Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. P-7062-CHA

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT OF S400 MILLION

TO

THE PEOPLE'S REPUBLIC OF CHINA

FOR A

WAIGAOQIAO THERMAL POWER PROJECT

May 21, 1997

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 withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS(as of March 18, I1)97)

Currency = Yuan (Y)Y 1.00 = 100 fen$1.00 = Y 8.2958

Y 1.00 = $0.12

WEIGHTS AND MEASURES

km = Kilometer (= 0.62 miles)kWh = Kilowatt hour (= 860.42 kcal)

MWh = Megawatt hour (= 1,000 kilowatt hours)GWh = Gigawatt hour (= 1,000,000 kilowatt hours)

kW = Kilowatt (= 1,000 watts)MW = Megawatt (1,000,000 watts)GW Gigawatt (= 1,000,000,000 watts)kV = Kilovolt (1,000 volts)

ABBREVIATIONS AND ACRONYMS

BOT - Build, operate, transferCAS - Country Assistance StrategyEA - Environmental AssessmentECPG - East China Power GridECEPGC - East China Electric Power Group CompanyFGD - Flue gas desulfurizationGEF - Global Environment FacilityIDC - Interest during constructionIERR - Internal Economic Rate of ReturnNOx - Nitrous oxideRAP - Resettlement Action PlanSMEPC - Shanghai Municipal Electric Power CompanySMPG - Shanghai Municipal Power GridS02 - Sulfur Dioxide

FISCAL YEAR

January 1 - December 31

Vice President Jean-Michel Severino, EAPDirector Nicholas C. Hope, EA2DRDivision Chief Richard Scurfield, EA2INStaff Member Elaine Sun, Senior Financial Analyst, EA2IN

FOR OFFICIAL USE ONLY

CHINA

WAIGAOQIAO THERMAL POWER PROJECT

LOAN AND PROJECT SUMMARY

Borrower: People's Republic of China

Beneficiary: Shanghai Municipal Electric Power Company (SMEPC)

Poverty: Not applicable.

Amount: $400.0 million.

Terms: 20 years, including a 6-year grace period, at the standardinterest rate for LIBOR-based US dollar single currencyloans

Commitment Fee: 0.75 percent on undisbursed loan balances, beginning60 days after signing, less any waiver.

Financing Plan: See Schedule A.

Economic Rate of Return: 19.3 percent (risk weighted)

Staff Appraisal Report: Report No.16271-CHA

Map: IBRD 28487

Project ID Number: CN-PE-44485

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THEINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORSON A PROPOSED LOAN TO THE PEOPLE'S REPUBLIC OF CHINA

FOR A WAIGAOQIAO THERMAL POWER PROJECT

1. I submit for your approval the following memorandum and recommendation on aproposed loan of $400.0 million to the People's Republic of China to help finance theWaigaoqiao Thermal Power Project. The loan would be a US dollar loan at the standardinterest rate for LIBOR-based single currency loans, with a maturity of 20 years,including six years of grace. The proceeds of the loan would be onlent through ShanghaiMunicipality to the Shanghai Municipal Electric Power Company (SMEPC) on the sameterms and conditions as the Bank loan, with SMEPC bearing the foreign exchange risk.

2. Country Power Sector Policies. Large-scale energy development andimprovements in the efficiency of energy supply and use are critical to meet the fastgrowing demand, alleviate shortages and mitigate adverse impacts on the environment inChina. China has experienced an annual growth rate of about 8.3 percent in installedcapacity and energy generated in the period 1980-95. To meet the electricity demand in themost cost-effective manner, the Government is implementing a comprehensive strategy ofsectorwide institutional reforms, energy price reforms, and promotion of energyconservation. Consumer prices for the major forms of energy now largely reflect economiccosts. A well-developed institutional network exists to promote energy conservation at thecentral, provincial and local levels. These measures have helped China achieve aremarkably low 0.86 elasticity demand growth to GDP growth during 1980-95.

3. Yet even with further improvements in conservation, generation capacity mustincrease by 15 to 20 GW a year for the next five years if current shortages are not tobecome more acute. For continued efficiency improvements-not simply in energy usebut in the overall functioning of the sector-and for the increased capital mobilizationnecessary for large-scale power industry development, China has launched an ambitiousprogram of power sector reforms. Thus far, progress has been made in sectordecentralization, cost recovery through major tariff reforms, and diversification offinancing sources, including development of a variety of independent power generationschemes. In the gradual process of legal reform and sector restructuring, three importantsteps have recently been taken, with passage of the country's first Electricity Law, adecision to abolish the Ministry of Electric Power and divide its functions among existinggovernment agencies, and establishment of the State Power Corporation to, inter alia,represent the state as owner of government-owned power assets. Furthermore, severaljoint venture companies have been established to build power plants in ShandongProvince and Shanghai, while build, operate, transfer (BOT) schemes have beenintroduced in Guangdong and Fujian Provinces. The process of international competitivetendering for projects has also begun with the Laibin B project in Guangxi Zhuang

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Autonomous Region, which will be constructed by an international consortium, and bidswill soon be issued for Changsha Power Project in Hunan Province.

4. Building on these accomplishments, the Government's future agenda for actionincludes: (a) further reforms to the sector's regulatory and legal framework; (b) furtherdiversification in financing for power development, including private sector participation;(c) institutional restructuring via commercialization and corporatization of powercompanies, together with achievement of greater enterprise autonomy and sectorrestructuring; and (d) further measures to rationalize power tariffs. While actions havebeen initiated on all of the above fronts, measures to commercialize the power entities arenow a focal point in the overall effort. These measures include separating the producingentities from the Government, granting them autonomy in business decision-making, andsubjecting them to market forces in an arms-length regulatory framework.

5. The Chinese approach to reform encourages experimentation with differentreform options and institutional forms. This gradual approach permits the Chinese toexamine the relevance and applicability of specific reforms and also to fine-tune reformimplementation for broader dissemination or replication in other parts of the country.

6. Accompanying the move to commercialization are efforts to curb air pollutionrelated to the burning of coal and particularly to reduce the power sector's contribution tothe problem. In terms of emission control in large and medium-scale plants, China hasmade substantial progress in particulate control, through deployment of high efficiencyelectrostatic precipitators. The Government announced in June 1994 that it would spendabout $2 billion over the next seven years on an environmental program aimed at keeping

SO 2 emissions at a level of 15 million metric tons a year, as part of a comprehensiveprogram of acid rain abatement. Shanghai plans to invest $1.0 billion a year fighting theair pollution, about one-tenth of the total spent on environmental protection throughoutChina. The Government intends also to accelerate the development of hydropower andconstruction of large and efficient 300 and 600 MW coal-fired units to avoidmushrooming of the small, highly polluting plants that still constitute about 60 percent ofthe additional installed capacity.

7. Project Background-Shanghai. The proposed Waigaoqiao Thermal PowerProject is located in the Pudong area of Shanghai, China's largest industrial, commercialand financial center, where GDP has grown at an average annual rate of 13 percent during1990-95 while electricity demand increased at an average rate of 10.8 percent a year.Shanghai's economic development is being constrained by persistent power shortages dueto insufficient installation of new generation. The current power shortage is estimated at400-500 MW, including planned load curtailment. Load is shed daily, particularly insummer due to an increasing air conditioning load. In 1995, Shanghai's total electricitysupply was 39,130 GWh, corresponding to a load factor of about 65 percent. SMEPC-owned power plants generated about 30 percent of that supply, while SMEPC purchasedsome 63 percent of supply from other generators in the Shanghai Municipal Power Grid(SMPG) and 7 percent from the East China Power Grid (ECPG) encompassing Shanghai

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Municipality, Jiangsu, Zhejiang and Anhui Provinces.' Since all the neighboringprovinces are also experiencing high growth, Shanghai's potential for increased purchasefrom ECPG is limited. And, while electricity conservation continues to be supportedactively by SMEPC under the leadership of the "Three Electricity Office," investment inadditional generating capacity is unavoidable if the pace of economic development is tocontinue.

8. Rationale for Bank Involvement. The proposed project is consistent with theCountry Assistance Strategy (CAS) for China presented to the Board on March 18, 1997.In contrast to the Bank's recent support for projects in China's inland areas, with theproposed project, the Bank returns to the coast with an initiative demonstrating boldinstitutional restructuring in a major market combined with technical, environmental andfinancing innovations that ratchet up the scope of change. Furthermore, sector andinstitutional restructuring under the project would promote the Bank's strategy ofsupporting reform of state-owned enterprises through, among others, the introduction ofmodem and transparent financial systems, diversified ownership, and heightenedcompetition to enhance efficiency. By their listing on stock exchanges, Shanghai's powerentities would benefit from an inflow of private capital.

9. The proposed project would help remedy Shanghai's power shortage while alsotaking an integrated approach to addressing the environmental, institutional and financialgoals of the city's power sector development program. The project would expandShanghai's power supply by providing the first two very large-900 to 1,000 MW-"supercritical" generating units in China. The project would also pioneer the concept oftrading emissions in SO 2 within a specific control area or "bubble". This approachencourages emissions reduction at the lowest cost, by reducing emissions where therelated cost is lowest and offsetting emissions at other sites where such an investmentwould be more expensive. As a result, there is no net increase in the emissions in theoverall area. In this project, rather than fitting the Waigaoqiao units with flue-gasdesulfurization (FGD) equipment, an existing power plant with high SO2 emission levelswill be retrofitted with FGD at a lower cost than at Waigaoqiao. As an outcome, therewill be no net increase in the level of SO 2 in the area but an additional 1,800 to 2,000MW of coal-fired generation. Moreover, there will be an estimated capital cost savingsof $100 million.

10. The project would also support SMEPC's ongoing Restructuring Program,including incorporation of all subsidiaries, modernization of accounting and financialmanagement systems and practices, further rationalization of the tariff structure, and useof an adequate power purchase agreement and dispatch rules to promote competition atthe generation level. Although ownership of generation assets in Shanghai is reasonablydiversified, the sector operates like a vertically integrated utility, with SMEPC

SMPG is a part of ECPG. SMPG is connected with neighboring provinces within ECPG through two500 kV AC lines.

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responsible for generation, operation, dispatch, transmission and distribution. It isplanned that by December 1997 the sector would be transformed from effective verticalintegration to a structure with all generation separated from transmission and distribution.SMEPC would be responsible for development and operation of the transmission anddistribution system and would operate as the central power purchaser in the Shanghaipower system. The generation entity or entities formed after restructuring will offerequity to the public in domestic and/or international stock markets. The plan forseparating power generation from transmission and distribution and establishingappropriate contractual and commercial relationships for power sales/purchasesrepresents a significant step towards eliminating barriers to entry in the sector, openingthe sector to private investors, and introducing competition at the generation level.Finally, the project would test a diversified financing model for large infrastructureprojects.

11. Project Objectives. The proposed project is intended to: (a) increase electricitysupply to reduce the acute shortages in Shanghai through development of two very large,coal-fired supercritical thermal units; (b) develop a program to apply for the first time inChina the "bubble concept" for cost-effective air quality management in ShanghaiMunicipality; (c) support the ongoing power sector reform by restructuring SMEPC,increasing private sector involvement by stock exchange listing of the generationcompany, and adjusting the tariff level; and (d) promote an innovative and diversifiedfinancing model for a large infrastructure project and improve the access of power entitiesto international financial markets. Key indicators of the project's progress in achievingthese objectives would be, inter alia, reduced load shedding during periods of peaksystem operations, high fuel efficiency of the project unit and reduced SO2 emissions atthe power plant gaining FGD facilities under the project, consistency of the averageconsumer tariff with the cost of supply, and SMEPC's rate of return on equity.

12. Project Description. The proposed project includes investment, power sectorreform and institutional development components. The investments comprise:(a) construction of the first two 900-1,000 MW coal-fired supercritical thermal powerunits as the second phase of the Waigaoqiao power plant development. These unitswould be equipped with on-line monitoring systems to minimize coal consumption andgradually introduce advanced maintenance techniques; (b) installation of FGD facilities atShanghai's Shidongkou Power Plant to at least offset the anticipated SO 2 emissions fromthe proposed project; and (c) construction of two 500 kV transmission lines withassociated substations to connect the units to the Shanghai power grid and significantlyincrease supply reliability. Construction management and engineering services would beprovided to assist SMEPC with site construction supervision, technical interfacingcoordination, construction schedule and quality assurance control.

13. The main elements of the SMEPC restructuring program are:

(a) Unbundling and Structural Separation of Generation fromTransmission and Distribution. SMEPC will be structured as a limited

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liability company for transmission and distribution, with the completeseparation of all generation from transmission and distribution. Theobjective of this unbundling is to create a purchasing agency structurewhich will encourage investment in generation, and allow SMEPC tofocus on the efficient operation of the monopoly transmission anddistribution network. The complete structural separation of generationfrom transmission would create a framework for competitive procurementof future generation and efficient production. This unbundling will becompleted by December 1997. All noncore business of SMEPC will betransformed into profit/cost centers or subsidiary companies by December1997.

(b) Efficient Wholesale Generation Tariffs. A revised system of wholesaleelectricity tariffs would be devised for power purchase from eachgenerating plant on the system. These tariffs would encourage efficientdispatch and overall economic efficiency. All power will be purchased bythe restructured SMEPC transmission and distribution company on thebasis of wholesale contractual arrangements. All generators on the systemwill be treated equally and dispatched on a nondiscriminatory basis. Theprinciples and methodology for the determination of wholesale generationtariffs will be submitted to the government for approval in October 1997.The revised framework of tariffs and the contracts for power purchase willbe implemented within 12 months of approval by the government.

(c) Private Financing of Generation. The generation assets of SMEPC willbe restructured to form a viable generation company for subsequent listingon domestic and/or international stock exchanges. The listing of thegeneration company will be completed by December 1998. SMEPC wasselected by the State Council in January 1997 as one of 38 enterpriseseligible for public listing on foreign stock exchanges. Public listing of thegeneration company will facilitate increased private equity and debtfinancing for future system expansion.

14. Specialized advisory services for implementing the planned structure anddeveloping the requisite contractual arrangements for power purchases by the SMEPCtransmission and distribution business will be provided under the project. Additionalproject technical assistance would facilitate introduction in SMEPC of internationalaccounting and financial management systems to improve financial reporting, budgeting,and monitoring for more efficient enterprise management. Technical assistance,consulting services, and upgrading and equipping of SMEPC's training facilities wouldsupport a management development and training program aimed at enhancing thecompany's managerial, legal, technical and financial capabilities, in keeping with theneeds of its reform program.

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15. Project Costs and Financing. The total cost of the proposed project is estimatedat $1,656.6 million equivalent, excluding interest during construction (IDC) of $241.4million. The foreign exchange component is $830.6 million equivalent. The totalfinancing requirements, including interest during construction, are estimated at $1,898.0million equivalent. The local costs of $826 million equivalent for the project and $172million equivalent of IDC would be cofinanced by funds generated by SMEPC,convertible loans from Shenergy Company Ltd. and the East China Electric Power GroupCompany (ECEPGC), and commercial loans from two local banks. Financing from thefirst two sources, at $542.4 million equivalent, would comprise about 33 percent of thetotal project cost. Loans from the two local commercial banks would be arranged bySMEPC, Shenergy and ECEPGC.

16. Foreign costs, including a part of IDC of $69.4 million for foreign loans, would becovered by the proposed Bank loan of $400.0 million and, for the balance of $500 millionequivalent, cofinancing options would be explored, including: (a) export credits for about$155 million to cover part of the major equipment, following selection of the lowestevaluated bidder by February 1998; (b) Japan's Export-Import Bank (Eximbank) for anuntied loan of up to 5 billion Yen equivalent under the Accelerated Cofinancing Facilityfor the environmental protection component; and/or, if these funds are not available in atimely and satisfactory manner, (c) commercial cofinancing. In the latter case, theGovernment, represented by the Ministry of Finance, would raise the required funds incommercial loan/bond markets, and onlend the proceeds of the financing to SMEPC, asin previous cofinancing operations and Bank loans to China. The Government should beable to raise up to $500 million with sufficiently long maturity (10-20 years) without apartial credit guarantee of the Bank, assuming current market conditions prevail and thefunds are borrowed in tranches or intervals. The Government would start tapping thecommercial market by 1998, to coincide with the anticipated contractual paymentschedule. The Bank would provide the cofinancing framework (provision of an optionalcross default clause) for the government borrowing. The Bank would also considerproviding a partial credit guarantee at the minimum level needed if such a guarantee isrequired due to changing market conditions. The guarantee would be submitted to theBank's Board for approval. To accelerate project startup, retroactive financing in anaggregate amount of $5.0 million or 1.3 percent of the Bank loan is recommended tocover expenditures made after March 1997 and before the signing of the loan. Abreakdown of costs and the financing plan are shown in Schedule A.

17. Project Implementation. Primary responsibility for project implementationwould rest with SMEPC, an independent legal entity with corporate status in accordancewith China's State Enterprise Law. SMEPC has substantial experience in powergeneration, transmission and distribution, has been operating the Shanghai power gridsince 1986, and also has experience in operating supercritical units (of 600 MW unitsize). Project-financed consultant assistance would be available to SMEPC to assistwhere necessary. Schedule B shows procurement arrangements and the disbursementschedule. A timetable of key project processing events, the status of Bank Groupoperations in China and a "China at a Glance" table are given in Schedules C , D and E,

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respectively. A map is also attached. The Staff Appraisal Report, No.16271 -CHA datedMay 12, 1997, is being distributed separately.

18. Project Sustainability. The project's institutional and financial sustainabilitywould be promoted by: first, SMEPC's Restructuring Program aimed atcommercialization of the Municipality's power system and enhanced financialperformance; and, second, project-supported technical assistance and training to preparethe corporation for the more demanding managerial, legal, and financial environmentassociated with current and future reforms. Financial sustainability is also likely becausecurrent pricing policy ensures that project costs will be fully recovered and passed on toconsumers. The market for power is also guaranteed because of Shanghai's acuteshortages. Operation of the completed plant is considered sustainable, given SMEPC'sexperience in operating supercritical units and the project's provision of technicalassistance and training to expand technical capabilities.

19. Lessons from Previous Bank Experience. Bank experience with a previousoperation implemented by SMEPC, the Wujing Thermal Power Project (Ln. 2852-CHA),was highly satisfactory. The project's power plant expansion (with two 300 MW unitsand transmission line), distribution network master plan study and training program wereall implemented as envisioned, and the training programs-in utility management,financial planning and investment programming-facilitated SMEPC's incorporation(from a municipal bureau) and forthcoming listing on domestic and/or international stockexchanges.

20. Other previous Bank operations in the sector, especially the previous nine thermalpower projects, yielded useful lessons in project preparation, technical and operatingaspects of power systems, and the sequencing of institutional reforms. These experiencesand broader international experience in power sector restructuring have been taken intoaccount in developing the proposed operation, particularly to: (a) improve projectmanagement and ensure satisfactory coordination between different contractors;(b) improve the quality of environmental and resettlement studies, management plans andmonitoring; and (c) ensure commitment of the beneficiary to the institutional andcorporate reforms to be included in the project. SMEPC was receptive to the Bank'ssuggestion of involving international consultants to assist it in assessing the project'senvironmental impacts and designing an appropriate environmental management plan,preparing to list the new generating company on the stock market, and clarifying therelationship and contractual arrangements between power generators andtransmission/distribution companies. Finally, a serious boiler accident during theBeilungang Thermal Power Project (Ln. 2706-CHA) has been taken into account in boilerdesign and specifications, coal specifications, and coal quality monitoring.

21. In power sector restructuring and reform, international experience shows that evenin advanced countries with strong and transparent institutional systems and wellestablished market economies, the time needed to build consensus on the reformdirections, establish a new regulatory framework, and implement structural changes can

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be very long. China faces the same problems as Central and Eastern Europe, where hopesfor achieving quick progress in economic regulation and restructuring of the powersectors have been unrealized because of the intricate political context of institutionalchanges, the complex macroeconomic reforms needed in the transition to a marketeconomy, and the difficulty of putting in place an adequate legal and regulatoryframework. The proposed project, therefore, focuses on limited, implementable priorityactions to enhance the Shanghai power sector's commercial orientation, contractualarrangements, competitive environment and operational efficiency.

22. Environmental Aspects. The project is classified as Category A, requiring anEnvironmental Assessment (EA) for all components. The EA, which has been preparedand cleared by the responsible Chinese authorities, is satisfactory to the Bank. The issuesaddressed in the EA include: air pollution (from dust, S02, nitrogen oxides from boileroperation, and coal and ash storage and conveyance); noise, surface water pollution(thermal pollution and material contamination of the Yangtze River from coaltransfer/storage and non-cooling effluent discharges); electric field strength (fromtransmission lines); industrial hazards; and worker health and safety. The EA examinedindividual and cumulative impacts from the Phase I Waigaoqiao project (1,200 MW)nearing completion, the Phase II project proposed here, and the planned Phase III project(1,800-2,000 MW). Mitigating measures would be undertaken for these impacts andhave been designed to meet appropriate Chinese requirements or World Bank guidelines,whichever is stricter.

23. Use of the "bubble concept" in the project will result in an overall increase of1,800 to 2,000 MW of power generation capacity with no or negative growth in overall

S02 emissions for the Municipality. The Waigaoqiao plant is a greenfield operation,about 18 km from the center of Shanghai city and, thus, able to disperse liquid effluentsand flue gas emissions and minimize impact on the human and natural environment.Bottom ash will be disposed on site at a specially constructed ash yard. The plant willhave modern pollution control technologies such as high efficiency electrostaticprecipitators and low NOx burners. Low-ash, low-sulfur coal will be supplied to theplant.

24. Shidongkou was selected for an FGD retrofit based on an SMEPC study of itsseven power plants, considering factors such as annual emissions of SO2, plant age, spaceavailability for the retrofit, and the need for air quality improvements in the adjacentareas. SMEPC's choice of Shidongkou and the type of technology to be used wasconfirmed by an international FGD expert The project's transmission component wouldpose no particular environmental problems since the line routing would either follow agreenbelt being established along a highway under construction or along the same right-of-way as an existing transmission line.

25. Resettlement. The project will require acquisition of about 1,555 mu (103.7 ha)of land and relocation of 274 households and 17 township or village enterprises. Overall,about 1,933 people will be affected. A Resettlement Action Plan (RAP), acceptable to

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the Bank, has been prepared to ensure equitable treatment of the affected population. TheRAP aims at improving or at least maintaining the living standard of the affectedpopulation, providing compensation for lost land and assets at the replacement valuewithout depreciation, providing nonfarm employment to farmers losing land (with wageshigher than their present income), defining a schedule and budget for resettlement, andestablishing mechanisms for grievance and appeals as well as monitoring by SMEPC andan independent institution. Arrangements for relocation were prepared in collaborationwith the affected population.

26. Project Benefits. The proposed project would demonstrate to other areas ofChina the viability and impact of power sector commercialization and the new airpollution trading scheme undertaken in China's premier industrial center. As such, theproject has the potential to influence the country's other large municipalities experiencingsimilar energy deficits yet hesitating to carry out the reforms needed to mobilizefinancing of the scale required.

27. The investment in Waigaoqiao was selected for implementation based on thefindings of a least-cost generation expansion study for the East China power gridundertaken by the Beijing Energy Research Institute. Since East China has nohydroelectric potential, practical alternatives to the proposed thermal power station are:(a) coal-burning thermal power stations near Shanghai, the major demand center;(b) mine-mouth power stations in Shanxi Province; and (c) a combined cycle plant fueledby either LNG or diesel fuel oil The study shows that it is far more economic to generateelectricity close to the load center than to transport the electricity to the load center.Generation from a combined cycle plant is more expensive than the Waigaoqiaoalternative because of higher fuel costs, despite the better fuel-conversion efficiency ofthe combined cycle. Moreover, power exchange within the East China Grid was alsoconsidered in the study. The specific Waigaoqiao site was chosen because of its locationat the mouth of the Yangtze River, its favorable topographic and geologic conditions,and, with a plant design and implementation incorporating environmental considerations,the overall adverse environmental impact would be low. The proposed project remainsthe first choice for investment in the least-cost investment program under a variety ofsensitivity analyses.

28. The internal economic rate of return (IERR) is estimated at 19.3 percent, based ona power price of 47 fen/kWh (in 1995 prices) in 2003, the first year of plant operation, aswell as the very conservative assumption of 5,600 hours of operation at full capacity(equivalent to a 63.5 percent load factor). This IERR underestimates the project'seconomic benefits in two ways: first, it is based on revenues generated by the new powerplant rather than the economic value of a shortfall in electric power supply; and, second,if the plant operates at a more typical load factor of 74 percent, the IERR would increaseto 22.6 percent. The IERR would decrease to the test discount rate of 12 percent, in theevent of one of the following occurrences: (a) the price paid at the plant gate forelectricity were about 29 percent lower than the base case price, i.e., 33.4 fen/kWhinstead of 47 fen/kWh in 1995 prices; (b) the project were to experience a cost overrun of

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more than 60 percent; (c) the power plant operation were reduced to 3,450 hours a yearinstead of about 5,600 hours; (d) fuel costs were 122 percent higher than the base case;and (e) the project were to experience a commissioning delay of more than four years.However, these occurrences are unlikely because SMEPC has a very good record inproject implementation, the economic assumptions considered in the base case are veryconservative, and the project's financial covenants would ensure that prices are highenough to meet the financial and economic viability requirements.

29. Risks. The major project risk is delay in implementing power sector reforms inan efficient and timely manner, which could jeopardize the sector's progress towardopenness and efficiency and SMEPC's emerging financial and managerial autonomy.This risk is considered manageable, considering Shanghai's critical need for foreignfinancing of power system expansion, investment that will be forthcoming only if theproposed reforms materialize. Further comfort is given by the steady progress in sectorreform at both the central and provincial levels, the constructive Municipality-Bankdialogue on reform that emerged during project preparation, and the project's provisionof relevant technical assistance to work with the authorities in implementing theRestructuring Program and related reforms.

30. The project's economic risk has been assessed and is regarded as low. Risksimulations, using Risk Master computer software, of the five main risks (output,investment cost, fuel cost, construction lead time, and contractual price), results in anexpected IERR of 17.5 percent (with a standard deviation of 2.3 percent), about 2 percentlower than the base case value without consideration of project risks. The minimum andmaximum IERR, under the considered uncertainties, are 11.4 and 24.8 percent,respectively. The potential risks associated with power plant construction, cost overruns,and implementation delays are manageable with advanced procurement actions, timelystaffing and training of SMEPC personnel, and the assistance provided by highlyexperienced international engineering consultants. Attention will also be given to thesafety aspects of the project and to the capability and performance of major contractors.

31. Agreed Actions. Assurances were obtained from the Borrower that it will onlendthe proceeds of the proposed Bank loan to SMEPC through Shanghai Municipality onterms and conditions satisfactory to the Bank. Assurances were also obtained fromSMEPC that it will: (a) carry out the accounting and financial management systemsstudies according to an agreed schedule and implement the recommended organizationalimprovements, and accounting and financial management system, taking into accountBank comments; (b) provide the Bank with semiannual progress reports and with auditedproject accounts, statements of expenditure and financial statements within six months ofthe end of each fiscal year; (c) implement any changes to accounting practices asrecommended by the financial management consultants to meet international accountingstandards, and require auditors to comply with international auditing practices and toprovide audit plans prior to each audit; (d) employ consultants to assist in theimplementation of the SMEPC's Restructuring Plan and afford the Bank an opportunityto exchange views periodically and at least annually on the progress; (e) carry out the

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management development and training program as agreed with the Bank; (f) carry out theEnvironmental Management Program in a manner satisfactory to the Bank; (g) carry outthe agreed Resettlement Action Plan for the project power plant, submit animplementation plan for resettlement related to Yanghang substation, and carry out theresettlement program as necessary for the transmission component and Sanlin substationin accordance with a RAP acceptable to the Bank; (h) take all necessary measures,including but not limited to tariff adjustments, to ensure its internal cash generation to:(i) provide a debt service coverage ratio of no less than 1.5 times; and (ii) earn an annualrate of return on equity (including paid-in capital and retained earnings) of not less than 8percent in 1998-99, 10 percent in 2000-2001, 12 percent in 2002-2003, and 15 percent in2004 and thereafter; and (i) annually furnish to the Bank a rolling eight-year financialplan containing projected income statements, funds flow statements and balance sheets.Execution of subsidiary Loan Agreements between the Government, SMG, and SMEPCwould be a condition of loan effectiveness.

32. Recommendation. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank and I recommend that the Executive Directors approveit.

James D. WolfensohnPresident

By: Gautam S. Kaji

Attachments

Washington, D. C.May 21, 1997

-12- Schedule A

CHINA

WAIGAOQIAO THERMAL POWER PROJECT

ESTIMATED COSTS AND FINANCING PLAN

($ million)

Local Foreign Total

ESTIMATED COSTS

Preparatory Works 1.9 0.0 1.9Land Acquisition & Compensation 58.2 0.0 58.2Civil Works 149.4 0.0 149.4Traffic Works 29.2 20.8 49.9Construction Management 65.8 0.0 65.8

Plant Equipment and Materials 164.0 597.7 761.7Transmission line 43.0 22.2 65.2FGD 14.0 63.4 77.3

Engineering Service 0.0 2.5 2.5Environmental Protection 0.0 0.045 0.045Technical Assistance 0.0 5.0 5.0Training 0.2 2.7 2.8

Total Base Cost 525.6 714.3 1,239.9

Contingencies:Physical 49.6 34.0 83.6Price 52.7 82.3 135.0

Taxes and duties 198.1 0.0 198.1

Total Project Cost 826.0 830.6 1,656.6

Interest during construction Ig 85.9 155.5 241.4

Total Financing Required 911.9 986.1 1,898.0

FINANCING PLAN

SMEPC 216.9 0.0 216.9

Convertible Loans byECEPGC 108.6 0.0 108.6Shenergy 216.9 0.0 216.9

Commercial Loans byCCB* 184.7 43.1 227.8ICBC** 184.8 43.0 227.8

Cofinancing 0.0 500.0 500.0IBRD 0.0 400.0 400.0

Total 911.9 986.1 1,898.0

L& Interest during construction (IDC) is based on onlending rates for projected disbursement of loan proceeds.

* CCB represents China Construction Bank.** ICBC represents Industrial and Commercial Bank of China.

- 13 - Schedule B

CHINA

WAIGAOQIAO THERMAL POWER PROJECT

Summary of Proposed Procurement Arrangements

($ million)

Proposed Method Total ProjectProject Items Cost

ICB Other La NBF L2

WorksPreparatory works - - 2.2 2.2Land acquisition & compensation - - 66.9 66.9Civil works - - 179.4 179.4Traffic works - - 61.5 61.5Construction management - - 79.1 79.1

GoodsPlant equipment and materials 538.7 18.0 504.2 1,060.9

(383.3) (9.0) (392.3)Transmission line - 86.7 86.7

FGD and Environment ProtectionEquipment - - 109.5 109.5

ServicesEngineering services - 2.5 - 2.5

(2.5) (2.5)Environmental protection - 0.1 - 0.1

(0.1) (0.1)Technical assistance - 5.0 - 5.0

(2.5) (2.5)Training - 2.6 0.2 2.8

(2.6) (2.6)

Total 538.7 28.2 1,089.7 1,656.6

IBRD Loan (383.3) (16.7) (400.0)Cofmancing 155.4 11.5 263.7 430.6

/a Other procurement includes LIB, international and national shopping, direct contracting, andconsultancy services.

Lb NBF=Not Bank Financed.

Note: Figures in parentheses are the amounts financed by the Bank.

- 14 - Schedule B

DISBURSEMENTS

($ million)

Category Loan amount Percent financed

(1) Goods 380.0 100% of foreign expenditures, 100% oflocal expenditures (ex-factory), and 75%for local expenditures for other items

procured locally

(2) Consultants services & training 7.5 100%

(3) Unallocated 12.5

Total 400.0

ESTIMATED DISBURSEMENTS

($ million)

IBRD FY 1998 1999 2000 2001 2002 2003 2004 2005

Annual 26.2 27.4 42.1 98.7 108.3 58.5 15.6 23.2Cumulative 26.2 53.6 95.7 194.4 302.7 361.2 376.8 400.0

- 15 - Schedule C

CHINA

WAIGAOQIAO THERMAL POWER PROJECT

Timetable of Key Project Processing Events

Time taken to prepare the project 12 months

Prepared by SEMPC with Bank assistance

First Bank mission March 1996

Appraisal mission departure March 1997

Negotiations April 1997

Planned date of effectiveness December 1997

List of relevant PCRs, ICRs and Lubuge Hydro (Ln. 2382-CHA), PCR (12549)PPARs Power Transmission (Ln. 2493-CHA), PCR

(12548)Beilungang Thermal (Ln. 2706-CHA), ICR(14717)Yantan Hydro (Ln. 2707-CHA), ICR (14773)Wujing Thermal (Ln. 2852-CHA), ICR (15183)Beilungang Extension (Ln. 2955-CHA), ICR(15446)

This report is based on the findings of an appraisal mission that visited China in March1997. The report was prepared by E. Sun (Task Manager), N. Berrah (Principal EnergySpecialist), S. Kataoka (Consultant, Power Engineer), J. Wu (Power Engineer), B. Baratz(Principal Environmental Specialist), R. Lamech (Restructuring Specialist), C. Garstang(Legal Counsel), T. Matsukawa (Cofinancing Officer), P. Brereton-Miller (OperationsAssistant), T. Aricanli (Consultant, Resettlement Specialist), and J. Zhao (OperationOfficer). The peer reviewers were D. Mehta (EAllN), R. Hamilton (EC2ET), and P.Cordukes (IENPD).

- 16- Schedule DPage 1 of 3

STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINAA. STATEMENT OF BANK LOANS AND IDA CREDITS

(As of March 31, 1997)Loan/ Amount (US$ million)Credit (net of cancellations)

Number FY Borrower Purpose Bank IDA Undisb.(a)52 loans and 51 credits have been disbursed 5,702.8 3,822.8 -

of which SECAL:2967/1932 88 PRC Rural Sector Adj. 200.0 93.2 -

Active Loan1885 88 PRC Northern Irrigation - 103.0 1.02968 88 PRC Railway IV 200.0 - 2.81997 89 PRC Shaanxi Prov. Agriculture - 106.0 0.12009 89 PRC Integrated Reg. Health - 52.0 0.63022 89 PRC Tianjin Light Industry 154.0 - 4.4

3073/2025 89 PRC Shandong Prov. Highway 60.0 (50.0)(b) 6.72145 90 PRC National Afforestation - 300.0 6.82159 90 PRC Hebei Agricultural Dev. - 150.0 4.02172 91 PRC Mid-Yangtze Agricultural Dev. - 64.0 1.4

3265/2182 91 PRC Rural Credit IV 75.0 200.0 0.13274/2186 91 PRC Rural Indust Tech (SPARK) 50.0 64.3 2.13286/2201 91 PRC Medium-Sized Cities Dev. 79.4 89.0 3.5

2210 91 PRC Key Studies Development - 131.2 7.82219 91 PRC Liaoning Urban Infrastructure - 77.8 4.82242 91 PRC Henan Agricul. Dev. - 110.0 10.8

3337/2256 91 PRC Irrig. Agricul. Intensif. 147.1 187.9 6.02294 92 PRC Tarim Basin - 125.0 1.12296 92 PRC Shanghai Metro Transport - 60.0 7.83406 92 PRC Railways V 330.0 - 33.7

3412/2305 92 PRC Daguangba Multipurpose 30.0 37.0 4.62307 92 PRC Guangdong ADP - 162.0 57.0

3415/2312 92 PRC Beijing Environment 45.0 80.0 37.72317 92 PRC Infectious and Endemic Disease Cont. - 129.6 71.53433 92 PRC Yanshi Thermal Power 180.0 - 1.32336 92 PRC Rural Water Supply and Sanitation - 110.0 20.32339 92 PRC Educ. Development in Poor Provs. - 130.0 9.53443 92 PRC Regional Cement Industry 82.7 - 4.13462 92 PRC Zouxian Thermal Power 310.0 - 27.23471 92 PRC Zhejiang Provincial Highway 220.0 - 70.12387 92 PRC Tianjin Urban Devt. & Envir. - 100.0 462391 92 PRC Ship Waste Disposal - 15.0 6.32411 93 PRC Sichuan Agricultural Devt. - 147.0 41.53515 93 PRC Shuikou Hydroelectric II 100.0 - 43.92423 93 PRC Financial Sector TA - 60.0 43.33530 93 PRC Guangdong Provincial Transport 240.0 - 33.13531 93 PRC Henan Provincial Transport 120.0 - 19.92447 93 PRC Ref. Inst'1 and Preinvest. - 50.0 26.33552 93 PRC Shanghai Port Rest. and Devt. 124.3 - 10.72457 93 PRC Changchun Water Supply & Env. - 120.0 69.82462 93 PRC Agriculture Support Services - 115.0 21.2

3560/2463 93 PRC Taihu Basin Flood Control 100.0 100.0 93.82471 93 PRC Effective Teaching Services - 100.0 53.53572 93 PRC Tianjin Industry II 134.0 - 90.13581 93 PRC Railway VI 420.0 - 178.23582 93 PRC South Jiangsu Envir. Prot. 250.0 - 50.22475 93 PRC Zhejiang Multicities Devt. - 110.0 64.93606 93 PRC Tianhuangping Hydroelectric 300.0 - 156.6

3624/2518 93 PRC Grain Distribution 325.0 165.0 435.02522 93 PRC Environmental Tech. Assist. - 50.0 24.12539 94 PRC Rural Health Workers Devt. - 110.0 63.03652 94 PRC Shanghai Metro Transport II 150.0 - 15.63681 94 PRC Fujian Provincial Highways 140.0 - 85.63687 94 PRC Telecommunications 250.0 - 145.02563 94 PRC Second Red Soils Area Devt. - 150.0 54.9

- 17- Schedule DPage 2 of 3

Loan/ Amount (US$ million)Credit (net of cancellations)

Number FY Borrower Purpose Bank IDA Undisb.(a)2571 94 PRC Songliao Plain Agric. Devt. - 205.0 92.83711 94 PRC Shanghai Environment 160.0 - 111.03716 94 PRC Sichuan Gas Devt & Conservan. 255.0 - 176.13718 94 PRC Yangzhou Thermal Power 350.0 - 201.8B103 94 PRC Yangzhou Thermal Power 57.2 - 56.13727 94 PRC Xiaolangdi Multipurpose 460.0 - 134.72605 94 PRC Xiaolangdi Resettlement - 110.0 59.32616 94 PRC Loess Plateau Watershed Devt. - 150.0 67.12623 94 PRC Forest Resource Devt. & Prot. - 200.0 132.43748 94 PRC National Highway 380.0 - 207.4

3773/2642 95 PRC Ent. Housing/Soc Sec Reform 275.0 75.0 287.03781 95 PRC Liaoning Environment 110.0 - 84.03787 95 PRC Xinjiang Prov. Highways 150.0 - 101.42651 95 PRC Basic Ed for Poor/Minorities - 100.0 46.03788 95 PRC Shenyang Industrial Reform 175.0 - 145.82654 95 PRC Economic Law Reform - 10.0 7.82655 95 PRC Comp Maternal/Child Health - 90.0 46.73846 95 PRC Zhejiang Power Development 400.0 - 361.4B105 95 PRC Zhejiang Power Development 64.3 - 61.53847 95 PRC Technology Development 200.0 - 195.03848 95 PRC Sichuan Power Transmission 270.0 - 262.3

3873/2709 95 PRC Fiscal TA 25.0 25.0 43.23874/2710 95 PRC Yangtze Basin Water Res Devt 100.0 110.0 98.2

3897 95 PRC Railway VII 400.0 - 400.03906/2744 95 PRC Southwest Poverty Reduction 47.5 200.0 173.2

3910 95 PRC Inland Waterways 210.0 - 184.43914/2756 95 PRC Iodine Deficiency Dis. Control 7.0 20.0 21.8

3929 96 PRC Shanghai-Zhejiang Highway 260.0 - 193.83933 96 PRC Ertan II Hydroelectric 400.0 - 137.7B106 96 PRC Ertan II Hydroelectric 50.0 - 48.32794 96 PRC Disease Prevention - 100.0 87.2

3966/2799 96 PRC Hubei Urban Environment 125.0 25.0 142.23967/2800 96 PRC Labor Market Development 10.0 20.0 26.6

3980 96 PRC Henan (Qinbei) Thermal (c) 440.0 - 440.03986 96 PRC Second Shaanxi Prov. Highways 210.0 - 200.03987 96 PRC Second Shanghai Sewerage 250.0 - 248.02831 96 PRC Third Basic Education - 100.0 73.22834 96 PRC Shanxi Poverty Alleviation - 100.0 78.64001 96 PRC Animal Feed 150.0 - 150.04027 96 PRC Second Henan Prov. Highway 210.0 - 210.0

4028/2870 96 PRC Gansu Hexi Corridor 60.0 90.0 137.44044/2886 96 PRC Seeds Sector Commercialization 80.0 20.0 96.7

4045 96 PRC Chongqing Ind. Pollution Control 170.0 - 170.04055/2892 96 PRC Yunnan Environment 125.0 25.0 149.04063/2898 97 PRC Vocational Education Reform 10.0 20.0 19.1

4099 97 PRC Second Xinjiang Highway (c) 300.0 - 300.04124 97 PRC Second National Highway (c) 400.0 - 400.0

Total 8,913.6 9,452.517,090.8

of which has been repaid 1,711.1 53.8

Total now held by Bank and IDA (a) 15,379.7 8,859.8Amount sold: Of which repaid - -

Total Undisbursed 7,549.3 1,903.2 9,452.5

(a) As credits are denominated in SDRs (since IDA Replenishment VI), undisbursed SDR credit balances are converted to dollars atthe current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance and total credit amountheld indicate a dollar amount greater than the original principal credit amount expressed in dollars.(b) Fully disbursed.(c) Not yet effective.

- 18- Schedule DPage 3 of 3

B. STATEMENTOF IFC's COMMITTED AND DISBURSED PORTFOLIO(As of March 31, 1997, in US$ million)

Committed DisbursedFY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1985 Guangzhou Auto 1.88 3.23 0.00 0.00 1.88 2.23 0.00 0.001987 China Bicycles 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001988 Crown Elec 2.09 0.00 0.00 0.00 2.09 0.00 0.00 0.001992 China Bicycles 8.50 2.44 0 00 0 00 8.50 2.44 0.00 0.001992 Guangzhou Auto 0.00 1.32 0.00 000 0.00 1.32 0.00 0.001993 Shenzhen PCCP 3.76 .99 0.00 0.00 3.76 .99 0.00 0.001993 Yantai Cement 17.69 1.95 0.00 9.44 17.69 1.95 0.00 9.441994 China Bicycles 0 00 .95 0.00 0.00 0.00 .95 0.00 0.001994 China Walden JV 0.00 7.50 0.00 0.00 0 00 3.79 0.00 0.001994 Dalian Glass 20.50 2.40 0.00 40.50 20.50 2.40 0.00 40.501994 Dynamic Fund 0.00 12.35 0.00 0.00 0.00 9.46 0.00 0.001994 China Walden Mgt 0.00 .01 0.00 0.00 0.00 .01 0.00 0.001994 Plant. Timber 10.00 1.00 0.00 20.00 10.00 1.00 0.00 20.001995 Dupont Suzhou 24.92 3.85 0.00 52.00 11.34 3.85 0.00 23.121995 Nantong Wanfu 5.63 2.41 0.00 0.00 0.00 0.00 0.00 0.001995 Newbridge Inv. 0.00 10.00 0.00 0.00 0.00 5.04 0.00 0.001995 Suzhou PVC 0.00 2.48 0.00 0.00 0.00 2.48 0.00 0.001996 Beijing Hormel 5.00 .50 0 00 5.50 1.00 .50 0.00 0.001996 Fairyoung Ports 0.00 4.98 0.00 0.00 0.00 4.98 0.00 0.001996 Jingyang 40.00 0(00 0.00 100.00 18.57 0.00 0.00 46.431996 Nanjing Kumho 16.00 3.81 0.00 45.50 7.59 3.81 0.00 21.571996 Weihai Weidongri 4.32 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PendingCommitments

1996 * CALTEX OCEAN 31.33 0.00 0.00 66.001996 * NANJING HUINING 4.00 0.00 0.00 0.001997 * NINGBO 0.00 2.00 0.00 0.001996 * SHANDONG SAND 17.00 0.00 0.00 25.001995 * SUZHOU PVC 14.10 0.00 0.00 15.801996 * TIANJIN 9.10 0.00 0.00 9.101996 * TIANJIN KUMHO 23.50 0.00 3.00 47,001996 * XIAMEN XIAN 10.00 0.00 0.00 0.00

- 19- Schedule E

China at a glance

POVERTY and SOCIAL East Low-China Asia income Development diamond*

Population mid-1995 (millions) 1,211.2 1,709 3.188GNP per capita 1995 (US$) 620 830 460 Life expectancyGNP 1995 (billions US$) 751.0 1,418 1,466

Average annual growth, 1990-95

Population (%) 1 2 13 1.8Labor force (%) 1 1 1 4 1 8 GNP Gross

Most recent estimate (latest year available since 1989) per erimery

Poverty: headcount index (% of population) 11Urban population (% of total population) 30 31 29Life expectancy at birth (years) 69 68 63Infant mortality (per 1,000 live births) 29 36 58Child malnutrition (% of children under 5) 17 17 38 Access to safe water

Access to safe water (% of population) 83 77 75Illiteracy (% of population age 15+) 19 17 34Gross primary enrollment (% of school-age population) 118 117 105 China Low-income group

Male 120 120 112Female 116 116 98

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1975 1985 1994 1995Economic ratios'

GDP (billions US$) 160.3 304.9 5409 6976

Gross domestic investment/GDP 30 3 37.8 39 9 40 5Exports of goods and non-factor services/GDP 5.2 9.9 22.0 21 0 Openness of economy

Gross domestic savings/GDP 30.6 33.7 41.2 42.0Gross national savings/GDP 30.6 34.0 41.2 40 5

Current account balance/GDP -0 2 -3 9 1 3 0 2Interest payments/GDP . 0 2 0.7 07 Savings InvestmentTotal debt/GDP 5.5 186 169Total debt service/exports .. 8 3 8.9 9 9Present value of debt/GDP . . 15.8Present value of debt/exports . . 68 5

Indebtedness

1975-84 1985-95 1994 1995 1996-04(average annual growth)

GNPpercapita 7.1 6. 11. 109 76 - China Low-income group

Exports of goods and nfs 17.9 13.3 28 1 96 8 S

STRUCTURE of the ECONOM1975 1985 1994 1995 Growth rates of output and investment (%)

(% of GDP)Agriculture 32 0 28 4 20 3 20 6 25

Industry 42.8 43.1 48 0 48 4

Manufacturing 31.6 35.4 37 6 37.6 15

Services 25.2 28.5 31 7 31.1 10

Pnvate consumption 61.9 53 1 45 9 4 7 92 93 94 5

General govemment consumption 7.6 132 12 8 12 2Imports of goods and non-factor services 5.0 14.0 206 19 4 - GDI -0-GDP

(average annual growth) 1975-84 1985-95 1994 1995 Growth rates of exports and imports (%)

Agriculture 5.1 4.2 4 0 5.o 40

Industry 100 12.8 184 14 1 30

Manufactunng 13.1 12.3 184 13.3 20Services 88 9.4 9 3 7 1

Private consumption 7.3 8 3 97 6 o .

General govemment consumption 8.5 9 5 7 8 1a a 9 2 03 94 5

Gross domestic investment 8.9 9.7 10 5 19 1 -20

Imports of goods and non-factor services 21.1 9.0 93 50Gross national product 8.5 9.5 126 90 Exports i-0- Imports

Note: 1995 data are preliminary estimates.The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

- 20 - Schedule E

China

PRICES and GOVERNMENT FINANCE

Domestic prices 1975 1985 1994 1995 Inflation (%)

(% change) 25

Consumer prices 0.2 9.3 24.1 17.1 20Implicit GDP deflator -0.9 10.1 19.5 13.1 15

10Government finance(% of GDP) 1

Current revenue .. 25.5 12.0 11.6 90 91 92 93 94 95

Current budget balance .. 67 0.4 0.4 - GDP def -*-CPIOverall surplusldeficit .. -0.5 -1.6 -1.6

TRADE1975 1985 1994 1995

(millions US$) Export and import levels (mill. US$)

Total exports (fob) .. 27,350 121,006 148,770 160,000Food .. 3,803 10.015 9,954 14Q.00Fuel . 7,132 4,069 5,335 120,000Manufactures .. 13.522 101,298 127,283 100.000

Total imports (cif) .. 42,252 115.614 132,07B 80. ooFood .. 1.881 5,014 9,126 60000

Fuel and energy .. 172 4,035 5,127 40Capital goods .. 18,694 55,624 57,481 [ U

Export price index (1987=100) .. 92 123 133 a9 90 91 92 93 94 95

Import price index (1987=100) .. 78 122 132 Exports nflmportsTerms of trade (1987=100) .. 118 101 101

BALANCE of PAYMENTS

(millions US$) 1975 1985 1994 1995 Current account balance to GDP ratio (%)

Exports of goods and non-factor services 7,828 28,163 118,811 142,000 4

Imports of goods and non-factor services 8,097 41,149 111,472 127,600Resource balance -269 -12.986 7,339 14,400

Nelfactorincome 0 932 -1,018 -14,300Net current transfers 0 171 836 724

Current account balance, , , 1 91 92

before official transfers -269 -11,883 7,157 824 -1 89

Financing items (net) .. 9,443 23,370 21.376 2Changes in net reserves .. 2,440 -30,527 -22,200

Memo:Reserves including gold (mill. US$) .. 13,214 53,560 75,760Conversion rate (locajVUS$) 1,9 2.9 8.6 8.4

EXTERNAL DEBT and RESOURCE FLOWS1975 1985 1994 1995

(millions US$) Composition of total debt, 1995 (mill. USS)Total debt outstanding and disbursed 0 16,696 100,457 118,090

IBRD 0 498 5,933 7,209IDA 0 431 6,097 7,038 A. 7209

G 22328 8 703aTotal debt service 0 2,478 11,135 15,065

IBRD 0 26 679 810 D 2055

IDA 0 4 50 63 EI'.E819980

Composition of net resource flowsOfficial grants 0 117 337 326Official creditors 0 1,117 3,121 7,203Private creditors 0 2,867 6,690 5,683Foreign direct investment 0 1,659 33,787 38,000Portfolio equity 0 0 3,915 2.807 F 59483

World Bank programCommitments 0 1,092 4,020 2,850 A - IBRO E -BilateralDisbursements 0 565 2,063 2,269 B - IDA 0 - Other multilateral F - PrivatePrincipal repayments 0 0 324 364 C - IMF G - Short-termNet flows 0 565 1,739 1,905Interest payments 0 29 405 509Net transfers 0 536 1,334 1,396

Intemational Economics Department 12/6/96Note: The dollar estimate for China's GNP per capita is taken from the World Development Indicators and is a preliminary figure based on anon-going World Bank study of China's GDP. It was calculated to facilitate inter-country comparisons. Official statistics are used as the basisfor all other economic analysis contained in this document.

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Report No.: P 7062 CHAType: MOP