Overview

Since initiating market reforms in 1978, China has shifted from a centrally-planned to a market-based economy and has experienced rapid economic and social development. GDP growth has averaged nearly 10 percent a year—the fastest sustained expansion by a major economy in history—and has lifted more than 800 million people out of poverty. China reached all the Millennium Development Goals (MDGs) by 2015 and made a major contribution to the achievement of the MDGs globally.

With a population of 1.3 billion, China recently became the second largest economy and is increasingly playing an important and influential role in the global economy.

Yet China remains a developing country (its per capita income is still a fraction of that in advanced countries) and its market reforms are incomplete. According to China’s current poverty standard (per capita rural net income of RMB 2,300 per year in 2010 constant prices), there were 70.17 million poor in rural areas in 2014.   

Rapid economic ascendance has brought on many challenges as well, including high inequality; rapid urbanization; challenges to environmental sustainability; and external imbalances. China also faces demographic pressures related to an aging population and the internal migration of labor.

Significant policy adjustments are required in order for China’s growth to be sustainable.  Experience shows that transitioning from middle-income to high-income status can be more difficult than moving up from low to middle income.

China’s 12th Five-Year Plan (2011-2015) and the newly approved 13th Five-Year Plan (2016-2020) forcefully address these issues. They highlight the development of services and measures to address environmental and social imbalances, setting targets to reduce pollution, to increase energy efficiency, to improve access to education and healthcare, and to expand social protection. The annual growth target in the 12th Five-Year Plan was 7 percent and the growth target in the 13th Five-Year Plan is 6.5 percent, reflecting the rebalancing of the economy and the focus on the quality of growth while still maintaining the objective of achieving a “moderately prosperous society” by 2020 (doubling GDP for 2010-2020). 

Last Updated: Sep 14, 2016

Building on a cooperative relationship spanning over 35 years, the World Bank Group’s Country Partnership Strategy (CPS) for fiscal years 2013 through 2016 is aligned with China’s 12th Five-Year Plan. It is also informed by the joint study, China 2030, prepared by the World Bank and the Development Research Center of the State Council. To support China’s goal of a harmonious society, the Bank Group focuses on three main areas of engagement:

  • Supporting greener growth, by helping China shift to a more sustainable energy path; enhancing urban environmental services; promoting low-carbon urban transport; promoting sustainable agriculture practices; piloting sustainable natural resource management approaches; demonstrating pollution management; and strengthening mechanisms for managing climate change.
  • Promoting more inclusive development, by increasing access to quality health services and social protection; strengthening skills development programs, including for migrant workers; enhancing opportunities in rural areas and small towns; and improving transport connectivity for more balanced regional development.
  • Advancing mutually beneficial relations with the world, by supporting China’s South-South cooperation and China’s role as a global stakeholder.

In addition, the Bank will provide client-driven knowledge services that help underpin reforms needed to reenergize the drivers of growth.

The Bank Group’s most valuable contribution in China remains its role in bringing and applying ideas, innovation, and knowledge. The CPS emphasizes knowledge sharing and cooperation through advice and analytical products and through investments at the provincial level that introduce and demonstrate new approaches.

A Performance Learning Review (PLR) of the CPS, prepared in early 2016, found good progress in implementing the CPS.

As of June 30, 2016, Bank cumulative lending (IBRD and IDA) to China was about $57.71 billion for 399 projects. The portfolio is concentrated in environment, transportation, urban development, rural development, energy, water resources management, and human development.

In line with the government’s increased emphasis on growth that is balanced with social and environmental concerns, the focus of the Bank’s activities in China has shifted significantly.

Today, more than 70% of the Bank’s portfolio has environmental objectives, many with global implications. The Bank also pays particular attention to the western and central provinces, where poverty rates are significantly higher than in coastal provinces.  About two-thirds of active projects are in lagging interior provinces.

New approaches are also being introduced to finance investments to improve energy efficiency, pilot and expand the use of innovative renewable energy sources, rehabilitate and modernize urban district heating systems, and address air pollution. Urban environmental management is being strengthened to help cities meet challenges such as rapid motorization.

As China develops, collaborative research and analysis are becoming an important part of the Bank’s engagement. For example,  China 2030: Building a Modern, Harmonious, and Creative Society, a joint research report by the World Bank and the Development Research Center of China’s State Council, lays out six strategic directions for China’s future: completing the transition to a market economy; accelerating the pace of open innovation; going “green” to transform environmental stresses into green growth as a driver for development; expanding opportunities and services such as health, education and access to jobs for all people; modernizing and strengthening its domestic fiscal system; and seeking mutually beneficial relations with the world by connecting China’s structural reforms to the changing international economy.

Urban China: Toward Efficient, Inclusive, and Sustainable Urbanization, also a joint research report by the World Bank and the Development Research Center of China’s State Council, recommends that China curb rapid urban sprawl by reforming land requisition, give migrants urban residency and equal access to basic public services, and reform local finances by finding stable revenues and by allowing local governments to borrow directly within strict central rules.

To meet growing demand from other developing countries to learn from China, the Bank also plays the role of knowledge broker to support China in sharing its development experience.

International Finance Corporation (IFC)

China is IFC’s second largest portfolio country. Since its first investment in 1985 to date, IFC has invested US$12 billion (combined IFC's own account and mobilization, including short-term finance) to support over 350 projects across 30 provinces in China. In fiscal year 2016, IFC has invested US$1.2 billion in 25 projects.

IFC’s strategic priorities in China focus on climate change, including renewable energy, energy efficiency, water efficiency, clean tech, green policy and green credit; balanced rural and urban development, including a focus on frontier regions, food safety, scaling up microfinance outreach and capacity, and agricultural linkages; and China’s outbound investment, including partnerships with Chinese firms to invest in other emerging economies, particularly in Africa, mobilizing capital, syndication loans, and sharing knowledge and standards.

Last Updated: Sep 14, 2016

China’s dramatic progress in reducing poverty over the past three decades is well known. More than 500 million people were lifted out of poverty as China’s poverty rate fell from 88 percent in 1981 to 6.5 percent in 2012, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms. World Bank extrapolations suggest that the percentage of the population living below the international poverty line continued to fall to 4.1 percent in 2014.

Substantial progress was made in human development indicators as well, contributing to global efforts to achieve the Millennium Development Goals.

China began its partnership with the Bank in 1980, just as it embarked on its reforms. Starting as a recipient of support from the International Development Association (IDA), the Bank’s fund for the poorest, China graduated from IDA in 1999 and became a contributor in 2007. It became the third largest shareholder in the World Bank upon completion of the capital increase approved in 2010, the 30th anniversary year of its partnership. 

Throughout this time, the nature of the Bank’s activities in China changed to meet the country’s rapidly evolving needs. Initially, the Bank provided technical assistance to introduce basic economic reforms, modern project management methodologies, and new technologies. Later, the focus shifted to institutional strengthening and knowledge transfer. The Bank now encourages knowledge sharing to enable the rest of the world to learn from China’s experience.

Here are some recent results of the World Bank-supported Projects in China:

More results

Last Updated: Sep 14, 2016


LENDING

China: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments