"The picture that emerges is one of enormous momentum, of positive change in so many areas and a willingness to confront and resolve the hard issues of development," Mr. Wolfensohn said. "In a relatively short time, China has emerged as a country of truly global stature, having joined the World Trade Organization, strengthened ties with ASEAN and won the right to host the 2008 Olympics. This is a more dynamic, more confident China -- and rightly so. The simple fact is that more than 250 million people in the past 20 years have been lifted from poverty here. The problems confronting China have not been totally overcome -- far from it -- but the magnitude of this achievement in a single generation is such that other countries should learn from it."

Mr. Wolfensohn said that in meetings with President Jiang and Premier Zhu, as well as with other ministers and members of the National People's Congress, a consistent theme was raised: leveraging the World Bank Group's resources to pilot reforms and initiatives which could be scaled up to meet China's needs. "If there is any country where scale is important, it's obviously China, and I am delighted that the demand for our support in piloting change is so strong. This is how we can, with relatively modest financial support, have a major positive impact on the tens of millions of Chinese who need assistance."

Mr. Wolfensohn said that "even with the successes of the past 20 years, the picture in China today is also one of real needs and challenges, as almost everyone I have met this week has reminded me. The acute poverty in the western regions appears even starker in contrast to the boom taking place in the east. We need to remember that for every Shanghai, there are hundreds of rural areas in China where people live on less than a dollar a day. The poverty challenge is vast. To see it first hand is to understand the great need for the World Bank and China to work even more closely together. We have to find ways, beyond even what we have done over the past 20 years, to assist the desperately poor to have a chance at a better life, a chance to share in the growth that has transformed so much of this country in the past generation. The World Bank looks forward to supporting efforts of the Government to alleviate poverty in the western provinces."

Mr. Wolfensohn identified several areas in which China needed to make significant progress in the years immediately ahead to secure the benefits of recent years:

• Focusing on the poorer areas. Income disparities and lack of opportunity are marginalizing millions of people, mainly in the remote, western regions. More concerted efforts will need to be made to provide sustainable livelihoods for these people, in a way that also protects their cultural identity. This will mean not just greater investment in rural development, health, education, and basic infrastructure, but also finding ways to provide financial assistance -- perhaps through micro-credit schemes -- to small businesses and farmers. These efforts have been assisted recently by an innovative financing arrangement with valuable support from the UK Department for International Development (DFID).

• Major structural reforms associated with the continued transition to a more open, market-driven economy. Non-performing loans held by state banks, the drain of loss-making state-owned enterprises, unfunded pension systems, inadequate property markets and the relatively weak domestic financial system -- these are among the obstacles China must continue to deal with as it prepares for full compliance with WTO requirements in 2007.

• Continuing to provide greater space for the private sector to flourish. The private sector needs to continue to grow and develop if China is to sustain high growth rates in the years ahead without reliance on Government spending. Mr. Wolfensohn said that the International Finance Corporation -- the World Bank's private sector arm -- was ready to expand its work to assist in this vital area. He cited other issues needing attention to create a better investment climate, including progress in improving transparency and accountability in businesses, reducing corruption, and upgrading the legal and judicial system.

• Stepping up efforts to restore and protect the natural environment. In urban and rural areas, the environment has suffered badly through inadequate planning, protection and enforcement. The clean-up task is considerable; it will take time and cost a great deal, and in some cases, the situation is actually deteriorating even now. But in a number of other cases, China has shown a remarkable ability to turn things around, in providing cleaner water in Shanghai, or in restoring barren landscape in the Loess Plateau. China will benefit in human terms and financial terms if the environment improves.

"The opportunities and needs are considerable; the capacity of the people we met is remarkable; and the sense of momentum is unmistakable," Mr. Wolfensohn said. "The Bank has been proud to be associated with the development success of China these past 20 years. We have learned a great deal from the relationship, and we look forward to working closely with the Government, with other donors and partner agencies, with civil society and with the people themselves to make the future even brighter."

During his eight-day visit, Mr. Wolfensohn first made a field visit to a number of development projects supported by the World Bank in Yunnan, Sichuan and Shanghai. On his first stop in Lijiang, he saw a Bank-supported Earthquake Rehabilitation Project that financed the restoration of the Mu Mansion, a World Heritage Site, as well as residences and service facilities damaged by the earthquake in 1996.

In Xichang, Sichuan Province, Mr. Wolfensohn visited a Yi nationality village and talked to farmers who participated and benefited from the Bank-supported Anning Valley Agricultural Development Project. He also visited a forest plantation run by a group of four farmer households, with funding support from the China Forestry Development in Poor Areas Project.

In Chengdu, capital of Sichuan and a gateway to the western provinces, he launched the International Finance Corporation (IFC)-managed China Project Development Facility, which is co-financed by the governments of the UK, Australia and Switzerland. The facility aims to catalyze support to small and medium enterprise managers in the Western Region. Mr. Wolfensohn exchanged views on small business development, and used the opportunity to learn about the needs and concerns of private business in poorer regions. He was also shown an IFC-supported cement factory, which is supported 75 percent by Lafarge and 25 percent by the local Dujiangyan Building Materials Corporation. The plant brings advanced technology and high environmental standards to a major industrial undertaking. Also at Dujiangyan, Mr. Wolfensohn visited a massive 2,000-year-old irrigation system, which is a candidate for World Heritage listing. At the same time, Mrs. Wolfensohn visited a school that has been active in raising awareness for the prevention of HIV/AIDS. Mr. and Mrs. Wolfensohn also visited the Southwest Minorities University where they expressed strong support for efforts to provide education opportunities for minority students.

In Shanghai, Mr. Wolfensohn saw the tremendous changes that have taken place in the city -- especially in Pudong -- in recent years. After a tour of the Shanghai Urban Planning Exhibition Center, he visited a crowded housing area that is due for renewal, which may be supported partly by the proposed Shanghai Urban Environmental Adaptable Program Loan (APL). This would be the Bank's first APL in China. Discussions with residents helped him get a better appreciation of the expectations of the residents who will benefit from the upgrading. This project will introduce to Shanghai a set of world class methods and technologies for the management of urban environmental issues and the financing of urban infrastructure.

Banking system reforms in China include the development of private commercial banks, and IFC is the first direct foreign investor in China's banking sector. Mr. Wolfensohn met a group of bankers in Shanghai to learn about their successes and remaining challenges. This group included officials from the People's Bank of China Beijing and Shanghai, as well as leaders from Bank of Shanghai, Nanjing City Commercial Bank, Xian City Commercial Bank, and Minsheng Bank. He discussed with them a broad range of issues such as the role of IFC in China's banking sector, corporate governance in the financial sector, the competitive strategies employed by banks, and their expectations regarding potential foreign partners.

Mr. Wolfensohn exchanged views with the governors and vice-governors of Yunnan and Sichuan, and with the Mayor of Shanghai, on the World Bank Group's country program.

In Beijing, Mr. Wolfensohn met with President Jiang Zemin and Premier Zhu Rongji. He discussed with them economic developments in China and abroad, China's needs and challenges, and ways in which the World Bank Group can assist. Mr. Wolfensohn reconfirmed the commitment of the Bank Group to help China meet the challenges emerging from closer integration in the global economy, especially in assisting disadvantaged groups and regions. He also met with Minister of Finance Xiang Huaicheng, Chairman of the State Development and Planning Commission Zeng Peiyan, the Minister of Education, Vice-Minister of Health, Minister of Water Resources, Vice-Minister of Communications and Administrator of the State Environment Protection Administration. At these meetings, he was able to reinforce the very useful partnership and dialogue that China and the World Bank Group have had since active collaboration on development issues began in 1980. He received useful suggestions on the orientation of the future partnership with the Chinese government and Chinese people.

Together with Vice Premier Wen Jiabao, Mr. Wolfensohn opened the first Annual Forum of the APEC Finance and Development Program, which is jointly-sponsored by the Ministry of Finance and the World Bank. He congratulated the Government for taking the lead in establishing the AFDP, and for having the foresight to pursue the overarching theme of AFDP: improving financial intermediation for economic growth, development and stability. Emphasizing the importance of a sound financial system in his address, he said, "a sound and robust financial system is fundamental to growth and poverty alleviation, employment creation and economic stability. Good financial systems promote these outcomes, weak systems threaten them." World Bank Senior Vice President and Chief Economist Nicholas H. Stern also attended the Forum, which focused on three themes: financial sector development and growth, lessons and prospects for financial restructuring, and achieving financial stability.

Mr. Wolfensohn also gave a keynote speech at an International Conference on Corporate Governance which was co-sponsored by the Development Research Center of the State Council, the National Accounting Institute, the World Bank and IFC. He spoke to an audience of senior government policymakers, donor agencies, academics, enterprise executives and the press at the conference in Beijing. The conference also show-cased the Global Development Learning Network (GDLN), a fully interactive, multichannel distance learning network with a mandate to serve the developing world. This enabled a hookup with conference participants Ningxia, where the first node of the Beijing hub of GDLN has been established, with financial assistance from the Australian Government and AusAid. At the conference, Mr. Wolfensohn said: "The real challenge for this country and for this region, and for many other regions, is simply to do what we know is good sense. It's taking the step to clean up the banking system, to clean up corporate governance, to act with integrity, to institute laws and regulations which are clear and simplified and understood by the accounting profession, by the legal profession. And if we do that, the future is ours." A new World Bank and IFC-sponsored study, titled China: Corporate Governance and Enterprise Reform, was released at the conference.

Mr. Wolfensohn attended a ceremony to celebrate China's joining the Development Gateway Foundation as a Founding Member. Together with Minister of Finance Xiang Huaicheng, he signed a Memorandum of Understanding to initiate this process. And, together with the Minister of the State Council Information Office Zhao Qizheng, he launched the China Country Gateway, part of China's contribution to the Foundation. The purpose of the Development Gateway portal is to provide access to and sharing of critical knowledge and experiences on development. It represents a collaborative e-space for communities, organizations, and individuals to build partnerships, share ideas, and work together to reduce poverty. The World Bank has been a Founding Member of the Foundation since July 2001, and has played a major role in establishing the Foundation.

Mr. Wolfensohn also met with senior leaders of the National People's Congress (NPC), China's parliament, including Vice Chairman Cheng Siwei of the NPC Standing Committee, Chairman Chen Guangyi of the NPC Financial and Economic Committee, Chairman Gao Dezhan of the NPC Agriculture and Rural Affairs Committee, Vice Chairman Hu Guangbao of the NPC Law Committee, Vice Chairman Wang Jiaqiu of the NPC Education, Science, Culture and Health Committee, and Wang Xianjin, Member of the NPC Environmental and Resources Protection Committee. Mr. Wolfensohn received helpful suggestions on possible World Bank Group assistance on policy analysis and advice.

On several occasions during their 8-day visit, Mr. and Mrs. Wolfensohn met with representatives of civil society, including academics, researchers, NGO leaders, and women activists. Mr. Wolfensohn was very pleased to see that civil society is playing an increasingly important role in general development, and that participatory project approaches that include the views of affected people are being accepted and introduced. He offered the World Bank Group's assistance in accelerating this process.

Mr. Wolfensohn gave a major speech to over 600 students and faculty at Peking University. In the speech he emphasized the need for a partnership between developing and developed countries and contributions from both in achieving the millennium goals. He also spoke about the challenges facing China in completing the remaining reforms that would establish it as an essentially market-based, modern, and globally integrated economy. He identified reforms of the financial sector and state enterprises as the most pressing. He also stressed the need to confront the new challenges emerging from joining the WTO: enhancing governance, alleviating social pressures, mitigating environmental degradation, and strengthening infrastructure while promoting innovation and change. He encouraged China to increase efforts to embrace the potential of the "Knowledge Economy" and pledged World Bank Group support to deepening collaboration on this front. "Across the world, we must educate our children -- students such as yourselves who are standing before me today -- to be global citizens with global responsibilities," he said. "We must celebrate diversity, not fear it. We must tell our children to dare to be different -- international, intercultural, interactive, global." During this visit, Mrs. Wolfensohn was able to visit a number of schools and universities and discussed with policymakers and education specialists issues related to education development and reform in China.

Mr Wolfensohn was accompanied on his visit by the Regional Vice President for East Asia and the Pacific, Mr. Jemal-ud-din Kassum, Country Director for China, Mr. Yukon Huang, East Asia Director for IFC, Mr. Javed Hamid, and the IFC China Country Manager, Ms. Karin Finkelston."

(china.org.cn May 30, 2002)