At a press conference sponsored by the State Council Information Office on December 20, 2001, Vice Minister Zhang Jiyao of the Ministry of Water Resources offered an overview of the implementation since 1998 of state bond-financed water projects. He also answered questions from the press.

Zhang Jirao

Since the implementation of the 'Ninth Five-Year Plan' (1996-2000), the economic and social development in China has entered into an important historical period of continuous stable and rapid development. Water resources development has also achieved great progress. In particular, since the devastating floods in the Yangtze River, Nen River and Songhua River in 1998, the central government has increased financial input in the water sector by issuing state bonds. So quite many water projects which were not constructed due to lack of funds have been developed and begun to generate benefits. These projects have helped prevent flood and drought disasters effectively and guarantee social stability and economic development. The implementation of some key water projects has directly stimulated stable economic development, which has made the water sector a new focus for promoting the current economy.

1. Investment scale and benefits

Since 1998, the central government has input 136.4 billion yuan, including 93 billion yuan state bonds. The annual investment is 4.84 times of that in the "Eighth Five-Year Plan" and 2.82 times of that in the first two years of the "Ninth Five-Year Plan". In 2001 alone, the central financial input reached 40 billion yuan, out of which 30.1 billion yuan were state bonds. The utilization of state bonds in recent years has satisfied the financial requirement of reinforcement of crucial dikes along the Yangtze River, maintenance of important problematic reservoirs, water supply for human and livestock, and other key water projects in the West. Large-scale investment has significantly promoted water resources development and great achievements have been made in water project construction in general and flood control projects in particular.

Among flood control project construction, the reinforcement of around 30,000 km dikes has been initiated, out of which 16,000 km have reached standards set for cross section, including over 10,000 km first and second class dikes along the mainstream and tributaries of the major rivers. A number of key control projects have been put into operation, such as Xiaolangdi Project on the Yellow River, Jiangya Project in Hunan Province, Wuluwati Project in Xinjiang, Feilaixia Project in Guangdong, Guangyinge Project and Baishi Project in Liaoning. The maintenance and reinforcement of over 180 key problematic reservoirs have been completed and 5.8 billion m3 reservoir capacity has been restored. Large-scale river and lake dredging projects have been carried out with a total dredging amount of 80 million m3. In the meantime, such non-structural projects as hydrology and flood control telecommunication have been carried out. Through integrated management, the flood control system of major rivers has been strengthened and overall flood control capacity has been improved.

Among water resources projects, a large number of water source projects, integrated water development and utilization projects, and inter-river basin and inter-region water transfer projects have been constructed, such as Wanjiazhai project on the Yellow River, Heiquan project in Qinghai, Daqiao project in Sichuan, Manla project in Tibet, Donglei project diverting water from the Yellow River in Shaanxi, Kelamayi project diverting water from Erqisi River in Xinjiang, Diverting water from the Datong River to Yongdeng County in Gansu, Water Diversion and Poverty Alleviation project in Ningxia. These projects have increased water supply capacity by 40-50 billion m3. Rehabilitation has been carried out for 217 large-scale irrigation districts with the focus on water use efficiency, which has increased water-saving irrigation area by 7,766,700 hectares. 3800 township water supply projects have been constructed to solve the drinking water difficulty of 69 million rural people. Meanwhile, integrated basin-wide water management and scientific dispatching have been strengthened. In the very dry year of 2000, the Yellow River did not dry up, the Black River diverted 650 million m3 to its downstream, Tarim River diverted 320 million m3 to its downstream twice, which have played an important role in improving ecosystem of the dry areas.

In water and soil conservation, water and soil conservation and ecosystem improvement projects of the seven large river basins have been initiated with a focus on the middle and upstream of the Yangtze and Yellow River, which can control erosion area of 50,000-100,000 km2 every year. The monitoring and protection of water supply source areas have been strengthened and the first phase water function division has been completed. Besides, clean energy development has been sped up by increasing hydro power with 11,000 MW installed capacity, including over 8,000 MW medium and small hydro power. 338 counties with primary rural-electrification were developed and rural power grid rehabilitation was going on well.

2. Features of recent investment in the water sector

2.1. Total investment increased greatly and construction scale under control

2.1.1. The central government adopted an active fiscal policy and invested 93 billion yuan state bonds in the water sector. The total project investment supported by these state bonds was 350 billion yuan, which is 4 times as much as state bonds and below the national average (6.7 times). This shows that the total scale of water projects is appropriate.

2.1.2. By the end of the "Ninth Five-Year Plan", the central and local governments altogether invested 270 billion yuan. Compared with the total 410 billion yuan investment of on-going projects during the same period, the rest investment was around 140 billion yuan, including 80 billion yuan central investment. According to the present government input, the on-going projects will be completed and no 'half-way' projects will be left.

2.1.3. The 140 billion yuan transferred to the "Tenth Five-Year Plan" was beneficial for stable government input in the water sector and saved time for the preparation of new projects in this period. It is estimated that the total investment of new key projects in this period would be around 160 billion yuan, most of which will complete preparation within two years. These projects together with other new local projects will sustain high investment requirement and large construction scale.

While the central government increased financial input into the water sector on a large scale during the "Ninth Five-Year Plan", the construction scale of water projects was still under appropriate control thanks to the following: First of all, the central government had very clear policies for water development. After the floods in 1998, the central government adopted a policy to restore homes, control rivers and lakes and develop water resources, which was a guiding principle for water infrastructure projects. Secondly, the Ministry of Water Resources adopted a new idea of shifting from project-based water management to resource-based water management on the basis of drawing lessons from the 1998 floods and considering the serious drought in the North in 2000. It put forward guidelines, areas and focuses for project investment. Thirdly, in the investment planning, the principles of focusing on key projects, on-going projects and projects to be operated soon were upheld to avoid too large construction scale.

2.2. Optimize investment structure and highlight the key areas

After the 1998 floods, the weak areas of the flood control systems were witnessed and the whole society realized that floods were still the trouble-maker of the Chinese nation. So it is necessary to develop flood control systems of such large rivers as the Yangtze River and Yellow River. The continuous droughts in the North in 1999 and 2000 made water shortage a major limiting factor of national economic development. The central government prioritized water resources as national strategic resources and made it clear that it is necessary to guarantee sustainable economic and social development with sustainable water utilization. The "Great Development in the West" strategy proposed that the infrastructure and ecosystem development in the west shall achieve some breakthrough in 5-10 years. The water sector must take protection and rehabilitation of ecosystems as a starting point. According to the idea of promoting water modernization with information of the Ministry of Water Resources, scientific management and capacity building have become key areas for investment. All these require adjustment and optimization of investment structure and highlight key areas while taking various aspects into consideration.

Thanks to continuous adjustment and optimization of investment structure, the water project construction in the "Ninth Five-Year Plan" focused on key areas and took various aspects into consideration. While reinforcing dikes, the water sector also carried out such projects as key control projects in the rivers, rehabilitation of problematic reservoirs, safety facility development of flood detention areas and water and soil conservation. While increasing investment in flood control, the sector also developed projects in water-saving and water resources, large irrigation district rehabilitation, rural water supply and urban water supply. While increasing input into engineering projects, the sector also developed non-structural projects and modern management, strengthened development of network, analysis and decision-support systems of hydrology and key flood control commanding systems, improved real-time water resources monitoring, scientific decision-making and dispatching systems, increased input into preparation of water projects and improved water information and modernization.

2.3. Highlight social benefits of investment

In recent years, with the development of socialist market economy, non-commercial fiscal input has gradually withdrawn from the market. According to the principles of public finance, as national infrastructure with social benefits, the water sector is a main area for government investment. Therefore, the central government has increased investment in water projects with social benefits. For some commercial water projects with certain social benefits, the central government only allocates some policy funds to encourage relevant development. During the "Ninth Five-Year Plan", the central government allocated non-commercial fiscal investment 101.4 billion yuan, which is 78.6 billion more than and 4.45 times of the total fiscal investment of 22.8 billion yuan in the "Eighth Five-Year Plan". This has shown that the central government has increased its fiscal input in the water sector on a large scale.

2.4. More channels for investment in the water sector

In recent years, the channels for investment in the water sector have been increased. First of all, the central government has established water construction fund and raised 7.2 billion yuan during the "Ninth Five-Year Plan". Secondly, the domestic and foreign credit has been increased in central government investment. During the "Ninth Five-Year Plan", 19.2 billion yuan domestic and foreign loans were utilized, including 11.3 billion yuan bank loans, 7.2 billion yuan foreign funds and 700 million yuan own funds. Thirdly, under the precondition of increasing state bonds in local projects, the local projects are encouraged to use more loans to relieve fiscal pressure.

3. Strengthen management and guarantee investment benefits and security

3.1. Good planning and preparation are preconditions for investment benefits and security. During the "Ninth Five-Year Plan", the Ministry of Water Resources compiled a series of planning documents, including "National Flood Control Planning", "Several Ideas on Strengthening Recent Flood Control of the Yangtze River", "The Major Issues of the Yellow River and Solutions", "Several Ideas on Strengthening Recent Flood Control of the Nen River and Songhua River", "Planning Guidelines for Water Resources Development in the West", "The Major Issues of the Black River and Solutions" and "The Major Issues of the Tarim River and Solutions". After a few years of hard work, preparation of projects has been improved to satisfy the needs of project construction.

3.2. Under the precondition of good project preparation, investment planning is the basis for investment benefits and security. Therefore, investment planning has been strengthened: Investment need and possibility are combined and the project scale is brought under control to avoid "half way" projects and generate immediate investment benefits. Investment scale and investment structure are combined to focus on key areas and optimize resources allocation. Investment plan and project outlook and work amount are combined to realize quantitative management and improve the accuracy and properness of investment plan. Investment plan and plan inspection are combined to get implementation feedback, and guarantee investment security and timely completion. The compilation, implementation and evaluation of investment plan are combined for continuous review and improvement. In the meantime, laws and regulations concerning investment planning and programming are improved to strengthen investment planning. According to preliminary calculation, since 1998, 25 various regulations and methods have been issued, 8 are under review and 4 are being drafted, such as "Management Method for Construction Plan of Dikes", "Management Method for Investment Plan of Project Preparation", "Temporary Management Method for Infrastructure Construction Plan of the Ministry of Water Resources", "Management Method for Statistics of the Water Sector", "Management Method for Water Infrastructure Investment Plan", "Management Method for Evaluation and Approval of Water Infrastructure Projects", "Charging Standards for Compilation of Water Project Plan" and "Temporary Regulation for Equity Calculation of Water Projects" and so on. The formulation of various regulations and management methods has further standardized water project planning and management, which is a powerful guarantee for investment security.

3.3. Strengthening project construction and quality management is the key to investment benefits. During the recent years, according to the principles of market economy, such systems as project legal person responsibility, project tendering and contracting and construction supervision have been adopted to formalize water market. First of all, in accordance with establishment principles of legal person for social-benefit oriented water projects, the management capabilities of legal person have been improved in terms of institution, responsibility, rights and personnel. Secondly, project tendering and contracting and construction supervision systems have been promoted to ensure that almost 100% of such water projects as dike reinforcement of major rivers adopt tendering and bidding system and 90% adopt construction supervision system. Thirdly, formalize water construction market and achieve fairness, openness and justice in tendering. Fourthly, establish sound quality guarantee system to ensure strict quality control. The sample result of projects during the "Ninth Five-Year Plan" proves that 100% of the projects reach set standards and over 83% are excellent projects.

According to the "Tenth Five-Year Plan" of water development, the water sector will require over 400 billion yuan investment in total during that period. In 2002, the central government will keep on adopting active fiscal policy and stable currency policy to further strengthen water resources development as infrastructure and ensure coordination between water resources and national economic and social development.