Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 29564

IMPLEMENTATION COMPLETION REPORT(IDA-24470)

ON A

CREDIT

IN THE AMOUNT OF SDR 34.489 MILLION

TO

THE PEOPLE'S REPUBLIC OF CHINA

FOR A

REFORM, INSTITUTIONAL SUPPORT AND PREINVESTMENT PROJECT

June 29, 2004

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 2002)

Currency Unit = Renminbi (RMB) Yuan (Y) Y 1.0 = US$ 0.12

US$ 1.0 = Y 8.3

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMSABC Agricultural Bank of ChinaADB Asian Development BankBank World BankBTO Back to Office ReportCASS Chinese Academy of Social SciencesCOSMD Class of Service and Multi-DesignCPC Chinese Communist PartyDICOM-3 Digital Image Communication for Medicine Ver 3.0EDI Economic Development InstituteEIA Environment Impact AssessmentGDLN Global Distance Learning NetworkICP International Comparison ProjectICR Implementation Completion ReportIDA International Development AssociationIFAD International Fund for Agricultural DevelopmentMOF Ministry of Finance MPS Material Product SystemPIP Project Implementation PlanPMO Project Management OfficePROST Pension Reform Option Simulation ToolkitRMB Chinese Currency (Yuan)SAR Staff Appraisal ReportSARS Severe Acute Respiratory SyndromeSOE State Owned EnterprisesSPC State Planning CommissionSRC State System Reform CommissionSTA State Tax AdministrationSTB State Tax BureauTA Technical AssistanceTCP IV The Fourth Technical Cooperation ProjectTCP V The Fifth Technical Cooperation Project SARS Severe Acute Respiratory SyndromeSNA System of National AccountingSSB State Statistical BureauWBI World Bank InstituteXBRL Extensible Business Report LanguageXML Expanded Marketing Language

Vice President: Jemal-ud-din KassumCountry Director Yukong HuangSector Manager

Task Team Leader/Task Manager: Zhengxuan Zhu

CHINAREF. INST'L.& PREINV

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 66. Sustainability 77. Bank and Borrower Performance 88. Lessons Learned 99. Partner Comments 1010. Additional Information 10Annex 1. Key Performance Indicators/Log Frame Matrix 11Annex 2. Project Costs and Financing 21Annex 3. Economic Costs and Benefits 24Annex 4. Bank Inputs 25Annex 5. Ratings for Achievement of Objectives/Outputs of Components 26Annex 6. Ratings of Bank and Borrower Performance 27Annex 7. List of Supporting Documents 28Annex 8. Borrower's Contribution 29

Project ID: P003592 Project Name: Reform, Institutional Support and Preinvestment

Team Leader: Zhengxuan Zhu TL Unit: EASRDICR Type: Core ICR Report Date: June 29, 2004

1. Project DataName: Reform, Institutional Support and Preinvestment L/C/TF Number: IDA-24470

Country/Department: CHINA Region: East Asia and Pacific Region

Sector/subsector: Public Sector Management/Other Public Sector ManagementTheme: Administrative and civil service reform (P); Infrastructure services

for private sector development (P); State enterprise/bank restructuring and privatization (P); Other financial and private sector development (P); Other economic management (P)

KEY DATES Original Revised/ActualPCD: 1991-12-24 Effective: 1993-12-03

Appraisal: 1992-05-20 MTR:Approval: 1992-12-15 Closing: 1998-06-30 2003-12-31

Borrower/Implementing Agency: PRC/MINISTRY OF FINANCEOther Partners: Subprojects Implementing Agencies

STAFF Current At AppraisalVice President: Jemal-ud-din Kassum Cheetham RussellCountry Director: Yukon Huang Shahid Javed BukiSector Manager: Dvid PearceTeam Leader at ICR: Zhengxuan Zhu Albert D. HowlettICR Primary Author: Zhengxuan Zhu

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time:

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The project has two principal objectives. The first is to support the Government's program of reform, and related institutional strengthening. The second is to support the Government's investment program. Specifically, the project is to (a) support reform-supportive studies and economic research; (b) help strengthen selected core agencies responsible for macroeconomic management, (c) support local training institutions, including some of those working with Economic Development Institute, and (d) provide an assured and flexible source of financing for technical assistance for preparation of projects expected to be financed by the Bank and IDA, and in selected cases for their implementation.

3.2 Revised Objective: The project objective has not been revised throughout the project implementation.

3.3 Original Components: Reform and institutional development component. The estimated cost of this component was US$ 26.6 million, including US$ 20 million of IDA credit and US$6.6 million of government fund. It consists of subprojects for key core agencies involved in the reform program. At the time of appraisal, agreement was reached with the government on a core list of seven subprojects under this component: (a) the state Statistical Bureau - to strengthen its national accounting system and analysis capability; (b) the Chinese Academy of Social Sciences - to improve its economic analysis and forecasting; (c) the System Reform Commission - to carry out several studies; (d) the State Tax Bureau - to help its capacity strengthening to formulate and implement tax policy; (e) the Ministry of Materials and Equipment - to support its program of reform of the production distribution system for major goods of steel, timber, cement, ferrous metals and vehicles; (f) the Ministry of Finance - to carry out China's program of economic and sector analysis in support of the economic reform program; and (g) the Training networks in health sector, which was supposed to carry out in close collaboration with EDI of the World Bank. The total committed credit amount was around US$ 7 million. Funding reserved for financing of other and additional subprojects are required for approval on a case-by-case basis during project implementation. At the time of appraisal, following subprojects were under consideration: Legal Reform, Training Networks for Agriculture, transportation and Finance sectors, etc,. Preinvestment and project preparation components. Cost estimate of this component was US$ 34.4 million, including US$ 30 million of IDA credit and US$ 4.4 million of government fund. The purpose of this component is to finance feasibility studies and selected project-related studies. Subprojects were selected according to following agreed criteria: (a) preparation of feasibility studies of projects to be financed by the Bank or the Association; (b) selected project related studies; and (c) in exceptional cases, the implementation of such projects.

3.4 Revised Components:Component Credit Government Rating REFORM AND INSTITUTIONAL DEVELOPMENTS $23,680,401.63 4,800,000 S In addition to the seven subprojects approved at the time of appraisal, the following 26 subprojects were approved during the process of implementation: (1) Training network of the transportation sector; (2) Agricultural Sector Training; (3) Public Finance and Management Training; (4) Management Strengthening of Bank Credit/Loan; (5) Bond Trading Custody; (6) Quality Monitoring; (7) National External Debt Management; (8) State Planning commission Training; (9) Quality Monitoring II; (10) Capital Market Financial Management; (11) Institutional and Staff Capacity Strengthening of MOF; (12) Strengthening Provincial Bureaus; (13) Medium and Long Term Fiscal Policy; (14) Strengthening Shanxi Finance; (15) Liaoning Public Finance; (16) Shanghai High Education Reform; (17) Guizhou Investment

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Environment Improvement; (18) Supporting Tax Judicature Study; (19) Wuhu Enterprise Reform; (20) Wuhan Enterprise Reform; (21) Changsha Enterprise Reform; (22) Shengyang Enterprise Reform; (23) System Design on Information Disclosure Database of China's Listing Companies; (24) Promotion of Stability and Development of Medium and small Banks in China; (25) MOL Tackling Key problems in National Employment and Social Insurance Management Information System; (26) Capacity Strengthening in foreign debt Auditing.

Component Credit Government RatingINVESTMENT SUPPORT $24,543,917.31 4,860,000 S Twenty two subprojects were approved and implemented under this component. They are: (1) Yanzhou Power; (2) Zhejiang electric Power; (3) Longtan Hydropower; (4) Shengyang Energy Industry; (5) Ertan Transmission; (6) Hunan Water Resources; (7) Hubei Water Resources; (8) Qinbei Electric Power; (9) Toketo Power; (10) Chongqing Industry Reform; (11) Hubei Environment; (12) Gansu Company Development; (13) Yunnan Environment; (14) Shanghai Wai Gao Qiao Power; (15) East China transportation ; (16) Hunan Power Development; (17) Second Tarim Basin Irrigation; (18) Tongbo Pump Storage; (19) Beijing Transmission and Distribution; (20) Baise Multipurpose; (21) Guanzhong Irrigation; (22) Hebei Urban Environment.

3.5 Quality at Entry: Quality at entry is good for the following reasons: (a) The design of the project is in line with the CAS: Since 1980, the fundamental objective of the Bank's Country Assistance Strategy in China had been to provide analytical and material support to the country's economic reform and modernization process; (b) It requires a vigorous dialogue at the national level, supported by a substantial program of economic and sector work, in order to address the Bank's objectives in China to support broad based economic development and to combat poverty. It also requires direct support to key core agencies to strengthen their capacity to carry out the analysis and later to implement major reform measures; (c) This project is able to help the Bank to support a substantial program of lending with a strong reform program; (d) Before this project, three other projects of similar nature were implemented. Lessons of those projects were learned and applied during project preparation, including (i) detailed preparation and design of individual subprojects; (ii) appropriate mechanisms and processes for periodic monitoring of subproject execution; and (iii) flexible, but systematic overall project coordination and management; and (e) Mr. Lewis T. Preston, the then president, expressed his satisfaction over the project preparation, by saying "I am satisfied that the proposed credit would comply with the articles of agreement of the Association".

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective: The project objective and outcome were substantially achieved, which met the Government requirement, helped expedite the Government reform process and raised the project preparation quality. Annex 1 provides in detail the achievements of objective and outputs.

Part A - Reform and Institutional Development (Credit amount: US$ 23,680,401.63 supporting 33 subprojects). Good achievements were made under this component: (a) About fifteen government agencies and core research institutes responsible for macro economic management, as well as six local governments were directly benefited from the project. (b) Through overseas trips and local studies, researches, international and domestic workshops, as well as international and local consultancies, a lot of new concepts and ideas were introduced, which promoted the government reform. (c) Weakness of various sectors and government administrations were identified, reform needs were defined, good practice were learned and policy recommendations were made accordingly. (d) A substantial part of the recommendations made under the project were adopted by the Government at central and local levels, hence becoming part of the government policies and regulations, or the basis for government legislation set up.

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For examples: (i) A research was conducted by Heilongjiang under A20 on starting up the second undertaking. It's recommendations on the key areas of investment during the second undertaking and their fund mobilization provided good guidance to the provincial economic development. What's more, it is in line with the needs to the "revitalization of the northeast old industrial base", which is a strategic plan put forward recently by the Chinese Government. Based on this, the provincial government issued a series of policies to support the revitalization of the old industrial base. (ii) Guizhou is among the poorest provinces in China. Attracting external investment is one of the effective ways to help the province to get rid of poverty and to develop the provincial economy. Focussed on this issue, the subproject supported several studies, including long-term planning for external investment introduction; the organizational set up, policies and regulations governing external fund introduction and management, the information system and software development, etc. Following the completion of this subproject, the Provincial Merchant Bureau was established, and a series of policy measures governing the external investment were issued by the provincial government based on the recommendations of the subproject. To ensure sound climate for external investors, the government traced the investment climate of thirteen cities and eleven national and provincial development zones, and the tracing reports were made open to the public. (iii) Information disclosure is an important mean to standardize the behavior and actions of the listing companies. A 31 is approved for this purpose. Based on the recommendations of the subproject, the Security Supervisory Board made the decision to push forward the information disclosure of all listing companies in China. Since April 2004, the Board also has requested all the listing companies to use XBRL international standard to issue their annual reports, thus greatly enhancing transparency of the listing companies . (e) In addition, sector reform agenda, and that of the government at local levels are worked out. All these have supported and promoted the government reform process.

The project has achieved great success in institutional and staff capacity building and strengthening. Its impact is obvious: (a) Great number of government and core agency staff received overseas and domestic training either through the established training networks under this project, or the individual subprojects. As a result, the trainees opened up their minds and learned best practices, both international and domestic. Many of them got promotion and were able to play a better role in the government decision process by putting forward good recommendations for the decision makers. (b) New models and technologies developed under the project became useful means for smooth and successful transition from the planned economy to the market economy. For example, (i) By implementing A1 subproject, SSB was able to reform its business accounting system from MPS to internationally accepted SNA, which played its due role in helping transmit from the planned economy to the market economy. It also helped SSB to reform its survey method, using sample techniques, both for use in national accounting work and for monitoring of economic trends. (ii) The dynamic annual economic analysis and forecast model, the seasonal model and the enterprise model developed under A2 had helped strengthen the capacity of the Quantitative and Technical Economics Institute of the Chinese Academy of Social Sciences by enabling the Institute to provide the government a quantitative basis for policy making. Its analysis and forecast had become an important source of information for the government, the enterprises, and the academic ranks. (iii) With the subprojects A14 and A17, China was able to adopt internationally accepted quality management and certification system, including the principles, criteria and procedures, thus raising the competitiveness of the government agencies and the enterprises in the international market. (iv) With A 16, the Chinese Government is able to fundamentally change its way of formulating its National Five Year Development Plan. The Ninth National Five-Year Plan (1996-2000) was no longer mandatory, but acted as a guidance. (v) The information management systems set up under A4 (Tax Bureau), A33 (Tackling key issues in Social security) and A34 (Auditing ) subprojects has forcefully strengthened the government's capacity in information collection and analysis, and help link them to the National Golden Tax, Golden Social Security and Golden Auditing Projects. In a word, the government capability in leading macro economic reform and analysis is greatly enhanced.

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In spite of all achievements made, implementation quality of subproject vary. Two SOE subprojects (Whhan and Changsha) were cancelled with no implementation at all. Impact of some individual subprojects is modest, such as A5 - Material distribution system, due to subproject design, and A 32 - Promotion of stability of small and medium banks, due to lack of China experience of the selected international consultants. The whole project was not completed until after four extensions.

Part B - Preinvestment and project preparation (Credit amount of US$ 24,543,917.31, supporting 22 subprojects). Given the government's funding and expertise gaps for project preparation, Part B apparently filled the gap and contributed substantially to the enhancement of the preparation quality of the follow up investment projects and ensured their time delivery. Good international experience were learned in the project design. It also enabled the Bank to support a lot of projects with strong reform content. This component led to 18 Bank/IDA follow-up investments, with the exception of three power projects and the Baise Water project, ad the government decided at later stage to invest the projects with its own money. Even though, the project preparation experience and the prepared documents of the subprojects played its due role in ensuring high quality of project. implementation.

4.2 Outputs by components: Annex 1 of this reports provides in details the outputs of the project. Part A - Reform and Institutional Development. The outcomes of this component are in the form of (a) research reports and policy recommendations; (b) new modelling and economic forecast techniques; (c) comprehensive statistical survey system; (d) design of new management and service organizations, such as the small and medium size enterprises service center, and the foreign teaching material center; (e) establishment of the training networks in rural, health, transportation, and finance sectors; (f) national database in auditing, social security, as well as the design for information disclosure system of China's listing companies, etc.,

Part B - Preinvestment and project preparation. Outputs of this component include: (a) feasibility studies; (b) EIAs; (c) Resettlement Reports; (d) project designs; (e) procurement plan and bidding documents; (f) dam safety documents; (g) PIPs; and (h) others.

4.3 Net Present Value/Economic rate of return:NA

4.4 Financial rate of return:NA

4.5 Institutional development impact: The institutional development impact of the project is positive and substantial: (a) its impact has gone beyond the project itself. The project activity had spurred on similar activities of other research institutes in other sectors and areas and at the various levels. Preinvestment preparation methodology were adopted in projects with other financing sources. Their documents were regard as model for similar projects. (b) The project established a proper administrative system, with the central PMO set up in the International Department of MOF, and subproject PMOs in the concerned agencies and institutes. Their capacity in project implementation and management was en enhanced. (c) Close linkages between the government agencies, the research institutes, universities and the decision makers were established, which has promoted the reform process of the government.

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5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency: Nature of the project. This project was not completed until after four closing date extensions. This is largely due to the nature of the project, as economic reform in China is a dynamic process and thus country's needs and priorities are changing along implementation. Subprojects were submitted by the borrower and approved by the Bank in different time slices in order to respond to the changing needs. Also to support a number of important reforms requires more time than was envisaged during the project appraisal and approval.

Natural and man-made calamities. The SARS occurred during the first half of 2003, affected largely the overseas Study tours and trainings. It also affected to certain extent the procurement of foreign teaching materials and international consultancy.

Frequent changes of the Bank Task Team The Bank's Task Team had changed over four times during the whole project cycle from preparation to ICR. This has brought some adverse effect on the project implementation.

5.2 Factors generally subject to government control: Motivation and Accountability. The positive factor is that the top Government leaders had a strong demand for improving capacity and introducing reforms. There was also strong demand among the beneficiaries for improving skills and institutional capacities. In addition, the Government attached great importance to ensure adequate project preparation of major investment, hence is willing to use the credit for project preparation. In a word, motivation and accountability, as well as the strong government commitment contributed substantially to the successful project outcomes.

Government Reorganization. The government reorganization in 1998 had brought both positive and negative impact on the project implementation. The positive factor is that there was stronger demand for institutional strengthening among the government agencies both at the central and local levels. The negative factor is project implementation of some individual subprojects were affected and delayed, due to organization and project staff changes.

5.3 Factors generally subject to implementing agency control: Project organization and structure. The organization and administrative arrangements made for the project, with a Central PMO in MOF and subproject PMO in each implementing agency worked well in general. Sound coordination and good services provided by MOF to the subproject implementing agencies, as well as good performance of the most implementing agencies contributed substantially to the successful outcomes of the project.

Staff Turnover. Frequent staff change and turnover has affected to certain extent, the project implementation. During project implementation, MOF staff changed several times, due to government organization and staff rotation system in the Chinese government. Staff of a few individual subproject also changed.

Subproject Programming. There is lack of subproject programming and lending program discussion system. All subproject were reviewed and approved on a case by case basis. This could easily cause prolonged implementation.

5.4 Costs and financing: At the time of SAR, the total project cost was estimated at US$ 60,000,000. Among which, US$

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50,000,000 was IDA credit and US$ 10,000,000 was government funding. The actual project costs was US$ 57,884,318.94, including 48,224,318.94 of credit and US$ 9,660,000 of government fund, representing 97.03% of the estimated credit amount and 96.6% of the government funding respectively.

6. Sustainability

6.1 Rationale for sustainability rating: The project sustainability is rated as likely. (a) Right from the beginning, MOF and the implementing agencies of various subprojects had retained responsibility for the objectives of the project and the respective sub-projects. Their ownership was strong. (b) For many of the subproject implementing agencies, the activities financed by the credit represented only the first step in improving the techniques, changing the regulatory framework, and altering the fundamental approaches to the scope and methods of their work. The subprojects were continued to make use of the tolls and concepts acquired under the subprojects, and were able to attract other funding sources to expand the their achievements: (i) the Chinese Academy of Social Sciences continued to receive support from the Bank under TCP IV project. The Blue Book - developed under this project has brought about similar activities of other sectors. In addition to Blue Book, there are now Agriculture Green Book, and World Economic Yellow Book. A comprehensive analysis and forecast model system was established, which includes seasonal, annual, as well as medium and long term models. Regional models in some areas were also developed. (ii) One of the major outcomes of A15 is the two software on national foreign debt monitoring and World Bank projects data transmission. These software were developed in 1998 and represented a big step forward in foreign debt monitoring. Based on this, the State Foreign Exchange Administration upgraded these software in 2002 using the government funding, which not only speeded up data transmission, but also made English version available. Because of this project, the Administration was able to get a grant in 2003, to set up the foreign debt forecast and warning system. (iii) As a result of A5 subproject, the Bank approved the Tax Bureau a technical assistance project, specifying on finance and tax reform. (c) The policy reforms and the strong performance of the economy have encouraged these agencies to continue to try new approaches. Again, the government's motivation in economic and sector reform is a strong sense for sustainability. TCP IV was approved in May 1999, and the Government is now working closely with the Bank on the preparation of TCP V.

6.2 Transition arrangement to regular operations: Apart from the continued expansion of the achievements of the earlier completed subprojects, the 4 subprojects completed in the past year have all made transition arrangements: (a) Shenyang SOE Reform: Based on the research on the establishment of the enterprise servicing center, Shenyang Municipal Government has officially approved the setting up of the Center using the government fund. Once it is established, it will provide regular services to the middle and small scale enterprises; (b) Information Disclosure of China's Listing Companies: To strongly push forward information disclosure, China Security Supervisory and Management Committee had made the decision to set up a large scale information disclosure platform in accordance with the recommendations and the design made under the project, to serve the public. (c) National Social Security Network: Under the project, pilots were conducted in Tianjin and Liaoning. At the end of 2003, the social security network was extended to 10 other provinces of Shaanxi, Shandong, Hebei, Henan, Zhejiang, Hubei, Hunan, Fujian, Sichuan and Beijing. The Ministry of Labor and Social Security have made arrangement to further extend the network to cover 20 provinces in 2004, and to link the network established under the subproject to the National Golden Social Security Project (Government funded). By doing so, all information related with social security and statistical analysis data could be sought out at the network, and the social security work will be standardized throughout China; (d) Auditing Capacity strengthening: The arrangements made by the State Auditing Administration are: (i) compilation of the project proceedings, including the international

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best practice, which will be translated and distributed to all the provincial and local auditing bureaus; (ii) The two platforms developed under the project, namely foreign funded projects auditing management and operations, will be extended to all the auditing bureaus and at all levels in 2004.

7. Bank and Borrower Performance

Bank7.1 Lending:Bank's performance in lending is rated as satisfactory. The project objectives is correct and the subprojects identified are consistent with the Bank's strategies and the reform needs of the Government. It is built on the experience gained from the three earlier technical assistance projects. The weakness is that the criteria for subproject selection were broad and not fully prioritized.

7.2 Supervision: The Bank's performance at supervision is also rated as satisfactory. This is a project with 55 subprojects, including 33 under Part A and 22 under Part B. They across many sectors. The credit amount of the subprojects vary. Apart from 7 subprojects which were approved at the time of appraisal, all the others were approved during project implementation, after proper review. The Bank team provided training on procurement, disbursement and project management not only to MOF, but also to the individual subprojects. During the whole process, the Bank Team worked closely with MOF. The project complexity and difficult to supervise is obvious. Great efforts were made by the Bank team to supervise the project during implementation. It met MOF and the subproject implementing agencies on a semiannual basis, to learn the project progress and solve the problems. The Bank team also maintained daily communications with MOF and the subproject agencies through telephone and other communication means. Special meetings were arranged upon needs or request by the Borrower.

However supervision was not as thorough across all subprojects as it should have been, as it is merely impossible to visit all the subprojects during supervision. Inadequate resource support/input from sectors also affected, to certain extent, the supervision efficiency. Frequent changes of Task Managers had brought some adverse effect to the effective supervision of the project.

7.3 Overall Bank performance: The overall Bank performance is rated as satisfactory, for its due contribution to the success design and supervision of the project.

Borrower7.4 Preparation: The Borrower performance at the time of project preparation is rated as satisfactory. It collaborated closely with the Bank team to work out the project objectives, the various components, as well as setting up the criteria and procedures for subproject selection, process and approval.

7.5 Government implementation performance: Government implementation performance is rated as satisfactory. Its commitment and support to the project is high and consistent throughout the project preparation and implementation. Technical Division of International Department of MOF performed as the first reviewer of the subproject proposals submitted by various agencies and government at different levels. MOF maintained good contact with the various implementing agencies and provided support and services to them. MOF provided good support to the Bank supervision missions by organizing the meetings and field visits, as well as the compilation of the overall project progress reports. The cooperation between the Government and the Bank remained firm at all times of project implementation and resulted in a positive impact on project performance. Procurement

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ex-post review and the auditing showed that the project was carried out in line with the Bank's legal document and no major issues were discovered.

Like the Bank, frequent staff turnover of MOF caused some problem on effective implementation. Absence of ex-post evaluation of the completed subproject is a weakness, which affected MOF and the implementing agencies' learning from past mistakes to improve the project design and implementation in the future.

7.6 Implementing Agency: The performance of the implementing agencies was rated as satisfactory. All the subproject implementing agencies had appointed project staff. They prepared and submitted to the Bank, through MOF, their progress reports on semi-annual basis, and provided useful support to the Bank's supervision missions. They kept good contact with MOF and the Bank team. However performance of different agencies was uneven. Some were less efficient than the others.

7.7 Overall Borrower performance: The overall Borrower performance is rated as satisfactory.

8. Lessons Learned

Motivation to obtain know-how is the most important factor to the success and sustainability of the projects. In China, such motivation is strong. The experience of this project shows that a small size credit (for subproject) can have a good impact on the recipient government’s policy reforms and institutional strengthening, if its timing is fully aligned with a political window of opportunity for reform.

The project involved a process, and a flexible approach. This is appropriate on the one hand, given the uncertainties of the demand for TA and of a changing environment. However on the other hand, it could easily cause implementation delays and difficulties in supervision. Part of the four time extension of closing dates was related to this. To ensure that the project is implemented in a timely manner, yet to respond to the needs of the policy makers, (a) alternative ways should be considered. The Bank and the Government should adopt a more strategic approach to analyze and prioritize the government needs and to identify the most binding constraints to economic development and continued reform. (b) Subproject planning and approval approach should be improved. Case by case approach was adopted under this project. It will be much more efficient if the Bank and the MOF teams meet on a quarterly basis, to discuss the priorities, the assisted areas and to agree on the lending program.

To maintain the high implementation and supervision quality, it is important to (a) stabilize the Task Teams of both the Bank and the government; (b) keep a good filing system, to maintain continuity of the project implementation, and to avoid adverse effect in the case of the task team changes; (c) work out the standard formats for project proposal and progress report, as well as the performance indicators, to be strictly followed by all subprojects; (d) encourage involvement of the sector expertise in lending program discussion, subproject request review and approve process, as well as supervision, as such TA projects are involved in multi sectors and multi agencies and at different levels, and their involvement is key to quality insurance; (e) set up the subproject task manager system. Following approval of a new subproject, a subproject Task Manager is appointed, who will work closely with the Task Team Leader, to exercise the full responsibility of subproject supervision and evaluation; (iv) allocate adequate preparation and supervision budget by both the Bank and the Government; (v) training on the Bank operational procedures and regulations, especially on procurement, disbursement and project management, are very important and should be carried out for each subproject before implementation starts.

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To keep the momentum of the TA project, and to allow participation of those potentially priority agencies and localities, it is ideal if MOF and local finance bureaus consider taking the repayment responsibility of the credit/loan, and require repayment only from those revenue-earning agencies.

9. Partner Comments

(a) Borrower/implementing agency: The project played a positive role in supporting China’s economic reform and promoting China’s economic development. International experiences were broadly introduced into Chinese Government’s decision making process. A lot of policy researchers and makers were trained to master concerned knowledge and skills to solve new problems and develop new plans in transition from planned economy to market economy.

In general, the World Bank Task Team did a good job in guiding and supervising the implementation of the project. They maintained a close cooperation with MOF and subproject implementation agencies. Not only suggestions on procedures, but also suggestions on sector development were available.

The ICR prepared by the World Bank Task Team with strong support from MOF factually shows the outcome and impact of the project. Its analysis of lessons learned and proposal of future operations are reasonable.

(b) Cofinanciers:N/A

(c) Other partners (NGOs/private sector):N/A

10. Additional Information

There is no additional information.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome/Impact IndicatorsIndicator/Matrix Projected in last PSR Actual/Last Estimate

Professional and technical capability strengthening for economic and statistical analysis.

A1 Subproject was successfully completed in around 1998.

The impact of the subproject is substantial. Professional and technical capability of SSB was greatly enhanced, which is reflected by (a) China’s national accounting system was reformed, from the MPS to the internationally accepted SNA; (b) data collection approaches were upgraded by introducing the sampling techniques; (3) SSB’s training program was strengthened; (d) SSB is able to use the economic data in an analytical context; (e) SSB is able to participate in the ICP within the United nations Framework; and (f) The traditional analysis of pure description is now replaced by qualitative economic model analysis

Extending CAAS capacity in undertaking the annual and biennial economic forecasts and analysis using combined methods of quantitative with qualitative analysis of economic problems.

A2 subprojects was completed in around 1998. Impact is substantial. Implementation of the subproject has greatly helped enhance the capability of CASS in both conventional economic analysis and forecast and has laid a good foundation for its further development. The economic analysis and forecast made by CASS has become an important source of information on economic development of the government and enterprises, to be used in their decision making process. They have also become source of information for external countries to understand China's economic development trend. CASS established good and longer-term relations with overseas research institutes. Implementation of this subproject spurred similar activities of other government agencies and research institutes, similar analysis and forecast books are published, such as the Agriculture Green Book, etc.

Capacity enhancement of SRC on SOE reform and Financial Sector reform. .

The impact of A3 is positive SRC has a major responsibility in design and monitoring the overall economic reform program. SOE reform and Financial Sector reform were two key areas SRC focused on at the time of subproject approval. To make the reform successful, it was important to help enhance the capacity of SRC staff. The subproject has played its due role in this respect. Through overseas studies and trainings, as well as international workshops, SRC staff’s capacity was enhanced in areas of enterprises structure; law framework of enterprises, operation of enterprises; organization and management of state controlled companies. It also included areas of foreign currency management, personal income system; finance and tax system, government bond market, etc.

Capacity strengthening of STB. A4 subproject was completed in 1996 Impact of this subproject is substantial. STB is an agency responsible for drafting new tax laws to support China’s reform program, and in particular, in areas of corporate and personal income taxation, as well as the turnover tax. Under the subproject, quantitative examination of the Chinese tax system and reform alternatives was conducted, based on the collected

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information on enterprises, which has an important bearing on China’s tax reform. Institutional capacity building and strengthening were realized accordingly. Following the completion of this subproject, STB was upgraded as STA. In addition, as a result of this subproject, a tax reform technical assistance project was approved by the Bank in 1995, which is linked to the National Golden Tax Project.

Reform the Materials Distribution System A5 subproject was completed in 1998 The subproject gained some positive impact in helping . China’s Material distribution system reform, which was traditionally monopolized by the state. However the impact was not as substantial as expected, as the subproject design was not focussed.

Capacity strengthening of MOF in economic study.

A6 subproject was completed in 2002. The impact is positive. During the implementation period, over 20 studies were conducted, in the heated reform areas of urban employment and salary reform; public investment and co-financing, capital market development, 21st century education etc,. Institutional and staff capacity of the concerned agencies was raised.

Capacity building and enhancement of the Public Health Administration through establishment of the training network

A7 subproject was completed in 2000. The subproject achieved great success. Six training and research centers of the medical universities of Beijing, Shanghai, Wuhan, Harbin, Xian and West China participated in the network. By close collaboration with WBI, several hundreds people, including senior local health officials received training and participated in the international workshop, as well as field visits. In addition, Website Learning program was formulated, over 13 courses for the trainers were conducted. Health economy, which was new to China at the time of subproject approval, gained great progress. A lot of recommendations made by the subproject received attention and accepted by the government, such as the Decision of the Central Committed of the Chinese Communist Party (CPC) on Health Sector Reform and Development. The subproject laid a good foundation for further deepening the reform in the health sector. The health sector is now better linked with the international society.

Capacity strengthening of the transport sector through establishment of the training network

A8 subproject was completed in 1999. The training network include fourteen institutes and universities concerned with transport. Due to government reorganization and staff changes, only about half of the subproject activities were carried out, thus the impact is lag behind the expectation.

A9 Capacity strengthening of the rural sector through establishment of the training network

A9 subproject was successfully completed in 1998

Nine training institutes under the constituent ministries and agencies participated in the subproject activities. Over 1,000 people, including the medium and senior level professional staff received Training for trainers were also conducted. The impact on the capacity building and strengthening is substantial. The subproject also played its due role in promoting the international cooperation of the concerned organizations with other countries. Tianjin College of ABC signed cooperation and partnership agreement with the University of US. The Northeast Forestry University established the Training Center on Wildlife protection and

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Management. Strengthening of China's Financial Management Training Network

A10 subproject was completed in 1999. Finance universities under MOF participated in the subproject. Impact of the subproject is good. During the implementation period, over 800 officials in the financial sector, both at the central and local levels received training. As a follow up of this subproject, MOF formulated the national financial sector training program for years 2001-2005, under which, a total of 700,000 people have been receiving training. The training, although funded by the government, it applies training methodology learned under this subproject. GDLN training is developed. In addition, 18 training centers were set up in different parts of the country. A Memorandum of Understanding was signed between MOF and WBI, to further expand the training opportunities.

Capacity strengthening of the world Bank Department of MOF, to enable better cooperation with the World Bank

A11 subproject was successfully completed in 2000

The impact of this subproject is positive. Key staff were sent overseas to study master and PhD, in areas of macro economic management, public management and project management. Staff engaging in the World Bank affairs received short-term training on project management. All these have laid food foundation for better cooperation between the World Bank and China. With capacity strengthening, the Department staff are able to manage a larger portfolio to include also operations of ADB and IFAD.

Capacity Strengthening of the Chinese Government in Controlling the State Bond through Setting up of a State Bond Trading Custody and Monitoring System

A12 subproject was completed in 1998. At the time of subproject approval, China was in its initial stage of issuing the state bond. It is important to standardize the state bond market, hence essential to strengthen the Government’s capacity in controlling the State Bond. The subproject provided the government with a useful tool to realize its objectives through setting up of a State Bond Trading Custody and Monitoring System. In this respect, the subproject impact is very positive.

Raise the competitiveness of China’s enterprises through setting up of quality management and certification system

A14 & A17 subprojects were completed in 1997 & 2000 respectively.

The impact is great. First it aroused the awareness of the government and the enterprises of the importance of the product quality, and its relations with the enterprise competitiveness. Second, through consulting services, overseas trips and international workshops, both the Government and the enterprises learned the technical skills for quality management and certification. Third, the government and the enterprises had a better understanding of the legislation implication to the effective operation of such system, hence the legislation set up was promoted.

Enhance China's capacity in external debt statistics and supervision

A15 subproject was completed in 1999. The National Foreign Debt Statistics and Monitoring System was first developed in 1987. To raise both the speed and quality of the work, it was an urgent need to upgrade the system. The subproject played an important role in helping upgrade the system through a series of studies and workshops. The software developed In 1998 under the subproject was proved quite effective. Based on this, the government once again upgraded the software with its own funding in 2000.

Introducing new method for formulating the National Five Year Plan

A16 subproject was completed in 1996. China used to formulate mandatory Five Year Development Plan under the planned

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economy. To help transit from the planned economy to market economy, It is an urgent need to alter the traditional method. In this regard, concept change is essential. The subproject objective was realized through sending senior staff of SPC to study and got training in US Stanford University. The National Ninth Five Year Development Plan (1996-2000), abolished for the first time the mandatory plan, and was replaced by the Guidance Plan.

Capacity Strengthening of SPC in risk management of international capital flow

A18 subproject was completed in 2000. The subproject objective was reached through overseas studies and international consultancy services. It had also good impact on enhancing the project management skills of SPC staff, in areas of post evaluation and international competitive bidding. As a result of this subproject, SPC issued a series of policy measures on standardizing co-financing and foreign debt risk management.

Capacity Strengthening of MOF The outcome/impact of A19 is likely to achieve. It was completed in 2003.

This subproject was approved in 1998, when the government reorganization took place. To fulfill the missions of MOF and to meet the needs of reform in the finance sector, capacity enhancement of MOF staff was essential. Supported by the subproject, senior officials, key professional staff and promising young professional received training or degree studies overseas in different areas of the finance sector. Those who had completed their studies/trainings all returned to MOF and are playing a better role in MOF’s work. Many of them got promotion because of their outstanding performance.

Capacity strengthening of Heilongjiang Finance Department in supporting economic development and foreign fund management.

A20 subproject was completed in 2001. The subproject received quite positive impact in promoting economic development of the province through researches, study tours and training. Over 2000 people received training. About 47 staff gained master degree. Many had published their paper in the local economic newspapers. In addition, through the training courses of accounting and government procurement, the participants mastered the new accounting methods and had a better understanding of the basic theory and the related legislation. People are better aware of the risk management. The research on Starting the Second Undertaking was forward looking, and was of particular significance to the revitalization of Northeast old Industrial Base, a strategy put forward by the government recently.

Capacity Strengthening of MOF in analyzing and forecasting the long and medium term fiscal development trend, as well as fund management of the state finance.

The achievement of A21 subproject objective is likely.

Through large number of studies and researches on the key issues related to financial sector reform, the capacity of MOF was strengthened, especially in areas of fiscal development trend forecast, as well as fee levy, collection and their management. The research result had an important impact on reducing the farmer’s financial burden. In 2003, MOF issued a circulation, calling for reducing the farmer’s financial burdens by standardizing rural fee levies. Rolling fiscal plan System was also initiated by MOF based on the recommendations of this subproject.

Capacity Strengthening of Shanxi Finance in policy study and World Bank project management.

A22 subproject was completed in 2001. Impact of the subproject is very positive in two aspects: (a) policy study: Studies were carried out on key issues related to finance

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sector reform, especially in areas of finance income distribution mechanism, Regional Finance; relations of industrial policies and finance policies, etc.. Based on the recommendations made of the above studies, Shanxi Government issued a circulation in December 2001,to adjust the finance management system of prefecture/municipal level. (b) Strengthened World Bank Project management through training on computer use, and foreign debt risk management.

Capacity strengthening of Liaoning Finance Department in tackling key problems in the financial sector.

A23 subproject was completed in around 2001.

The subproject brought Liaoning Finance good impact on key areas of financial sector, especially in the social security reform through support to a series studies and researches related to social security reform. A series of policies and methods were promulgated by the provincial government related to social security and government procurement. Due to its good performance, Liaoning was selected by the Ministry of Labor and Social security, as a pilot in the national social security reform. It was also among the first provinces to apply government procurement.

Higher Education Reform in areas of teaching material and teaching method, and achieving resource sharing among Shanghai Universities

The expected impact of A24 subproject is likely to reached.

After initial delays (due to government reorganization), implementation of this subproject gained good success. It had an important bearing on Shanghai higher education reform, especially in areas of teaching material and teaching methods: (a) Resource sharing among Shanghai based universities was realized, through the establishment of a foreign teaching material center. The large number of teaching materials procured under the subproject were placed in the center; (b)Shanghai higher education reform was promoted through application of new management and teaching models; and (c) Better information access through website setting up. (d) enhancing teaching quality. This is in particular in medical teaching. The subproject had enabled the Shanghai Medical University to use the computerized image to teach and to cure the patients. Due to good result, Shanghai Higher Education Bureau had decided to expand the subproject achievements with its own fund.

Attracting external investors to Guizhou A25 subproject was completed in 2001. Guizhou is a poor province in southwestern China. To raise the competitiveness of Guizhou Province, so as to promote sustainable economic development had been a major objective of the province. To attract external investors was an important mean to realize such objective. Based on the recommendations of the subproject related to the attraction of external investment, the Provincial Merchant Bureau was set up in 2001, a series of policies and regulations were promulgated by the provincial government, including the institutions set up; investment climate indicators and its monitoring, as well as the related software development. The long-term plan for attracting the external investment was also worked out. A project database was set up, which has inputted over 3000 selected projects, about RMB 3-4 billion Yuan had already been introduced to the province.

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Tax related Judicature study The subproject A26 was completed in 1996 The purpose of this subproject is the support tax reform through setting up of the check team and legislation set up, which was largely realized. It has laid a good foundation to the check team set up.

Wuhu SOE reform promotion The outcome/impact of A27 is likely to realize.

The subproject had good Impact on Wuhu SOE reform through researches on: (a) regrouping of properties & debts of some selected individual enterprises; (b) formulation of medium and long-term development plans of a number of enterprises; (c) design of the Consulting Company for Small and Medium sized Enterprises; and (d) staff training on applied technology and degree study of the senior managerial personnel of the government and the enterprises. Quite many people found their new jobs after training.

SOE reform of Wuhan SOE Reform A28 subproject was not implemented. Due to change of the Bank’s Task Manager, implementation was delayed and caused ultimately the subproject cancellation.

A29 Promotion of SOE Reform of Changshan

A29 subproject was not implemented. Cancellation of this subproject was caused by the staff change of the implementing agency. Also because the original subproject design was behind the needs of enterprise reform.

Promotion of Shenyang SOE reform The outcome/impact of A30 is likely to realize.The objective was basically reached. The strategic paper on Shenyang SOE reform and industrial development prepared under the subproject made its due contribution to revitalize the Northeast Old Industrial Base, which is the national government's strategy.

Promotion of information disclosure of the listing companies.

The outcome/impact of A31 is likely to realize.The impact of the subproject was great. Implementation of the subproject clarify issues related information disclosure of China's listing companies, and enabled transparency of the listing companies, which was in favor of standardizing the behavior and actions of the listing companies. XBRL criteria has been extended nationwide in China ever since April 2004. Because of this subproject, the Security Supervisory Board decided to establish large scale information disclosure platform.

Promote steady development of medium and small sized commercial bank though setting up the exit mechanism of China's small and medium banks.

The outcome/impact of A32 is basically positive, however could be better.

Impact of this subproject is not even. Overseas trips provided China with useful experience in areas of entry and exit of small and medium sized banks, the related operational procedures, as well as risk prevention through establishing deposit insurance and the risk forecast system. However the consulting service did not reach the expectation of the implementing agency, as the consulting company had little knowledge about China’s small and medium commercial banks.

Key problem research on Labor and Social Security Information management

The outcome/impact of A33 is likely to be realized.

Impact of this subproject was substantial. Based on the pilot in Liaoning and Tianjin, the National Social Security System became high quality and realized information sharing between Central and provincial levels is realized. New technology was used, such as PROST. These have laid a good foundation for the standardizing the social security work. The subproject has provided good recommendations to the policy makers. Forecast of pension insurance fund needs using PROST model facilitated the pilot work in Liaoning. Ministry of Labor and

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Social Security issued a circulation in December 2003, on setting up of unified nationwide social security information system, which was connected to the National Golden Social Security Project.

Standardize China’s auditing on foreign debt, to reduce foreign debt risks

The outcome/impact of A34 is likely to be reached before the closing date of December 31, 2003.

Impact of this subproject was substantial. It undertook useful exploration on a series of key issues, including proper foreign debt management system, risk prevention and improving the auditing methods. It had indicated in particular the way to extend the auditing experience of the World Bank project to other foreign funded projects. The extensive use of the auditing management and operational platforms had helped raise auditing management and standardize the auditing procedures throughout China.

Part B: Enhance the investment preparation quality and project.

Part B: All the subprojects were completed before 2000, which bought good impact on the project preparation quality.

Part B: Given the apparent funding and expertise gaps for project preparation, Implementation of part B subprojects has helped raise the preparation quality, ensure project delivering in a timely manner, and avoid implementation problems caused by poor preparation.

Output Indicators

Indicator/Matrix Projected in last PSR Actual/Last EstimateIntroducing national accounts based on SNA; Developing economic statistics based on business and enterprise survey using sampling techniques; use economic data in an analytical context

A1 subproject was successfully completed in 1998.

The output indicators were fully materialized: (a) SNA is introduced, which enabled connection of SSB with the international practice; (b) A comprehensive statistical survey system is established, focusing on sampling techniques; and (c)the economic forecast model was worked out.

Annual and biennial economic forecast; providing quantitative basis for policy making; a model specifically for decision making of the enterprises; setting up of a small scale database and a computer network for economic analysis and forecast.

A2 subproject was completed in 1998. All listed outputs were materialized. In addition to the annual and biennial economic forecast, the subproject enabled CASS to provide the Chinese Government the quarterly report. It published, on a regular basis, the annual report on China's economic analysis and forecast, both in Chinese and English. It has also set up information center and website for China's economic analysis and forecast

Improved government policies, laws and regulations governing enterprises and finance

A3 subproject was completed in 1996. Following the completion of the subproject, the State Council and SRC formulated a series of reform policies in the financial sector and SOE reform.

research reports and tax management software

A4 subproject was completed in 1996. Four research reports were completed, concerning tax statistics, real estate tax levy, technical specifications for tax levy and computerized tax management. The design for computerized tax management was worked out, software were procured.

Principles and prerequisites for the establishment of trading centers

A5 subproject was completed in 1998. Based on the set principles, a commodity transaction network was set up, and based on this, a National Commodity Distribution and Servicing Center was established by China’s Material Storage and Transportation Company after the subproject completion.

Research reports A6 subproject was completed in 2002. Research reports were prepared and submitted, in areas of urban employment and salary reform; public investment and co-financing; development of capital market; China’s foreign trade policy;

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modern enterprise system; state property; Pension system reform, development of the tertiary industry; long-term food security; Expenditure of the Public Sector; 21st century education; and SOE reform, etc,.

Establishing the training network for health sector, and research reports

A7 subproject was completed in 2000. The training network in health sector was established. research reports submitted included Fund mobilization of health care in poor areas; Financial resources for urban health care; Hospital’s operational behavior; Experience of the developed areas on health reform and development; regional health plan; pilot on health care in poor areas; reform and improvement of health care system of the enterprise employees; rural cooperative medical care system of the economically developed areas; impact of tax/fee reform on health care fund mobilization in rural areas; price for medical services; evaluation on the private health organizations; possibility of setting up of state shareholding hospitals; and analysis on irrational increase of medical fees and their control, etc,.

Training network set up; Formulation of the training plan targeting on the decision makers of the transport sector, as well as the managers of large and medium sized transportation enterprises;

A8 subproject was completed in 1999. The training network in transportation sector was set up. Based on a survey to over 60 senior management of both the concerned government agencies and the enterprises, training goals and activities for three years of 1996-1998 was formulated.

Training network set up of the agricultural sector; Development of training materials.

A9 subproject was completed in 1998. The training network was set up in the agricultural sector. Two teaching materials were worked out: (a) management and analysis of the agricultural projects; and (b) design and management of government official training.

Formulation of the national training program. A10 subproject was completed in 1999. About 20 training courses on finance related subjects were conducted,26 MOF staff were sent overseas either as visiting scholars, or receiving short term training. All of them submitted to MOF management their training reports, following their returning to China. After the completion of this subproject, MOF formulated the national training program for the period of 2001-2005

Training reports A11 subproject was completed in 2000. About 30 MOF staff were sent overseas to study Phd. MOF and local finance staff responsible for World Bank affairs received overseas training. All these have enhanced their capacity in world Bank project management and improved cooperation with the World Bank.

General design of the State Bond Trading Custody and Monitoring System

A12 subproject was completed in 1998. The design was completed. Computerized issuing and transaction of the state bond was realized.

Related reports on quality management and certification.

A14 & A17 subprojects were completed in 1997 & 2000 respectively.

The subproject was able to introduce the internationally accepted principles, criteria and procedures for quality review and certification. Four research reports were prepared: (a) Reviewing and approval procedure of quality certification; (b) International criteria for quality examination; (c) Methods to establish the international quality system; and (d) preview of quality framework.

Software development for foreign debt statistics monitoring

A15 subproject was completed in 1999. Two software were developed: (a) National Foreign Debt Statistics and Monitoring System; and (b) Transformation of World Bank Project Database.

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National Ninth Five Year Development Plan A16 subproject was completed in 1996. This is the first time that the Chinese Government using the new model (guidance planning) to formulate the Ninth National Five Year Plan.

Consultancy report on the foreign capital flow and risk management

A18 subproject was completed in 2000. The repot was submitted by the international consultant.

Back To Office Reports (BTOs) The output will be materialized. A19 subproject was completed in 2003.

All staff received training under submitted to MOF management their BTOs upon returning to MOF.

Research reports. A20 subproject was completed in 2001. Eight research reports were prepared by Heilongjiang Provincial Finance Department, (a) transfer payment, (b)key policy issues for regrouping the large and medium enterprises, (c)accounting staff education; (d)criteria for listing and circulating the state stock, (e) northeast finance policies, (f) finance and currency study; (g) research on setting up the provincial investment company using state property, and (h) start the second undertaking, which is of particular significance of revitalizing the Northeast Old Industrial Base.

Policy recommendations on reforming the fee levies

The output of A21 is likely to be realized. Policy recommendations were made on (a) Establishment of the framework of public finance; (b) establishment of finance and tax monitoring system; (c) Tax for fee reform: (d)methods to formulate long-term finance plan; and (e) increase the farmer’s income, etc,.

Research reports on key issues in finance reform of Shanxi Province

A22 subproject was completed in 2001. seven research reports were prepared: (a) Thee major mechanisms for Shanxi Finance; (b) regional finance; (c) training and education of the finance staff; (d) industrial and finance policies in favor of economic structure adjustment; (e) foreign fund utilization and their risks; (f) Shanxi finance system; and (g) improving transfer payment at levels below the province.

Research reports in institutional capacity strengthening of Liaoning Finance

A23 subproject was completed in 2001. A23 Five research reports were prepared: (a) social security; (b) government procurement; (c) crop structural adjustment and its supporting policies; (d) SOE reform and development; and (e) grain management information system.

Establishment of Shanghai foreign teaching material center; development of distant learning and computerized teaching; construction of medical image information center in Shanghai Second Medical University;

Outputs of A24 are likely to be realized. The center for foreign teaching materials is set up, which collects over 3000 teaching materials from famous universities of the world; The central website for foreign teaching materials were constructed and database set up; Shanghai Second medical University, through establishment of the image bank, XML database as well as DICOM-3 and COSMD software, was able to use the image to teach and for clinic purposes, thus greatly enhanced its capability.

Institution set up for introducing external investment.

A25 subproject was completed in 2001. About 12 research reports were prepared and published concerning the attraction of external investment. As a result, The External Investment Introducing Bureau was set up, with related software developed.

Study reports for setting up the tax check police

A26 was completed in 1996 Study reports were prepared: (a) tax police set up and their management; (b) type of tax abuse and their punishment; (c) legislation set up and their implementation; (d) check procedures.

Formulation of SOE reform program for some selected enterprises; Design of medium and small enterprise consulting company; Setting up of Wuhu Labor resources and

The outputs of A27 are likely to be achieved before the closing date of December 31, 2003.

The subproject helped three SOEs formulate either the regrouping program, or the long-term development plan and market strategy; The design for the medium and

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social security management system. small enterprise consulting company was also completed. The Wuhu Labor resources and social security management system had already covered the county level.

Formulation of SOE program of selected enterprises.

A28 subproject was cancelled. Not done.

Formulation of SOE program of selected enterprises; on job training for enterprise workers

A29 subproject was cancelled. Not done.

Formulation of the Strategic Paper of Shenyang Enterprise Reform and Industry Development; Research report on setting up of the servicing center for medium and small sized enterprise.

The outputs of A30 are likely to be achieved before the closing date of December 31, 2003.

The strategic paper of Shenyang enterprise reform and industrial development was completed and published. Based on the design made under the subproject, the provincial government had decided to set up the Service Center for the medium and small sized enterprises.

Design of the database for information disclosure of China's listing companies

The output of A31 is likely to be achieved before the closing date of December 31, 2003.

Design was finalized by the consulting company following four workshop, discussions and evaluations by the invited specialists of the implementing agency. The concerned staff received training on XBRL.

Policy recommendations for stability and development of medium and small banks. Translation of overseas research papers

The output of A32 was materialized. The policy framework for medium and small bank stability and development was completed. However it could be better if the consulting company had better knowledge about China's medium and small banks. The procured overseas paper of "Risk management of the banks - experience of the United States of America" was translated.

Formulation of criteria for employment and social security information system; various research reports.

The outputs of A 33 are likely to be achieved before the closing date of December 31, 2003.

Criteria for employment and social security information system was worked out, which have promoted information standardization. A series research reports were prepared, including: (a) Analysis on the national labor market information network; (b) Analysis of the information system on social security; (c) studies on social security information systems of Henan, Changchun Shanghai, Liaoning,, Yichang, Sichuan Guizhou, Inner Mongolia and Ningxia; (d) Forecast of pension insurance fund of Liaoning enterprises; (e) index for social security information; (h) regulations governing the use of personal social security card, etc.

The outputs covers two aspects: (a) two publications: (i) Management and Auditing of the Government Foreign Debts; (ii) Case Study on the World Bank Credit/Loan Projects auditing. (b) Development of the Management and Information System of Foreign Fund Projects.

The outputs of A34 are likely to be achieved before the closing date of December 31, 2003.

The research reports are completed and published. The management and information system was set up with two platforms of management and operations developed, which would be extended nationwide in 2004.

Prepare project preparation related documents.

All subprojects of Part B were completed before 2000.

Project preparation documents were prepared, including PIP, EIA, resettlement plan, feasibility studies, dam safety, project design, etc., with high quality.

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Annex 2. Project Costs and Financing

Component Appraisal Estimate US $

Actual/Latest EstimateUS$

Percentage of Appraisal (%)

Part A: Reform and Institutional Development1 National Accounting System 1,032,943.80 1,032,943.80 1002 Modeling and Forecast 780,137.12 858,405.50 1103 Studies in Support of Reform 1,474,852.84 1,474,852.84 1004 Tax Reform 871,432.25 871,432.25 1005 Materials Distribution System 981,432.84 981,432.84 1006 Economic and sector Analysis 488,185.09 425,929.22 87.257 Training Network of Health 1,380,443.89 1,300,368.88 94.208 Training Network of Transportation * 512,240.13 214,610.91 41.909 Training Network of Rural Sector 1,529,013.93 1,529,013.93 10010 Public Finance and Management Training 1,076,403.93 1,042,149.16 96.8211 Development of Capacity of the World Bank Department of MOF

343,641.75 342,712.12 99.73

12 Bond Trading Custody 110,166.08 110,166.08 10013 Institutional Strengthening of Transportation Sector

0 0 0

14 Quality Monitoring I 1,458,275.62 1,458,275.62 10015 Capacity Strengthening of National External Debt Bureau

281,882.32 282,020.80 100.05

16 Staff Training of the state Planning Commission

294,575.88 294,575.88 100

17 Quality Monitoring I 864,892.41 864,892.41 10018 Capital Market Risk Study 109,900.33 105,350.49 95.8519 Institutional and Staff Capacity Building of MOF

4,185,605.73 4,045,287.27 96.65

20 Capacity Strengthening of Heilongjiang Finance Administration

504,226.52 490,087.93 97.20

21Medium and Long Term Fiscal Policy 674,460.98 661,518.77 98.0822 Capacity strengthening of Shanxi Finance Administration

512,529.26 550,399.93 107.39

23 Capacity strengthening of Liaoning Finance Administration

328,421.80 300,046.48 91.36

24.Shanghai High Education Teaching Material Reform

1,032,731.78 1,032,340.42 99.97

25 Institutional Strengthening of Guizhou Government

300,428.91 187,523.35 62.42

26 Judicature Study 306,780.65 222,246.08 72.4427 Wuhu SOE Reform 670,327.15 625,444.93 93.3028 Wuhan SOE Reform 492,366.42 0 029 Changsha SOE Reform 601,780.37 0 030 Shenyang SOE Reform 449,514.41 449,375.36 99.9731 Information Disclosure of China’s Listing Companies

682,191.76 639,867.01 93.80

32 Promotion Stability of Small and Medium banks

527,174.49 465,063.67 88.22

33 Tackling Key Problems in Labor and Social Security

523,283.45 501,577.73 95.85

34 Capacity Strengthening of the State Audit Bureau

225,851.47 222,368.37 98.46

Part B: Preinvestment and Project Preparation1 Yangzhou Power Plant 2,196,402.98 2,196,402.98 1002 Zhejiang Power Development 1,144,801.71 1,144,801.71 1003 Longtan Hydropower 2,105,500.87 2,105,500.87 1004 Shenyang Engineering Industry 878,978.36 878,978.36 1005 Ertan Power Transmission 2,422,684.12 2,422,684.12 100

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6 Hunan Water Resources 346,693.39 346,693.39 1007 Hubei Water Resources 301,772.08 301,772.08 1008 Henan Qinbei Electric Power 682,890.42 682,890.42 1009 Inner Mongolia Tuoketuo Power Project 1,848,598.24 1,848,598.24 10010 Chongqing Industry Reform 382,953.71 382,953.71 10011 Hubei Environment 81,206.30 81,206.30 10012 Hexi Corridor 47,499.03 47,499.03 10013 Yunnan Environment 186,992.37 186,992.37 10014 15 Shanghai Waigaoqiao Power Plant 3,483,069.68 3,483,069.68 10016 East China Power Transmission 2,287.105.87 2,287.105.87 10017 Hunan Power Development 1,384,215.95 1,384,215.95 10018 Tarim Basin II 735,845.89 735,845.89 10019 20 Tongbo Pump Storage 437,220.16 902,762.29 206.4821 Beijing Power Transmission and Distribution 73,400.00 73,400.00 10022 Baise Multipurpose Development 1,257,450.23 1,257,450.23 10023 Guanzhong Irrigation 743,873.32 1,002,556.55 134.78

24 Hebei City Environment 790,537.27 790,537.27 100General* 272,383.96 98,121.60Total 49,700.171.27 48,224,318.94 97.03* This category is for funds set aside in the general categories that were not reallocated to subcategories, as well as the gain recognized in the Special Account.

Summary Table

Original Principal (US$) 50,000,000.00Disbursed (US$) 48,224,318.94% of Disbursed 97.03Undisbursed (US$) 1,775,681.06

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 9.10 3.00 0.00 12.10(0.00) (8.70) (2.80) (0.00) (11.50)

3. Services 0.00 0.00 31.70 0.00 31.70(0.00) (0.00) (26.50) (0.00) (26.50)

4. Training 0.00 0.00 16.20 0.00 16.20(0.00) (0.00) (12.00) (0.00) (12.00)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 0.00 9.10 50.90 0.00 60.00(0.00) (8.70) (41.30) (0.00) (50.00)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

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Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 1.10 5.59 0.00 6.69(0.00) (1.00) (4.63) (0.00) (5.63)

3. Services 0.00 0.00 31.16 0.00 31.16(0.00) (0.00) (26.20) (0.00) (26.20)

4. Training 0.00 0.00 20.04 0.00 20.04(0.00) (0.00) (16.40) (0.00) (16.40)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 0.00 1.10 56.79 0.00 57.89(0.00) (1.00) (47.23) (0.00) (48.23)

1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.Part A: Reform and Institutional Development

20000000.00

4000000.00

23680401.63

4800000.00

118.4 120.0

Part B: Preinvestment and 30000000.00

6000000.00

24543917.31

4860000.00

81.8 81.0

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Annex 3. Economic Costs and Benefits

N/A

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation03/92 1 Technical Assistance S

2 Training S

Appraisal/Negotiation07/92 1 Technical Assistance S

1 Operations S2 Training S

Supervision06/25/1993 1 SCO03/02/1994 1 SCO12/16/1994 1 SCO S HS07/19/1995 1 SCO S HS06/26/1997 2 TM, CO S HS12/18/1998 4 TTL, FDS, PS and C S HS11/24/2000 4 TTL; 2 FDS, PS S S05/18/2001 2 TTL; PS S S11/26/2001 2 TTL; PS S S05/20/2002 2 TTL; PS S S11/18/2002 2 TTL; PS S S06/16/1003 2 TTL; PS S S09/24/2003 2 TTL; PS S S

ICR04/20/2004 2 TTL; PS S S05/31/2004 1 TTL S S

TA: Technical Assistance Specialist T:Training Specialist O: Operations Officer SCO: Senior Country Officer TM: Task Manager CO: Country Officer FDS: Financial and Disbursement Specialist PS: Procurement Specialist C: Coordinator TTL: Task Team Leader

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 146.84Appraisal/NegotiationSupervision 276.54ICR 27Total 450.38

According the Bank's record, there are only two categories: LEN and SPN. Therefore the above 146.84 covers both identification/preparation and appraisal/negotiation.

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

1. Memorandum and Recommendation of the President of the International Development Association to the Executive Directors (November 20, 1992) . 2. Development Credit Agreement (December 30, 1992).

3. PSRs.

4. Borrower's ICR.

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Additional Annex 8. [Borrower's Contribution]

Implementation Completion Report

Of

China Reform, institutional Strengthening and Pre-investment Project

Prepared by:

International Department

Ministry of Finance

People’s Republic of China

June, 2004

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1. Summary of the Project1.1 Project Title: Third Technical Cooperation Credit Project (Reform, Institutional Support & Pre-investment Project)Credit No.:2447-CHAProject Implementation Agency: International Department, Ministry of Finance, People’s Republic of ChinaWorld Bank Board Approval: December 15, 1992Development Credit Agreement Signing:December 30, 1992Development Credit Agreement Effectiveness: March 12, 1993Original Closing:June 30, 1998Revised Closing: December 31, 20031.9. Allocated Credit:SDR 35,500,000(US$50,000,000 equivalent) Disbursed Credit:US$48,224,318.94 equivalentDisbursement Proportion:97.03%

2. Background

2.1 At the end of 1970’s, the Chinese Government began carrying out the well-known market-oriented economic system reform. In 1982, the Chinese Government put forward that, the general goal of economic development during the 20 years from 1981 to the end of 20th century is to doubled the whole country’s annual industrial and agricultural output with economic benefits increased. It was meanwhile put forward that, for realizing the goal, from 1981 to 1986, adjustment of economic structure, consolidation and perfection of implemented preliminary economic reform, and development of comprehensive scheme and implementation procedure of the reform should be focused. In 1987, the Chinese Government identified the full-scale reform and opening to the world as an important part of long-term guidelines followed through the period of preliminary stage of Socialism.

2.2 Since 1980, World Bank has specified the basic goal of its Country Assistance Strategy for China as supporting analytic and material assistance to China’s economic reform and modernization. One of the main components of such a support is technical assistance of which the main contents include pre-investment, policy recommendations and capacity building. In

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the 1980’s, World Bank approved 3 technical assistance projects applied by the Chinese Government for credit financing. They are First Technical Cooperation Credit Project (Credit No.: 1412-CHA), Second Technical Cooperation Credit Project (Credit No.: 1664-CHA), Planning Support and Specific Studies Project (Credit No.: 1835-CHA). The first two projects mainly supported pre-investment, and the latter mainly supported policy recommendations and capacity building. These projects had been implemented very well, playing positive roles on promoting China’s economic reform and modernization.

2.3 In 1992, based on the experiences summarized from past 14 years’ reform, the Chinese Government put forward that, the goal of economic system reform is to establish the socialist market economic system, in order to further liberate and develop productivity. It was meanwhile put forward that, establishing and perfecting socialist market economic system is a long-term development process, as well as a arduous and complex systems engineering. Therefore, it is highly necessary to accelerate economic reform, convert operation systems of state-owned enterprises especially large-and-middle- sized ones, accelerate the establishment of market system, deepen distribution system and social security reform, accelerate the transition of government functions. Under the new circumstances, World Bank approved the Chinese Government’s application for credit financing to implement Third Technical Cooperation Credit Project . The project supports policy recommendations, capacity building as well as pre-investment, and takes the first two contents as the core contents.

3. Comments on Project Objective

3.1 The objective of Third Technical Cooperation Credit Project consists of 2 aspects. One is to support the Chinese Government to accelerate and deepen economic system reform and strengthen capacity building of government departments and institutions related to policy research, development, implementation and training. The other one is to support concerned project implementation agencies to prepare well public investment projects, especially those to be financed by World Bank.

3.2 Revision of the objective: No revision happened to the objective during the project implementation because it is suitable for China’s reform and opening to the outside world, as well as economic development.

4. Comments on Project Design

4.1 As designed, the total cost estimation of Third Technical Cooperation Credit Project is US$60,000,000 equivalent, including World Bank credit financing of US$50,000,000 equivalent and domestic counterpart fund of US$10,000,000 equivalent. The project consists of two components. One is the Reform and Institution Development Component, with a cost estimation of US$26,600,000 equivalent. The other one is the Pre-investment Component with a cost estimation of US$33,400,000. Under the Reform and Institutional Development Component, only 7 subprojects were approved with a cost estimation of US$7,000,000 equivalent during project appraisal, and other ones were approved during project implementation. Under the Pre-investment Component, only an recapitulative demand analysis

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was made during project appraisal, all the subprojects were approved during project implementation.

4.2 The 7 sub-projects approved under the Reform and Institution Development Component during project appraisal were as follows:No. Sub-project Title Subproject Implementation

Agency1 Reforming China’s National Economic

Auditing System and Statistical Investigation Methods

Foreign Affairs Department, State Administration of Statistics

2 Strengthening China’s Capability of Macro-Economy Analysis and Forecasting

Institute of Quantitative Economy and Technical Economy, CASS

3 Strengthening Capacity of State Economic System Reform Commission

Foreign Affairs Department, SESRC

4 Strengthening Capacity of State Administration of Taxation

International Cooperation Department, SAT

5 Establishing New Materials Distribution System under Socialist Market Economy

Foreign Loan Office, Ministry of Domestic Trade

6 Strengthening China’s Capability of Economic Sector Investigation and Research

World Bank Department, Ministry of Finance

7 Strengthening China’s Public Health Economy Study and Training Network

Planning and Financial Department, Ministry of Public Health

4.3 During project implementation, World Bank and MOF continuously approved 26 new sub-projects under the Reform and Institution Development Component according to the Chinese Government’s requirements for reform priority and progress at different stages. Those subprojects are listed as follows::NO. Subproject Title Subproject Implementation

Agency1 Strengthening China’s Comprehensive

Transportation Training NetworkChina Comprehensive Transportation Management Training Center

2 Strengthening China’s Agriculture, Forestry and Water Sectors Training Network

Education Department, Agricultural Bank of China

3 Strengthening China’s Public Finance Training Network

Education and Training Center, Ministry of Finance

4 Strengthening China’s Capability of Utilizing World Bank Lending

World Bank Department, Ministry of Finance

5 Establishing China’s Government Debt Trusting and Monitoring System

Government Debt Department, Ministry of Finance

6 Establishing China’s Market-Reconstruction-Based Quality Management and Identification System

Chinese Association of International Quality Identification Consultation & Promotion

7 Improving China’s Foreign Debt Statistic and Capital Project Department, State

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Monitoring System Administration of Foreign Exchanges

8 Training the Staffs Involved in Formulating the 9th Five-year Plan

Foreign Affairs Department, State Planning Commission

9 Establishing China’s Market-reconstruction-based Quality Management and Identification System (II)

Chinese Association of International Quality Identification Consultation & Promotion

10 Studying Financing Methods and Risk Management in International Capital Market

Foreign Capital Utilization Department, State Planning Commission

11 Strengthening Capacity of Ministry of Finance International Department, Ministry of Finance

12 Strengthening Capacity of Heilongjiang Finance Management Departments

Heilongjiang Provincial Finance Department

13 Strengthening China’s Capability of Middle-and-long-term Fiscal Policy Study

Comprehensive Department, Ministry of Finance

14 Strengthening Capacity of Shanxi Finance Management Departments

Shanxi Provincial Finance Department

15 Strengthening Capacity of Liaoning Finance Management Department

Liaoning Provincial Finance Department

16 Establishing Shanghai Municipality’s 21st-Century-oriented College Curriculum and Teaching Materials Development System

Shanghai Municipal Education Commission

17 Improving Guizhou Province’s Investment Environment

Guizhou Provincial Investment Promotion Bureau

18 Perfecting China’s Taxation Judicature System International Cooperation Department, State Administration of Taxation

19 Perfecting Wuhu City’s Overall Plan of SOE Reform

Wuhu Municipal Economic and Trade Commission, Anhui Province

20 Perfecting Wuhan City’s Overall Plan of SOE Reform

Wuhan Municipal Economic and Trade Commission, Hubei Province

21 Perfecting Changsha City’s Overall Plan of SOE Reform

Changsha Municipal Economic and Trade Commission, Hunan Province

22 Perfecting Shenyang City’s Overall Plan of SOE Reform

Shenyang Municipal Economic and Trade Commission, Liaoning Province

23 Perfecting China’s Information Disclosure System of Listing Companies

Information Center, China Securities Regulatory Commission

24 Promoting Stabilization and Development of China’s Middle-and-small-sized Commercial

Bank Management Department II, China Banking Regulatory

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Banks Commission25 Perfecting China’s Recruitment and Social

Security Management Information SystemInformation Center, Ministry of Labor and Social Security

26 Further Enhancing China’s Capability of Government Auditing

Foreign Fund Utilization Department, State Administration of Auditing

4.4 During project implementation, under the Pre-investment Component, 22 sub-projects were approved, based on three-year rolling lending programs between World Bank and MOF updated at different stages. Among them, 12 are involved in electricity development, 2 are involved in industrial development, 5 are involved in agriculture development and water resources utilization, 3 are involved in environmental protection. Below are the details:

NO. Subproject Title Subproject Implementation Agency

1 Preparation for Jiangsu Electronic Development Project

Jiangsu Provincial Electric Power Company

2 Preparation for Zhejiang Electronic Development Project

Zhejinag Provincial Electric Power Company

3 Preparation for Longtan Hydro-power Development Project

South China Electric Power Affiliated Co.

4 Preparation for Shenyang Industrial Reform Project

Shenyang Municipal Finance Bureau, Liaoning Province

5 Preparation for Ertan Electricity Transmission Project

Sichuan Provincial Electric Power Company

6 Preparation for Hunan Water Resources Development Project

Hunan Provincial Water Resources Department

7 Preparation for Hubei Water Resources Development Project

Hubei Provincial Water Resources Department

8 Preparation for Henan Qinbei Power Plant Project

Henan Provincial Electric Power Company

9 Preparation for Inner-Mongolia Tuoketuo Power Plant Project

Inner Mongolia Autonomous Region Electric Power Company

10 Preparation for Chongqing Industrial Reform Project

Chongqing Municipal Finance Bureau

11 Preparation for Hubei Environmental Protection Project

Hubei Provincial Environmental Protection Department

12 Preparation for Gansu Hexi Corridor Agricultural Development Project

Gansu Provincial Water Resources Department

13 Preparation for Yunnan Environmental Protection Project

Yunnan Provincial Environmental Protection Bureau

14 Preparation for Shanghai Waigaoqiao Power Plant Project

Shanghai Municipal Electric Power Company

15 Preparation for East China (Jiangsu) East China Power Grid Co., Ltd

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Electricity Transmission Project16 Preparation for Hunan Electrical Development

Project Hunan Provincial Electric Power Company

17 Preparation for Xinjiang Tarim Basin Agricultural Development II Project

Xinjiang Uygur Autonomous Region Finance Department

18 Preparation for Zhejiang Tongbai Pumped Storage Project

Zhejiang Provincial Electric Power Company

19 Preparation for Beijing Electricity Transmission Project

North China Power Grid Co.,Ltd

20 Preparation for Baise Multi-purpose Project Guangxi You River Water Resources Development Co.,Ltd

21 Preparation for Shaanxi Guanzhong Irrigation Agricultural Development Project

Shaanxi Provincial Water Resources Department

22 Preparation for Hebei Urban Environment Project

Hebei Provincial Finance Department

4.5 In general, the project design is reasonable and feasible. World Bank and MOF fully absorbed the experiences summarized from other 3 completed or implementing technical assistance projects during project appraisal, and meanwhile, fully considered China’s real need of economic construction and social development in a new period, then made a highly flexible arrangement for project implementation. The flexibility of the arrangement is very necessary for project implementation to reflect duly and effectively moderate adjustments of reform contents and process, timely participations in international economic integration and appropriate demands for the World Bank financing. However, on the other side, the flexibility made project management conducted by MOF and World Bank more difficult, and requirements for their comprehensive coordination ability higher.

5. Realization of Project Objective

5.1 General speaking, the realization of project objective is substantive. All the sub-project objectives were closely related to project objective and elaborated on it well. Most of the sub-project objectives had been realized.

5.2 Under the Reform and Institution Development Component, a total amount of US$23,680,401.63 equivalent was utilized to support 33 sub-projects, among which 24 ones were implemented by central-level government departments and institutions, 9 by local-level government departments and institutions. Objectives of the subprojects covered fields of macro-economic management, finance, banking, taxation, planning, statistics, auditing, social security, materials distribution, SOE management, public health, transportation, agriculture, forestry, water resources, education, and etc. All the fields covered were among the development and reform priorities mentioned in the Government’s Working Reports presented by the Premiers each year during project implementation. Except for two sub-projects related to SOE management system reform, the objectives of all the other ones were realized, some of which were well realized. During project implementation, a lot of policy recommendations were adopted by central and local policymakers and became the action guidelines and

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implementation programs of reform in concerned fields. For example, the implementation of Reforming China’s National Economic Auditing System and Statistics Methods Subproject promoted the transition of China’s Statistics System from the Material Products System suited to the Planned Economy to the National Accounts System suited to the Socialist Market Economy. The implementation of Improving Guizhou Province’s Investment Environment Subproject propelled the Provincial Government to integrate the windows of attracting investments and issue a series of investment promotion measures. Meanwhile, the management capability and efficiency of key government departments and institutions related to the policy research, development and implementation were greatly enhanced. For example, the implementation of Strengthening China’s Macro-economic Analyzing and Forecasting Subproject help the Institute of Quantitative Economy and Technical Economy of CASS expand the scope of macro-economic data collection, update the mathematic models for handling macro-economic data, increase the accuracy of analyzing and forecasting results, and set up a continuous and steady system of releasing blue books. The implementation of Establishing Shanghai Municipality’s 21st-Century-oriented Curriculum and Teaching Materials Development System for Universities and Colleges Subproject help Shanghai Municipal Education Commission enlarge the scope of application of imported teaching materials in universities and colleges located at Shanghai Municipality, explore new modes of inter-universities-and –colleges sharing of imported teaching materials, and improve the teaching quality of the universities and colleges. Furthermore, a team of economic research and management talents was set up, having wide view and strong creativity, and being familiar with international practice and China’s real situations. For example, the implementation of Strengthening Public Health Economic Studying and Training Network Subproject made a good contribution to successful realization of the goal of reform in the field of public health, for provision of a lot of trained talents, as well as Training the Staffs related to the Formulation of the 9th 5-year Plan Subproject for successful transition of plan formulation patterns, and Strengthening China’s Public Finance Training Network for successful establishment of Public Finance Management Framework. In a word, the implementation of all these sub-projects played a positive role at different levels and from different sides in deepening reform, enlarging opening up and promoting the stable, sustainable and sound development of national economy.

5.3 Under the Pre-investment Component, a total amount of US$24,543,917.31 equivalent was utilized to support 22 sub-projects, all of which were implemented by local government departments and institutions. Objectives of the subprojects covered the fields of electricity development, industrial development, water resources utilization, agriculture development, environmental protection, and etc.. All of them were among infrastructure and social development fields, vital to the national economy and the people’s livelihood, and having urgent need of support from public financing. Especially, electricity was one of the development bottlenecks. Except for 3 subprojects related to the field of electricity development, the objectives of all the other ones were realized, some of which were well realized. The Preparation for Baise Multi-purpose Project Subproject is especially worthy to be mentioned for even the project was finally financed by the government debt fund, the China Development Bank loan and the equity capital of Guangxi You River Water Resources Development Co., Ltd. instead of World Bank loan or credit due to adjustment made to the

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country’s investment plan, the Feasibility Study Report, concerned regulations on Dam safety, procurement and financial management, which were developed under the sub-project as its outputs, were continuously applied with a good effect. During project implementation, a large amount of World Bank loan and credit were mobilized to support China’s economic construction, with immense social benefits and economic benefits followed. According to a glancing statistic, following the implementation of 19 subprojects under the Pre-investment Component of CRISP, totally US$4.095 billion of World Bank loan and credit was mobilized, including US$2.69 billion for electricity development (65.69%), US$0.345 billion for industrial development (8.42%), US$0.61 billion for agriculture, forestry development and water resources utilization (14.9%), US$0.45 billion for environmental protection (10.99%). Meanwhile, a lot of advanced international technologies and management experiences were applied in developing engineering plans, construction management plans, sector development plans and enterprise reform plans. For example, as an output of the implementation of Preparation for Shenyang Industrial Reform Project Subproject, the Arrangement for Restructuring Shenyang Machine-Tool Factory formulated by international consultants became a good roadmap of the development of the factory, making it keep a good development trends till now. As an output of the implementation of Preparation for Hebei Urban Environment Project Subproject, a new technology recommended by international consultants was adopted by Shijiazhuang Qiaodong Waste Water Treatment Plant, to reduce construction time and cost. Furthermore, a team of professional and management talents was established, having rich experiences and high liability, and being familiar with international practice and China’s real situations.

6. Project Output

6.1 The project outputs are satisfactory. According to the sub-project implementation plans agreed by World Bank and MOF, the sub-project implementation agencies conducted numerous research, study tour, training, seminar and goods procurement activities.

6.2 Under the Reform and Institutional Development Component, project outputs were made in the following forms: i) New economic reform and management policy recommendations. For example, during the implementation of Strengthening China’s Capability of Middle-and-long-term Finance Policy Study, Comprehensive Department of MOF prepared 21 reports with assistance from international and local consultants, and put forward a series of advanced and operational policy recommendations to the higher-level management. ii) New economic research and management tools. For example, during the implementation of Perfecting China’s Information Disclosure System for Listing Companies, China Securities Regulatory Commission decided to promote the development and application of information disclosure system for listed companies based the Data Base Design Plan proposed by international consultants, and then required all the listed companies to adopt XBRL standard to release their annual financial reports from April, 2004.iii) New economic management and service organizations. For example, during the implementation of Perfecting Shenyang Municipal SOE Reform Plan Subproject, establishment of a service center for middle-and-small-sized enterprises was approved by

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Shenyang Municipal Government, for provision of services to the enterprises such as information consultation,market development guidance and training.iv) Effective economic management training network. For example, during the implementation of Strengthening China’s Public Finance Training Network Subproject, the training capacity and quality of the network were further improved, making it possible for the network to play a positive role till now.iv) Improved quality and capacity of human resources. For example, during the implementation of Strengthening the Capacity of State Economic System Reform Commission Subproject, a lot of policymakers at different levels of the commission gained opportunities to learn directly international experiences, which optimized the decisions in terms of both originality and science.

6.3 Under the Pre-investment Component, project outputs were made in the following forms:i) Improved feasibility study reports in accordance with World Bank appraisal requirements. World Bank and the Chinese Government have the same requirements for principles of feasibility, but different requirements for specific contents, formats and evaluation methods. ii) Other documents prepared in accordance with World Bank appraisal requirements. Such documents mainly include the Environment Impacts Assessment Report, the Resettlement Plan, the Procurement Plan and the Project Implementation Plan. The Chinese Government has no or very simple requirement in this regard. iii) Improved engineering plans. International experiences are very important for optimizing engineering plans of the projects financed by World Bank loan and credit for they are always large-sized and complex, so that they will get obvious benefits in the fields of safety and applicability from introduction of new design concepts and technologies.iv) Procurement documents prepared in accordance to World Bank Procurement Guideline and Consultant Guidelines. It is a mandate requirement of World Bank that all the procurement activities financed by its loan and credit should follow its procurement guidelines and consultant guidelines, which is allowed by China’s Bidding and Tendering Law. v) Regional and sector development plans or reform plans. Such plans are always involved in power price reform, water resource price reform, drainage area treatment and urban development. World Bank generally requires the borrower to prepare and submit the plans for sustainability.

7. Institutional Development Impacts

7.1 During project implementation, all the subproject implementation agencies’ capacity were strengthened. They accepted new management concepts, established new management mechanisms, used new management methods, and finally improved their management efficiency.

7.2 Under the Reform and Development Component, the subproject implementation agencies are government departments and institutions responsible for reform policy research, development, dissemination and implementation. Strengthening their capacity not only made effect on their own development, but also the country’s macro-economic and micro-economic operation, allocation of public resources, balance of regional development and order of market

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competition. For example, the implementation of Establishing China’s Market-Reconstruction-Based Quality Management and Identification System Subproject made a good contribution to promoting the harmonization between China’s quality identification system with international practice, to provide solid guarantee for Chinese commodities’ entering into international market.

7.3 Under the Pre-investment Component, the subproject implementation agencies are government departments and enterprises responsible for public investment and construction. Strengthening their capacity, not only benefited the project financed by World Bank loan and credit, but also other public investment projects. For example, Hunan Provincial Water Resources Department successfully applied the investment management experiences accumulated in the implementation of Preparation for Hunan Water Resources Development Project Subproject to similar public investment projects financed by other resources, realizing the simplification of management and operation teams.

8. Key Factors Effecting on Project Implementation and Outcomes

8.1 Key factors effecting on project implementation and outcomes are: nature of technical cooperation projects financed by World Bank credit, the Chinese Government’s continuous requirements for deepening economic reform and enlarging opening up to the outside world, reorganization and staff adjustment, natural and man-made disasters. The effects of these factors are both positive and passive.8.2 Compared with ordinary projects financed by World Bank loan and credit, technical cooperation projects attach more importance on macro-management. Any adjustment made on the Chinese Government’s reform program and World Bank’s overall strategy on assistance to China, will make direct effect on project implementation. Therefore, technical cooperation projects were designed to be umbrella projects. Allocation of credit was based on the principle of case-by-case principle, a large proportion of credit was unallocated during project appraisal, and most of the subprojects were identified and approved during project implementation. From the positive side, such a situation gave a large flexibility to project implementation. For example, in the first part of project implementation, the focus of World Bank support was improving staff quality, but in the second part, it was adjusted to be providing policy recommendations. Besides, at the end of last century, when the Chinese Government took SOE reform as a core duty of reform, allocation of credit to support SOE reform in 4 pilot cities could be make quickly. However, from the passive side, such a situation brought high uncertainty to project implementation. More adjustments always caused to impossibility of timely allocation of credit in accordance with designed progress and plan, so that project implementation was delayed. The closing date was extended from original December 31, 1997 to December 31, 2003 (6 years in total) after 4 applications for extension submitted by MOF and approved by World Bank.

8.3 1n 1992, the Chinese Government ascertained its goal of economic system reform to be establishing socialist market economic system. Since then, China’s economic system reform walked on a new stage. During the 5 years from 1992 to 1996, the Chinese government

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adopted a series of measures to promote reform in the fields of finance, taxation, banking, foreign trade, foreign exchange, planning, investment, pricing, materials distribution, housing and social security, and preliminarily established the framework of macro-economic administration, successfully promoted a rapid economic growth while controlled inflation at a low level. During the 5 years from 1997 to 2001, the Chinese Government preliminarily established socialist market economic system, continued to deepen reform in the fields of finance, taxation, banking, housing and government reorganization. Meanwhile, the Chinese Government exerted great efforts in enlarging domestic demands, to offset bad influences of the Asian Financial Crisis and fluctuations of world’s economy, as well as maintain a fast economic growth. After 2002, the Chinese government put forward its strategic development goal in the first 20 years of the 21st Century as roundly constructing a well-off society, and mapped out a plan for building up a perfected socialist market economic system and a more open, more vigorous economic system. Such a situation assured the demand of credit to a largest extent, promote the expansion of project outcomes and play a solid foundation of successful project implementation. For example, in the last few years of last century, when establishment of a framework of public finance management became the core duty of deepening fiscal reform, allocation of credit was made accordingly to support capacity building of MOF and local finance departments. On the other side, the complexity of reform made passive effect on project implementation. Reform could not be accomplished in an action. A lot of investigations and discussions work needed to be done before issuing a reform measure. Project implementation had to be postponed for more time was required for some subproject to conduct more investigations and discussions.

8.4 During project implementation, natural and man-made disasters that made largest effect on project implementation and outcomes were Asian Financial Crisis, 911 Disaster and SARS Epidemic Situation. Generally, the effect of such disasters is passive, which was an important reason for delay of project implementation. After Asian Financial Crisis happened, the Chinese Government duly undertook necessary policy measures to keep steady economic growth. During the period of solving problems brought by the crisis, adjustments had to be made on general and specific working plans developed originally, so that adjustments had to made accordingly on the implementation plans of some subprojects. Aft 911 Disaster happened, for more attentions to safety and anti-terrorism, a lot of international consultants could not visit China to provide their services, and a lot of domestic policy researchers and developer could not go abroad for study tour and training, which heavily effect on project implementation. The same effect made after SARS Epidemic Situation happened. Certainly, happening of disasters always meant beginning of renovation, which accordingly might cause new demands of credit allocation.

8.5 Reorganization and staff adjustment happened on both World Bank side and Chinese side. Basically, the effect of World Bank’s reorganization and staff adjustment was passive. During project implementation, the task team leader of the project was changed for four times. Such a situation made it impossible for the task team leader to provide consistent and continuous guidance and supervision to project implementation. Worse effect made due to change of subproject manager. The most typical case was Perfecting Wuhan City’s Overall Plan of SOE

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Reform. The subproject implementation agency had to withdraw the subproject for much low-efficiency and long-time reviewing caused by highly frequent change of subproject manager in a short period. The effect of MOF and subproject implementation agencies’ reorganization and staff adjustment had positive and passive effects. From the positive side, the goal of reorganization and staff adjustment is transition of government functions, optimization of staff structure and improvement of management efficiency, which was consistent with the project objective, so concerned actions conducted could promote project implementation, and mutually, project implementation could support such actions. Meanwhile, the direct result of reorganization and staff adjustment was to reduce the quantity of staff and institutions, so that a steady project coordination and subproject implementation team could not be maintained, heavily effecting on the quality and progress of project implementation. Such an effect is passive. From this side, reorganization and staff adjustment was an important reason for delay of project implementation.

9. Sustainability

9.1 The sustainability of CRISP is good. Firstly, the Chinese Government considers reform and opening up to the outside world as one of the 3 historic huge changes taken place in the development process of China since 1 century ago. The Chinese Government clearly put forward that, combining socialism with market economy, needs deepening reform and enlarging opening up. Therefore, the demand of cooperation with World Bank on reform and institutional development is continuous and steady. In 1999, World Bank approved Fourth Technical Cooperation Project of which the objective and design are same as that of Third Technical Cooperation Credit Project. Up to now, most of credit under Fourth Technical Cooperation Project has been allocated to support 30 reform and institutional development subprojects in the fields of macro-economic management, regional economic development, urban development, agriculture and rural area development, disaster prevention and reduction, human resources development, power sector regulation, oil and gas sector regulation, fiscal and taxation system reform, financial system reform, comprehensive transportation system reform, road maintenance system reform, informatization, environmental protection, tourism development, high-tech industry development and high education development, and 2 pre-investment subprojects related to urban metro construction and express way construction. In addition, MOF and World Bank are preparing Fifth Technical Cooperation Project, of which a co-financer is proposed to be DFID.

9.2 Secondly, designing the project to be umbrella project in form enables MOF and the subproject implementation agencies have strong ownership in ascertaining subproject objectives and contents, so that the subproject outputs can meet well the need of factual work, and produce continuous impacts in a certain period. For example, during the implementation of Strengthening China’s Capability of Macro-economic Analyzing and Forecasting Subproject, Institute of Quantative Economy and Technical Economy of CASS set up a mechanism of regularly releasing macro-economic analyzing and forecasting reports, and made the reports become an important and authoritative resources for concerned government agencies, enterprises and international economic society to learn the economic development trends of China. Afterwards, some other economic research institutes set up similar

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mechanism of regularly releasing reports focusing on other topics, very helpful for expanding the channel of macro-economic information transmission and exchange, In 1999, MOF and World Bank provided further support under Fourth Technical Cooperation Project to the institute for updating the analyzing and forecasting model system. In 2003, under Fourth Technical Cooperation Project, MOF and World Bank provided another support to Institute of Rural Economy of CAAS to set up 9 mathematic models for agricultural and rural economic analyzing and forecasting, in order to improve China’s policy support system for agriculture sector. 9.3 Thirdly, key economic management sectors strengthened their capacity and meanwhile obtained very valuable experiences from experiment, which played a solid institutional foundation for future reform. The most typical case is Perfecting China’s Recruitment and Social Security Management Information System Subproject. In 2002, under the subproject, Information Center of MLSS completed the development of concerned system management regulations and standards, as well as network scanning software, and conducted concerned experiment operations in Tianjin Municipality and Liaoning Province. By the end of November, 2003, utilization of the network scanning software had been extended to other 10 provinces, and inter-linking between the above-mentioned 12 provinces had been realized. In 2003, MLSS circulated a notice on construction of social security information system, requiring the national uniform standards should be followed. According to concerned plans, from 2004, other 20 provinces will gradually realize their network linking with MLSS, and the scope of application will be expanded.

9.4 Fourthly, comprehensive quality and professional skills of the staffs related to reform policy and development measure research, development, dissemination and implementation were improved roundly and quickly, which played a solid talent foundation for future reform. During the implementation of Reforming China’s National Economic Auditing System and Statistic Methods Subproject, totally 40 staffs of State Administration of Statistics and 2 staffs of concerned provincial statistics bureaus were arranged to accept training on national economic auditing and statistic methods in concerned government agencies and universities in USA, Italia, France and Canada. All them returned China after completion of their training, and most of them have been sent to higher positions and played more important roles. During the implementation of Strengthening the Capacity of MOF Subproject, more than 80 staffs were arranged to study on public administration, business administration, economic management, trade and finance, information technology, economics, accounting, law, taxation, insurance, and etc. in concerned institutions and universities in USA, UK, Germany, Japan, Australia, Canada, Russia, and etc. All of them returned China after completion of their study. Some of them have been sent to higher positions in MOF, and some of them to other ministries and institutions to undertake more challenging duties. In the process of realization of successful transition from MPS to SNA, and successful finalization positive finance policy measures, they play a good role.

10. World Bank and Borrower Performance

10.1 Generally, World Bank performance during project implementation is satisfactory. They

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evaluated project and subproject objective based on the Chinese Government’s real need for deepening reform and enlarging opening up, and designed a simple but effective procedure to review subproject proposals, in order to increase the efficiency of project management. They regularly supervised the situations of project implementation, fully considered the comments and suggestions put forward by Chinese side, guided them to solve problems happened. Meanwhile, they gave full use any possible methods and opportunity, such as subproject launching workshop, training course, round-table discussion, telephone dialogue, to train the project coordination and subproject implementation staffs on Chinese side on project management, procurement and disbursement, in order to assure the quality of project implementation. The shortage on World Bank side was that, they could not positively provide more high-quality proposals for utilization of the unallocated credit, and they could not assure the stability of the task team leader and subproject managers, to lower the possibility of delay of project implementation.

10.2 Generally, MOF performance as the central project coordination unit during project implementation is satisfactory. The ascertained the principles and emphases of utilizing the allocated credit according to the Chinese Government’s overall requirements for deepening reform and enlarging opening up at different stages, introduced the nature, characteristics of technical cooperation project to concerned government agencies and institutions, guided them to prepare subproject proposal, reviewed and discussed with World Bank about those proposals, guided subproject implementation agencies to handle procurement and disbursement formalities, managed the special account and accept auditing, organized project supervision with World Bank and prepared concerned project implementation plans and project progress reports. Even though the closing date of the project were extended for 4 times, the reasons for extension were understandable, and the results of extension were suited for general requirements of World Bank and the Chinese Government. Supervision and auditing results showed that, project contents kept close line with project objective, the quality of project implementation was guaranteed, project impacts were good. The shortage on MOF side was that, they could not assure the stability of project coordination and management staffs, to lower the possibility of delay of project implementation. In addition, the quantity of project coordination and management staffs was too few to further improve the quality of project implementation, for many detailed analyzing and monitoring work could not be normally conducted,

10.3 Generally, subproject implementation agency performance during project implementation was satisfactory. They prepared and submitted subproject proposals in strict accordance with the Management Regulations of Third Technical Cooperation Credit Project circulated by MOF, conducted every activity in strict accordance with contents and objectives specified in approved subproject proposals, handled procurement and disbursement formalities in strict accordance with World Bank guidelines and handbooks, duly prepared and submitted subproject implementation plans and progress reports, accepted concerned supervision and auditing, undertook necessary measures to enlarge subproject impacts. However, the performance of each subproject implementation agency is various. The problem of some subproject implementation agencies was that, staff changes happened very quickly. The problem of some subproject implementation agencies was that, their understanding of

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complexity and renovation of reform was too low. Both of the problems had made passive effects on project implementation. Besides, most of the subproject implementation agencies could not give full consideration of training concerned subproject management staffs to improve their management capability.

11. Experiences Learned

11.1 The success of project implementation is hard-earned for long implementation period and wide support scope are two obvious characteristics of CRISP. Each subproject is independent. The main experience learned during project implementation is that, a strong government support, a reasonable subproject design and a steady team of project management personnel are 3 footstones for the success.

11.2 No strong government support, no loose macro environment and no active demand for project implementation. These two aspects are very critical for a highly flexible project implementation. It is same for implementing Four Technical Cooperation Project and preparing Fifth Technical Cooperation Project.

11.3 A reasonable subproject design shall include an innovative and clear subproject objective, and an operational subproject implementation plan. Deepening reform and enlarging opening up is a dynamic process, if the subproject objective lacks innovation and clarity, as the direct result, the subproject outputs will lose the meanings of direction and demonstration. Meanwhile, deepening reform and enlarging opening up is a complex process, if the subproject implementation is non-operational, as the direct result, the subproject output will be unmarketable.

11.4 A steady team of project management personnel can to largest extent guarantee the innovation of project implementation. It has been testified by practice that, innovation is the soul of technical assistance. The core contents of technical assistance are to analyze new development situations, summarize up new development experiences, probe into new development ways, set up new development mechanism, develop new development tools, solve new development problems. However, innovation is not innate. It is the rime of long-term hard work and intelligence. Therefore, quick staff change will always heavily effect on the quality and efficiency of project and subproject implementation.

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