Infrastructure, Growth and

Poverty Reduction
in China

Dong Yan

Institute of Comprehensive Transportation of National

Development and Reform Commission

April 1, 2004
 Contents
1. Institutional and Policy Framework
2. Driving Factors
3. Case Study: Impact of Transportation
Infrastructure on Regional Economy and
Poverty Reduction
4. Lessons Learned
5. Problems and Prospects

2
1. Institutional and Policy Framework

3
• Institutions involved in rural
transportation and poverty reduction

——The transportation administration sector

——Administration sectors for the Food for

Work Program

——Poverty reduction institutes

4
Administration sectors for The transportation Poverty reduction
the Food for Work Program administration sector institutes
National Development Ministry of Office of the State Council
and Reform for Development-oriented
Commission Communication Poverty Relief

Provincial Provincial Provincial Development-

Development Planning Communication
Commission oriented Poverty Relief
Department Office

Prefectural Developme Prefectural Commu Prefectural Development-o

nt Planning Commissio nication Bureau riented Poverty Relief Offi
n ce

County Development County County Development-

Planning Commission Communication oriented Poverty Relief
Bureau
Office 

Township
government Rural
Highways
Village committee

5
• Transportation policies for poverty reduction

—— Increased investment in transportation

infrastructure by Food for Work programs

—— Increased investment in transportation

infrastructure by financial transfers

—— Poverty reduction work implemented by

the transportation sector

6
2. Driving Factors

7
• Commitment and Political Economy for Change

The first factor is the great attention the Chine

se government pays to development-oriented pove

rty alleviation, transportation programs aimed at re

ducing poverty and development of rural roads.

8
 Development-oriented poverty alleviation

——8-7 National Poverty Reduction Program （ 1994-2000 ）

—— Outline for Poverty Alleviation and Development of

China’s Rural Areas （ 2001—2010 ）

 Transportation programs aimed at reducing pover

ty and development of rural roads
——Western development campaign

——Increased investment on highway construction and rural

highways are one of main concerns

9
 Table 1 The development targets of Chinese rural highways

Year Development targets

The accessibility and quality of Chinese rural highways are greatly

improved: 99.8 percent of townships have highways, and more
2001-2005 than 80 percent of these highways are paved by cement or asphalt.
96 percent of villages have highways, more than 50 percent of
these highways are paved by cement or asphalt.
All suitable townships and villages have highways. 95 percent of
administrative villages with highways have regular bus service.
2006-2010
Highways from counties to townships are paved by cement or
asphalt. Highways from townships to villages are paved.
Highways from townships to administrative villages are paved by
2011-2020 cement or asphalt, and all administrative villages with highways
have regular bus service.

10
• Institutional Innovation

Lack of funds is the key factor restricting the dev

elopment of rural transportation. Since economic refor
m in the late 1970s the diversification of funds resourc
e (including investments from governments of all level
s, funds collected by the local governments, voluntary
works of the farmers, domestic loans, foreign investm
ents ) has greatly promoted the development of rural h
ighways.

11
Example : Fund structure of Poverty-alleviation Road
Improvement Component of the Third Henan Provincial H
ighway Project Loaned by the World Bank （ RIPAⅢ ）

0.90%
1.24%
31.81%

66.05%

Loans from WB
Investment of provincial, city and county governments
Voluntary works of the farmers
Food for Work

12
• Learning and Experimentation

Since 1998 Law of Highways, Law of Contract, Law of

Bidding, Law of Engineering Administration and Regulations
on Highway Construction Market are issued by the Chinese g
overnment. The implementation of these laws and regulations
has created significant effects on protecting property right of t
he roads, ensuring smooth operation of the roads, strengthen a
dministration on highway construction and promoted the deve
lopment of rural highways.

13
• External Catalysts

The Chinese government has been actively working

with international organizations in development-oriented po
verty reduction and transportation infrastructure constructio
n.

In rural transportation construction, the international or

ganizations play a special role both in supplying funds and i

n management.

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3. Case Study: Impact of Transportation
Infrastructure on Regional Economy
and Poverty Reduction

15
• General introduction of RIPAⅢ

The Poverty-alleviation Road Improvement Co

mponent of the Third Henan Provincial Highway Pr
oject Loaned by World Bank (RIPAⅢ), started in
May 2001 and ended in Dec 2002, is a subsidiary of
Zhumadian-Xinyang Expressway. It consists of 10 r
oad sections, 372KM. Total expenses were RMB 33
3.82 million yuan, in it WB loan RMB 106.19 milli
on yuan.

16
 • Methodology

Chose 6 townships as Control Zone

Collect socio-economic statistics

Rural household survey Structured interview

Comparison analysis of Impact Zone and Control Zone

17
• Socio-economic background of Impact Zone
(IZ) and Control Zone (CZ)
The Impact Zone of RIPAⅢ includes 8 counties, 40 townships and 546
villages in Zhumadian City and Xinyang City, impoverished areas in Hena
n province, total population 1.809 million, total area 3508 km2. Control Zo
ne consists of 6 townships, 2 of them in Zhumadian City and 4 in Xinyang
City, total population 0.224 million , total area 561 km2.
Before the implementation of RIPAⅢ , IZ and CZ are similar in econo
mic development level, culture, natural and geographic situations and trans
portation conditions. Both areas are impoverished areas with a large poor p
opulation and poor transportation conditions .
After the implementation of RIPAⅢ, the road networks of IZ are upgra
ded and better structured, promoting economic development of local areas.

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• Socio-economic impact of RIPAⅢ
 The development of economy
Table 2 Comparison of GDP per capita between IZ and CZ
Unit: RMB yuan

Absolute Relative
IZ CZ
disparity disparity
（1） （2）
（3） （4）

2000 2847 2878 -31a 0.989b

2002 3236 3194 42a 1.013b

Growth rate 13.66% 10.98% — —

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 The farmer’s income and poverty reduction

2050 2023.0
2000
1950 1917.8
1900 IZ
1850 1808.3 1811.1 CZ
1800
1750
1700
2000 2002

Unit: RMB yuan

Figure 1 Comparison of income per capita between IZ and CZ

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 Table 3 Comparison of poor population between IZ and
CZ

IZ CZ
Change
Change
2000 2002 2000 2002 （%
（%）
）
The number of
118660 98710 -16.8 17800 15300 -14.0
poor population
Proportion in rural
7.9 6.5 -17.7 8.0 6.8 -15.0
population （ % ）

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  Market construction and urbanization

Table 4 Comparison of rural markets and urbanization

between IZ and CZ

IZ CZ
Change
Change
2000 2002 （% 2000 2002
（%）
）
Markets and
102 127 24.5 14 17 21.4
specialized markets
Town population
14.17 16.79 18.5 1.83 1.98 8.2
(10,000 persons)
urbanization （ %
9.5 11.1 16.8 8.3 8.8 6.0
）
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 Rural industrialization

Table 5 Comparison of rural industry between IZ and CZ

IZ CZ
Change Change
2000 2002 2000 2002
（%） （%）
Added value of in
dustry
119788 146151 22.0 17771 20431 15.0
（ 10,000 yua
n）
Its proportion in
28.1 29.9 6.4 27.9 28.5 2.2
GDP （ % ）

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 Transportation industry
Table 6 Comparison of transportation industry between IZ and CZ

IZ CZ
Change Change
2000 2002 （% 2000 2002 （ %
） ）
Number of vehicles 87868 99817 13.6 1330 1410 6.0
Passenger
volume （ 10,000 1335 1550 16.1 190 214 12.6
persons ）
Freight
volume （ 10,000 619 762 23.1 86 97 12.8
ton ）
Passenger transport task
52640 66550 26.4 7730 9050 17.1
(10,000 persons.km)
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Freight transport task
37810 49740 31.6 6724 7860 16.9
 Tourism

There are abundant tourism resources in the IZ, but the poor transpo
rtation restricted the exploitation of tourism resources in the past. After the
implementation of RIPAⅢ, the improvement of transportation greatly pro
moted the development of tourism, creating favorable conditions for the gr
owth of the farmer’s income.
“…Last year RIPAⅢ reached my village. Many tourists come to visit
General Xu Shiyou’s museum and tomb daily. We can sell souvenirs and f
ood to them. The villagers become rich. We built new house outside the mu
seum. A remote mountain village became a nice sightseeing.”
——Xu Yimin, a relative of General Xu Shiyou

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 Agriculture
The improvement of transportation promoted the adjustment of agri
cultural structure. Agricultural products planted by farmers in mountain vi
llages can be transported to cities easily and fast. The farmer’s income inc
reased fast by planting profitable products.
“In IZ we planted wheat and rice in the past. The farmers were poor.
RIPAⅢ improved the rural roads. Farmers built greenhouses and plastic
sheds along both sides of roads. They planted vegetables and fruits in off-
seasons. They planted flowers and precious plants to sell in the cities. The
y planted medical herbs to sell to the pharmacy factories. The trucks can
drive into their gardens to carry the loading. The income from one mu is e
qual to that of 10 mu grain.…”
——Sun Xiaofeng, technician of Zhumadian Agriculture Burea
26
u
 Changes in the farmer’s ideology

The improvement of transportation facilitated the travel for poor populat

ions and their connections with outer world, therefore brought great changes
in the living styles and ideology of the farmer’s.
“…Now the roads are better, more people went to work in cities. They s
aw the citizen’s living style. Now in modern city, woman is equal to man. In t
he city people like girls more because girls are dearer to their parents. Goin
g out to work in cities, girls have more chances than boys. After young peopl
e returned home village, they prefer less children and regard baby girls as g
ood as baby boys. Now one family has at most two babies. While in the past,
people born child one by one until they born a baby boy…”
——Zhang Hua, Cadre in Xinyang’s Women Federation
27
 Better access to healthcare facilities

The improvement of transportation has raised the accessibility of health

care service and increased utilization of healthcare service of rural population
s. When natural disaster happens, good transportation supplies a fast thorough
fare for the relief work, decreasing the loss to the largest extent and keeping t
he stability of the society.
“…I opened a clinic at the roadside. RIPAⅢ improved the transportation
conditions, more people can come to my clinic. If the patient is serious, I can
give him first aid treatment and sent him to the better hospital. Now it takes o
nly 20 minutes for us to go reach the county seat…In 2003, there was a big fl
ood in Shangcai. The RIPAⅢ displays its power, the medical teams and medi
cal vehicles from the province came at once. They disinfected the disaster are
as and cured the patients. So no one died of epidemic diseases that year.” —
—Liu Zhentang, a private rural doctor in Taqiao township, Shangcai county
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• Conclusions
After the implementation of RIPAⅢ the general economy, the farme
r’s income, rural markets and small town construction, rural industrializati
on, transportation industry in Impact Zone developed or increased faster t
han Control Zone. The implementation of RIPAⅢ also boosted the devel
opment of tourism and agriculture, raised accessibility of healthcare servi
ce and brought changes in the farmer’s ideology in IZ. The implementatio
n of RIPAⅢ has created positive impacts both on economic growth and s
ocial progress, done benefit directly to the poor population and accelerate
d the pace of poverty reduction in IZ.

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4. Lessons Learned

30
• The government’s role is central in Poverty-
Targeted Interventions (PTI)

——Investment of the governments of all levels is the most

important fund source of RIPA

——The local governments formulate preferential policies

and create favorable conditions for RIPA

——The local governments pay attentions to, support and

effectively organize the projects

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• Professional management guarantees successful i
mplementation and sustainability of PTI

Vigorous management according to related regulations an

d international principles is one of key reasons for the successf
ul implementation and of RIPA.
Although the investment scale of every RIPAⅢ project is
small and the construction period is short, every project, from
application to completion, was implemented according to the r
equirement of projects loaned by the World Bank. That increas
ed the investment benefit and ensured the sustainability of RIP
A.
32
• Funds from diversified sources ensured successful
implementation of PTI

The government, though the most important source of fun

ds, is not able to afford the total investment of rural highways a

lone. Collecting funds from diversified sources such as loans fr

om international financial organizations and voluntary works o

f the farmers is a good solution.

33
5. Problems and Prospects

34
• Remaining problems
Main problem is how to establish a sustainable mechanism
to collect funds for the construction and maintenance of rural hi
ghways.
——Limited support from the central and provincial
governments
——Most local governments have not enough financial
resources to develop rural highways
——In the recent rural fees and taxes reform the farmer’s
voluntary works are prohibited to be used at large scal
e
35
• Prospects
China still has a long way to go to reduce poverty. It has b
een fully proved that transportation infrastructure, especially hi
ghway infrastructure, is a fundamental factor affecting the soci
o-economic development of poor areas. The Chinese governme
nt is taking active steps to accelerate the construction of rural tr
ansportation infrastructure. Transportation infrastructure will c
ontinue to play an important role in economic development and
poverty reduction in the future.

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The end,
Thanks!

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