Final Report - Asian Development Bank

1. PROJECT SUMMARY 1
a) Rationale
1. Shaanxi Province is part of western China where economic growth rates have lagged those in
the eastern provinces. Shaanxi grew at an average of 7.5% from 1990 to 2000 compared with a national
average of 10% to 11%. When coupled with population growth, GDP/capita fell from 75% of the national
average to less than 60% over the same period. From 2000 to 2005 Shaanxi achieved an average growth
rate of 9.8% per annum exceeding the national average and increasing the GDP/capita to 63% of the
national average. A major stimulus for the increased growth was the additional investment made under
China’s western development strategy under the Tenth Five Year Plan. Among the 31 provinces,
autonomous regions and independent municipalities in China, Shaanxi currently ranks 16 th in terms of
population size, 22 nd in terms of the size of the economy and production base (as measured by GDP and
industrial production), and 26 th with respect to GDP/capita 2 . Shaanxi is home to about 2.8% to the
country’s population, contributes 1.8% to its GDP, and has a land area of 206,000 sq. km. (2.1% of the
nation’s total).
2. Shaanxi’s economic development is limited by (i) continued dependence on primary sector
production systems that are weakly linked to markets and local value addition, (ii) limited off-farm
employment in rural areas, (iii) below average productivity and efficiency in productions systems due to
the current structure of smallholder agriculture, (iv) low levels of industrial production and limited private
sector investment, (v) low savings rates to support future investment, (vi) limited local government
revenue for service provision, (vii) markedly lower levels of urbanization than in other areas (40%
compared with 60% in eastern provinces), and (viii) limited export trade that amounts to only 7% of GDP
(compared with 30% for PRC) and FDI inflow of 1.3% of GDP (compared with a national average of
4%). Shaanxi has a predominantly rural economy that continues to lack the capacity to generate sufficient
output for export trade, reinvestment and as a consequence the inability to generate sufficient employment
to diversify the economy out of agriculture.
3. The higher growth rates since 2000 derive largely from additional investment into infrastructure
and from the expansion of tourism demand that utilizes the past investment into accommodation and
product development in Shaanxi, especially in the capital Xian. Xian city accounts for 21% of provincial
population but contributes over 40% of GDP. Shaanxi’s poorer rural counties have GDP/capita less than
30% of the national average resulting in 55 of the 88 counties being classified as poverty counties. In
2004, the average annual income of Shaanxi urban residents was CNY5,928 ($730 equivalent) while per
capita income of the rural population was CNY1,050 ($130 equivalent). At these levels rural incomes are
only 35% of the $1/day poverty criterion and approximately 50% of the average provincial income level.
4. The Shaanxi Province 11 th Five Year Plan was approved on November 16, 2006. GDP is
targeted to grow in real terms by 11.5 % per year, the population is to grow at a modest pace to reach 38.3
million in 2010 compared with about 37 million at the present time, per capita GDP is targeted to increase
to CNY16,000 – which equates to about $2,050, and government revenues are targeted to increase from
the current level of CNY60 billion to about CNY100 billion, a real growth rate of nearly 14% per year.
1 A more detailed description of the Project may be found in the Project Document that is an attachment to this submission.
Greater detail on the environmental aspects of the Project can be found in the Environmental Assessment Report, available at
http://www.adb.org/Documents/Environment/PRC/38660/38660-PRC-SEIA.pdf, while further detail on the social aspects of
the Project can be found in the Resettlement Planning Document available at
http://www.adb.org/Documents/Resettlement_Plans/PRC/38660/38660-01-PRC-RP.pdf.
2 Used as a proxy indicator for the standard of living and consumer purchasing power at the provincial and sub-provincial levels.