China has achieved great success in reducing poverty. However, at the turn of the century, China still had the second-largest poor population in the world, after India. About 80% of the extreme poor, mostly rural residents, lived in the western and central provinces.
The Chinese government announced a plan to lift 148,000 villages out of poverty by 2010 and put in substantial funding for implementation. However, institutional constraints attached to the use of these funds limited the amount of funding that could actually reach villages and households. Only a limited share of the funding was available at the village level for essential rural infrastructure services such as roads and drinking water systems.
Many poor rural people also lived in remote and often environmentally fragile mountain regions. Conditions for agricultural production were lacking and alternative livelihood opportunities were very limited. Inadequate farming techniques and land and water resources management practices made the poor vulnerable to natural disasters and the effects of climate change.
The project was designed to assist the government in overcoming the institutional and administrative barriers to the effective use of poverty reduction program funding, so that a larger share of the funds would reach the poorest communities, and villagers themselves could play a greater role in determining the poverty reduction measures and forms of assistance that they adopt.
As the first of its kind in China, the project introduced and piloted Community Driven Development (CDD) and Community Development Financing (CDF) in the poor rural areas of three Chinese provinces. CDD provides control of the development process, resources and decision making authority directly to the communities. CDF provide small block grants to farmers’ mutual-help cooperatives in support of household-level productive activities, including improved and diversified crop production, animal husbandry and other income generating activities.
CDD and CDF empowered the rural communities and enabled them to select specific project activities that best met their needs. This would strengthen their sense of ownership and accountability, and promote village-level democratic management and capacity building.
The project also financed development of basic rural infrastructure and public services. It also piloted sustainable land management and climate adaption measures in selected project villages and counties.