing is the nearest to the capital and Mengeheng, 860 km to the south is the furthest. The project has a cultivable area of about 200,000 ha of which approximately 178,000 ha are presently cultivated. Further details of areas, population, etc., are shown in Table 2.1. Climate 2.02 About 90% of the rain falls in the period from the end of April through the end of October, and only light snow falls in the winter months. Some 65% of the rain falls in July, August and September mostly in the form of intense storms which cause widespread flooding. Damaging droughts occur nearly every year. Temperatures range from 400C in the summer to -200C in the winter. The number of frost-free days ranges from 200 to 220. Climate data (annual means) are summarized in Table 2.2.  Table 2.1: COUNTY AND PROJECT AREA DATA Shandong Province Anhui Province Henan Province Lingxian Yucheng Qihe Mengcheng Guoyang Suixi Shangqiu Ningling Minquan Total County Data Total area ('000 ha) 140 98 155 206 202 237 152 79 120 1,389 Cultivable area ('000 ha) 101 73 104 128 154 175 101 51 73 959 Population ('000) 528 423 582 830 955 887 842 429 583 6,060 No. of communes 24 19 24 49 71 63 27 18 17 312 No. of production brigades 1,127 951 1,067 507 682 511 532 302 423 6,102 Project Area Data Total area ('000 ha) 40 47 54 25 23 21 38 19 30 297 Cultivable area ('000 ha) 29 35 36 13 17 16 25 14 13 198 Population ('000) 135 168 204 81 102 68 187 107 99 1,151 No. of communes 11 18 11 9 8 11 7 6 4 85 No. of production brigades 292 444 382 79 80 60 129 82 86 1,634 1979 Cultivated area ('000 ha) 25 31 34 13 15 13 24 13 11 179 Irrigated area ('000 ha) 11 6 22 5 6 3 9 5 4 71 from surface water 9 3 14 4 4 1 0 0 0 35 from groundwater 2 3 8 1 2 2 9 5 4 36 Planted area ('000 ha) 28 38 53 20 22 19 34 17 15 246 No. of wells 1,250 1,200 1,480 700 920 980 2,370 1,010 1,490 11,400 Table 2.2: CLIMATE IN THE NINE COUNTIES (Annual means) Shandong Province Anhui Province Henan Province Lingxian Yucheng Qihe Mengcheng Guoyang Suixi Shangqiu Ningling Minquan Rainfall (mm) 632 621 636 882 830 863 697 659 650 Evaporation (mm) (60 cm pan) 1,412 1,379 1,292 1,225 1,156 1,175 1,191 1,137 1,404 Sunshine hours 2,643 2,557 2,560 2,340 2,338 2,326 2,412 2,219 2,365 Frost-free days 212 214 219 213 213 202 203 216 220  - 12 - Soils and Topography 2.03 The soils of Qihe, Lingxian, Yucheng, Ningling, Minquan and Shangqiu are mostly coarse to medium-grained silty loams which, when provided with adequate surface drainage, are well suited to wheat, maize and cotton, the main field crops grown in these counties. The project area covers about 150,000 ha of cultivable land in these six counties. About 94,000 ha are affected in varying degrees by salinity, of which about 19,000 ha are uncultivated and much of the remaining 56,000 ha are severely affected by drought and poor drainage. 2.04 The soils of Suixi, Guoyang and Mengcheng counties, known as "shajiang" black soils, are very heavy clays with low to very low permea- bility. The project areas covering nearly 50,000 ha are subject to water- logging particularly in low-lying areas where the drainage systems are inadequate. The soils are calcareous throughout with small lime and iron manganese concretions, evidence of a long-term waterlogged condition. The soils are not saline and with adequate drainage can support a wide range of crops, but are probably best suited to rice. Irrigation is also needed to protect the crops from droughts which occur almost every year. 2.05 The project areas are between 20 and 45 meters above sea level with slopes ranging between 1:5,000 and 1:10,000. To the eye the land appears flat with very little relief. However, small differences in elevation can lead to significant differences in land capability. Higher areas generally tend to be free from salinity, whereas low areas commonly suffer from salinity and waterlogging and are subject to crop damage from surface flooding. Population, Farm Size and Land Tenure 2.06 Farm families account for about 98% of the project area's population of 1,151,000. The average size of cultivated land per farm family is about 0.6 ha. There are 85 communes in the project area which are further subdivi- ded into 1,634 production brigades. Each production brigade comprises on the average 8-15 production teams which are made up of 20-50 families, often the inhabitants of a natural village. Present Status of Irrigation and Drainage 2.07 Of the 200,000 ha of cultivable land in the project area, about 71,000 ha are presently irrigated; 35,000 ha from surface water and 36,000 from groundwater. Lingxian, Yucheng and Qihe counties are within the areas served by major canal systems supplied through intakes along the left bank of the Yellow River. Mengcheng, Guoyang and Suixi counties are supplied by canals taking off from the Huai River. Shangqiu, Ningling and Minquan counties are supplied by water from wells.  - 13 - 2.08 Channel improvement has been carried out on virtually all of the rivers and streams in the project areas. Rivers have been straightened and deepened, and flood dikes have been constructed. During the flood season river levels are generally above the surrounding ground level and, therefore, large pumping stations have been built to dispose of surface runoff into the rivers. The works are, however, incapable of handling floods over a 1 to 3-year frequency. An important aim of the project would, therefore, be to increase the capacity of the main drainage system. Laterals and sub- laterals have also been constructed in parts of the project area, but they are mostly too widely spaced and too shallow to be fully effective either for surface drainage or for lowering the water table. The project would include deepening the existing lateral/sublateral drains and using them for water table control as well as surface drainage. Groundwater 2.09 The project areas are underlain by thick sequences of quaternary and recent alluvium consisting of alternating and interfingered layers of clay, silt, and fine sand with occasional coarse sand to fine gravel. Exploratory wells show a thickness of alluvium of at least 400 meters but similar deposits probably continue to considerably greater depths. The principal aquifers are the layer of fine sand interbedded with less permeable layers of silt and clay. In a typical well 50 m deep, there may be two or three layers of sand with a total thickness of 10 to 25 m. Some individual sand layers are as much as 20 m thick; particle sizes are generally from 0.05 to 0.5 mm. The aquifers, although fine-grained, are very permeable with individual wells furnishing from 30 to more than 100 cu m/hr and with specific capacities typically 5 to 15 cu m/hr/m. The quality of groundwater is suitable for irrigation over most of the project areas with total mineralization generally less than 1000 mg/l. Typically the cations are nearly equal parts of sodium, calcium, and magnesium and the dominant anion is bicarbonate. In the Lingxian and Yucheng areas there are some localities underlain by brackish to saline groundwater which would in the future be served by surface water. 2.10 Recharge of the aquifers results from infiltration of rainfall, deep percolation losses from irrigation, and seepage from rivers and canals. Probably as much as 20% to 25% of rainfall is available for recharge although in most areas some of this potential recharge is rejected because groundwater levels are already so close to land surface. Water levels are generally with- in 1 to 3 m of land surface, with seasonal fluctuations of 1 to 2.5 m. Frequent measurements in many observation wells have shown that water levels rise rapidly in response to rainfall. Groundwater occurs under unconfined or subartesian conditions. Over large areas the individual sand layers are probably hydraulically interconnected and can be treated as a single aquifer. Movement of groundwater is slow, with very low gradient, generally paralleling the local and regional topography.  - 14 - Pilot Projects 2.11 There are numerous pilot projects in the North China Plain aimed at solving the problems of waterlogging and salinity. The ones listed below for Shandong and Henan provinces are of interest since they are close to the pro- posed project areas. A pilot project has also recently been set up in Anhui province to address the problem of Shajiang soils. Although some of the pilot projects date back to the mid-1960s and early 1970s most of the work has been accomplished over the past five to six years. The pilot projects in the three provinces are listed below: Shandong Province Nanbei Zuhuang, Yucheng County: 2,000 ha established in 1975 operated by Chinese Academy of Agricultural Sciences (CAAS), Soil and Fertilizer Research Institute. Linxi, Lingxian County: 500 ha established in 1974 also operated by CAAS. Henan Province Wuliyang, Shangqiu County: 400 ha operated by Henan Provincial College of Agriculture initiated in 1974. Li Zhuang, Shangqiu County: 2,300 ha established in 1971 now operated by CAAS and Ministry of Water Conservancy. Dawu Zhuang, Shangqiu County: 350 ha begun in 1965 and directed by the Henan Provincial Academy of Agricultural Sciences. Anhui Province Xiaomadian, Mengcheng County: 2,400 ha established in 1978 operated by Anhui Provincial Academy of Agricultural Sciences. 2.12 Although the pilot projects have been designed and operated by a number of different agencies the technique evolved for controlling salinity and waterlogging is basically the same in each area. This consists of a system of open drainage combining the functions of surface and subsurface drainage, and a supply of water to leach salts from the soils and irrigate the crops. The design of subsurface drains depends to a large degree on judgement and experience gained from large-scale field trials. While numerous formulae have been derived in the USA, China, Russia and other countries, the results they yield are sensitive to small changes in the assumed soil properties (per- meability, storativity etc.) which in practice are difficult to measure. The pilot projects have shown that a depth of about 2.5 m is neccessary in the lateral drains to provide effective subsoil drainage. Spacing of laterals  - 15 - show some variation between pilot projects but, for the soils commonly encoun- tered in Shandong and Henan provinces, a spacing of 400-500 m has been shown to be adequate. Once the water table is lowered the leaching of the soil can be quickly accomplished since salts are present usually in only the top 20-25 cm. Initially, in some projects, the leaching proved to be a lengthy process because of delays in installing tubewells or bringing in surface water. However, where there is adequate pumping capacity the feasibility of flushing salts from the soils with ample quantities of water in less than one year has been demonstrated. 2.13 The nature and magnitude of benefits attributable to improved drainage and irrigation can be seen by comparing the 1979 economic charac- teristics of a sample of production teams which have benefited from the pilot projects with unimproved production teams farming saline land outside the pilot project area. The improved production teams typically grew less sweet potato and miscellaneous grain and more cash crops. Yields of wheat increased from 1.1 ton/ha for unimproved teams to about 2.9 ton/ha for improved teams; maize, from 2.1 ton/ha to 2.9 ton/ha; soybean, from 0.8 ton/ha to 1.0 ton/ha; and cotton, from 0.3 ton/ha to 0.6 ton/ha. Income from animal husbandry also significantly increased. Collective net income of the unimproved teams was Y 50 per capita (of which Y 43 was distributed to team members, none of which was cash income). In the improved teams, net income averaged Y 123, of which Y 99 was distributed (Y 61 in cash). 3. THE PROJECT Project Description 3.01 The project would be the first large-scale attack on soil salinity and waterlogging in China and would serve as a model for future development of the more than 6 million ha of land in the North China Plain affected by salinity and waterlogging. The project would provide drainage and irrigation for about 200,000 ha, covering parts of nine counties, and would also include agricultural inputs and support services to increase agricultural productivity. The principal features of the project are; (a) excavation to increase the capacity of some 70 km of river channels and 1,260 km of existing main and branch drains; (b) construction of 3,200 km of lateral drains and 8,200 km of sublaterals, (c) construction of new pumping stations for drainage and irrigation and installation of approximately 3,000 HP of pumping capacity;  - 16 - (d) construction of about 8,450 tubewells, and procurement of pumps and motors for these wells and for about 4,010 existing wells; (e) various works to improve water control at the field level con- sisting of land smoothing on about 60,000 ha, and field ditches and field drains to complement the drainage works and tubewells; (f) additions of 700 km of 10 kV lines, 1,470 km of 380 V lines, and related substations and provision of transformers; (g) construction and improvement of 130 km of rural roads; (h) procurement of agricultural machinery and construction equipment; (i) procurement of phosphate fertilizer and insecticides; (j) tree planting along field borders and establishment of orchards and wood lots; (k) a program to strengthen research and extension services in the project areas; (l) a comprehensive program of soil and water studies in each project area including technical assistance for the studies; and (m) an agricultural study of selected areas in the North China Plain to help formulate future agricultural development plans and to identify and prepare future projects. Project Works 3.02 Drainage Works. Rivers and streams have been canalized to form the main backbone of the drainage systems in each of the project areas. In addition there is a fairly extensive system of branch drains at spacings of 1,500-3,000 m. The aim of the proposed improvements of the river channels and main and branch drains would be to provide discharge capacity needed to handle surface runoff from a five-year storm (about 210 mm over three days, depending on location). In general, the bed levels of existing channels would be lowered by 0.5-1.0 m. 3.03 Lateral drains in most parts of the project are too widely spaced to serve as adequate collectors of storm runoff and are not deep enough to have an appreciable effect on water table depths. As a result of these defi- ciencies, severe and prolonged flooding often occurs in the project areas and this leads to waterlogging and salinity. A major feature of the project would be to provide a much more effective system of laterals and sublaterals.  - 17 - 3.04 In Shandong and Henan where soils are mainly silty loams the laterals would be at spacings of 400-500 m and be 2.5 m deep. Field observations in the pilot projects (para. 2.12) supported by theoretical analysis show that at such spacings and depths the laterals would ensure drawdown of the water table to about 2 m within 90 to 120 days following the end of the rainy season. They would also be sized to convey runoff from a 5-year storm. Sublaterals, at spacings of 200-250 m, would serve mainly to carry surface runoff to the laterals and be about 1.5 m deep. However, to promote leaching in the saline areas and to ensure water table control some sublaterals would be 2 to 2.5 m deep. 3.05 In Anhui, salinity is not the problem so much as controlling the water table to provide a healthy crop root environment. Lateral drains at a spacing of about 500 m and with a depth of about 2 m would mainly serve to remove surface water. Sublaterals, at the relatively close spacing of 80-100 m with depths of 1.2-1.5 m would be constructed over much of the project areas to ensure that within 10 days of a heavy rain the water table would drop to 0.7 m below ground surface. 3.06 The drainage systems would require many bridges and culverts to carry roads over branch, lateral, and sublateral drains. These would be constructed of brick in most cases but reinforced concrete would be used for large spans. Pumping stations and tubewell pumphouses would be constructed primarily from brick. Concrete pipe for culverts is made in the counties. At some locations it would be necessary to pump drainage flows from the branch drains into the rivers. The total installed capacity of drainage pumps would be about 3,000 HP. Details of the drainage systems are summarized in Table 3.1.  - 18 - Table 3.1: DRAINAGE SYSTEM Province: Shandong Anhui Henan Main and Branch Spacing (m) ----- 1,500-3,000 ------ Depth (m) ------- 2.5-3.5 -