World Bank Approves $ 200 Million Loan to Provide Rural Utilities in Hunan

The World Bank Board of Directors today approved a $ 200 million loan to help China’s Hunan Province deliver more equitable and efficient public services in rural areas.

While China’s growth has helped eradicate extreme poverty, it has been accompanied by widening disparities between coastal and inland provinces and between rural and urban areas. Imbalances in intergovernmental fiscal relations have led to excessive debt accumulation, inequitable service delivery and low spending efficiency, which has been exacerbated by the impact of COVID-19.

“Our support for China is increasingly selective, with an emphasis on reducing remaining institutional gaps and contributing to global public goods. China’s subnational finance reforms are important for reducing regional disparities, improving public service delivery in the poorest regions of the country and containing debt build-up, ”said Martin Raiser, World Bank Country Director for China.

The funding would support the Hunan provincial government through measures to strengthen local debt management and provide results-based transfers aimed at reducing disparities in the quality of basic education in rural areas. It would also improve the financing of rural road maintenance, in particular by strengthening the climate resilience of rural roads.

The project will also introduce greater accountability by making budget information more transparent and accessible to citizens.

The project is part of the provincial government’s rural revitalization program. The results will first be tested in eight selected rural counties in Hunan. These counties are relatively poor with a median GDP per capita of only about half of the national average.

“This project will introduce new approaches to manage fiscal risks, results-based transfers and better asset management at the sub-national level, while improving transparency and accountability in local government budgets,” said Min Zhao, Senior Economist at the World Bank. “We expect the project to achieve demonstration effects that could be replicated in Hunan and other provinces.”

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