New WB loan to boost private sector in China's poorest province

The World Bank's Board of Executive Directors approved a US$180 million project on Tuesday for China's Gansu Province  to expand income-generating opportunities and improve access to infrastructure and services. The project will focus on micro and small enterprise development, last-mile  urban-rural regeneration, and institutional strengthening in cultural heritage, sustainable tourism and creative industries. 

The project is part of a larger World Bank Group program for Gansu that includes US$80 million in financing from the International Finance Corporation (IFC) for microfinance lending in the province.

Gansu is the poorest province in China, with a per capita income less than half of the national average and less than a quarter than that of the country's leading provinces. About 65 percent of Gansu's population belongs to the national bottom 40 percent of income groups. The province also lags behind in terms of access to and quality of infrastructure. 

Tourism is one of the four pillars of Gansu's poverty alleviation program. Known as the "golden section" of the ancient Silk Road, Gansu has rich and unique natural, cultural and historical resources. However, tourism remains concentrated in the big cities and does not contribute to reducing regional disparities. Micro- and small enterprises (MSEs) in the cultural, tourism and creative industries represent an important source of employment and income for local residents but have limited access to finance needed for growth.

The Gansu Revitalization and Innovation Project will help towns and villages leverage their human, cultural and historical endowments to boost private sector growth and economic development. It will support MSEs through financing and through investments in public infrastructure and services to enable them to tap into the growing service sector. 

"This project will help boost private sector development in China's poorest province and demonstrate how cultural and tourism assets can be leveraged as a source of sustainable jobs, including in disadvantaged and remote areas," said Martin Raiser, World Bank Country Director for China.

In parallel, IFC will provide a local currency loan package of up to US$80 million, including US$50 million equivalent from IFC's own account and US$30 million equivalent IFC arranged syndicated loan, to expand lending to women-owned or managed micro and very small enterprises in rural areas, and to support the growth of the tourism and service sectors.

"This project is in line with IFC's strategy to deepen inclusion and reduce inequality in China's poorest regions. CFPA Microfinance has been IFC's partner in promoting financial inclusion in the past decade. By supporting its expansion into Gansu, we will help create opportunities for more women and micro entrepreneurs in China," said Randall Riopelle, IFC's Country Manager for China, Korea and Mongolia.  

Targeted investments will be made in infrastructure and public services to stimulate urban-rural regeneration and develop local creative industries. 

"This is the first World Bank-funded project to support the creative industries as a way to further local economic development. The project will support local traditions, including unique handcrafts in Gansu, such as jade carving, calligraphy, ink painting, colored pottery, lacquerware, sculptures, and folk performances," said Ahmed Eiweida, Task Team Leader and World Bank Coordinator of Cultural Heritage and Sustainable Tourism. 

Institutional and capacity building will help provincial and local government better manage and leverage the province's endowments.

The project is expected to result in new jobs, higher incomes and better living conditions in project areas, ultimately benefiting more than six million people. Lessons learned from the project will be shared with other provinces and countries with similar challenges and development opportunities.