Xichuan Integrated Ecological Protection and Environmental Improvement Project (RRP PRC- 53053-001)

SECTOR ASSESSMENT (SUMMARY): AGRICULTURE, NATURAL RESOURCES, AND RURAL DEVELOPMENT

A. Sector Road Map

1. Sector Performance, Problems, and Opportunities

1. in Henan Province, part of the River watershed in the Yangtze River basin, is a national key ecological function zone designated by the government. Although the county is not within the Yangtze River Economic Belt (YREB), it provides a critical contribution to the YREB.1 The county was one of the People’s Republic of ’s (PRC) 53 remaining national poverty counties in 2020. It has an area of 2,820 square kilometers (km2); in 2018 the population was 724,600, of which about 80% live in rural areas. It is located in the headwater zone of the middle route of the South-to-North Water Diversion Project (SNWDP), which transfers water from Reservoir through a 1,277-kilometer (km) canal to 30 water-deprived northern cities, including in the Beijing--Hebei region.2

2. Water resources management. Economic growth in the PRC is resulting in a growing demand for water. Under medium-growth scenarios (i.e., a medium economic growth and moderately intensive water conservation), total annual projected water supply (for water use) in the PRC from all sources is expected to reach about 700 billion cubic meters (m3) by 2030, an increase of 99 billion m3 compared with the 2014 base-year water supply. The middle route of the water diversion project has started to divert 9.5 billion m3 of fresh water annually from the in Xichuan County to water- scarce northern areas, benefiting more than 100 million people.

3. While the county is helping to resolve water scarcity in the northern region of the PRC through the SNWDP, the county itself is experiencing acute water insecurity. The county currently uses only 32.13 million m3/year (about 13%) of surface water because of the restriction by the central government to meet the water supply for , and 72.1 million m3/year of ground water (171% of the total permissible amount based on the natural replenishment rate). The overexploitation has led to decreasing water levels and deteriorating water quality, rendering many existing intake structures nonfunctional. A lack of knowledge and capacity are two of the biggest obstacles to effective water resource planning and management.

4. Water quality. To ensure water quality for the SNWDP, industries with high levels of pollutant discharge (such as chemical and pharmaceutical industries) are prohibited in the Danjiangkou watershed. The water quality in some rivers in the county (such as the Danjiang and Laoguan) and in the proximity of the Danjiangkou Reservoir has exceeded Class III, with high concentration of nutrients (fertilizers and pesticides).3 Runoff, landslides, and soil erosion have resulted in excessive leaching of nutrients, pesticides, and sediment from farmlands into water bodies. Other sources of pollutants include livestock waste and direct discharge of untreated domestic wastewater from rural and urban areas. Large amounts of garbage and construction waste have also accumulated in the rivers. Poor management of waste and unsustainable farming practices threaten water quality in the Danjiangkou Reservoir.

1 Asian Development Bank (ADB). 2017. Technical Assistance to the People’s Republic of China for Preparing Yangtze River Economic Belt Projects. Consultant’s report. Manila (TA 9311-PRC). 2 South-to-North Water Diversion Project. http://www.china.org.cn/waterdiversion/index.htm. 3 Water above Class III is unfit for drinking (PRC’s Environmental Water Quality Standard-GB 3838-2002). X. Xin, W. Yin, and K. Li. 2017. Estimation of non-point source pollution loads with flux method in Danjiangkou Reservoir area, China. Water Science and Engineering. 10 (2), pp. 134–142.

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5. The annual pollution load to the Danjiangkou Reservoir from the entire watershed totals about 58,200 tons of chemical oxygen demand (COD) and 1,863 tons of total phosphorus. About 3% of Danjiangkou Reservoir catchment is located in Xichuan County, with 4% of the water discharge into the reservoir coming through the Danjiang, Qihe, and Laoguan rivers; together these contribute about 3% of the reservoir’s total COD, and 6% of total phosphorus load. Within the county, about 73% of the COD load and 78% of the total phosphorus load are generated from the nonpoint pollution sources, with the remaining loads generated from point sources.4

6. Rural water services. The sewage network currently covers 85% of urban areas but almost none of the rural areas in the county. Total annual wastewater production in the county is estimated at about 13 million tons. There are 14 wastewater treatment plants with a capacity of 100,300 tons/day, but these serve only a fraction of the urban areas because of the lack of a wastewater collection network. As a result, all rural wastewater and 30% of wastewater from urban areas is discharged into local rivers without treatment. Poor sanitation prevails in rural areas, with many households lacking reliable piped water supplies and toilets, prompting many people to resort to open defecation (government plans to implement a public sanitation project).

7. In 2015, up to 18 million tons of food served in large cities in the PRC were wasted, enough to feed 30 to 50 million people.5 The county’s annual waste production includes 202,000 tons of solid waste; 1,000 tons of plastic waste; and 128,700 tons of farm waste. The average daily food waste produced in the county is estimated at 40 tons; this is one of the most toxic pollution sources but is not treated separately and instead is dumped in comingled landfill sites or flushed into the river system.

8. Almost all of the county’s rural population and 30% of its urban population lack proper access to water, wastewater, and solid waste management facilities. About 70% of the drinking water supply in the county comes from groundwater that has been contaminated, with supply restricted as a result of overexploitation. The county’s groundwater quality is far below national standards,6 resulting in poor health and creating heavy burden, particularly for women, who have a major role in household water and waste management. Poor access to safe water supplies and sanitation in combination with poor hygiene practices resulted in fast community spread of coronavirus disease (COVID-19) pandemic in the county in 2020.

9. Flood risk management. Small river sub-basins in the Yangtze River basin are highly susceptible to climatic events including floods, including the Danjiang River sub-basin in Xichuan County.7 The average annual rainfall in the mountainous area in the county is about 1,300 millimeters (mm), which falls mainly during May–October. There were about 14 major historical flash floods in the county, including in 2010, 2011, 2017, and 2018. Floods in 1958 and 2010 were the worst; in 2010, 10,716 houses along the Danjiang River in Xichuan collapsed completely as a result of the flood. The flood inundated 58,800 mu of cultivated land, resulting in losses of about CNY658 million.8 Flash flood events are exacerbated by poor drainage infrastructure and clogging

4 G.E Xiaoying, J. Zang, and L. Zhu. 2015. Analysis of Variation Characteristics of Drought and Waterlogging Disasters in Henan Province from 1981 to 2011. Modern Agricultural Science and Technology, No. 20, pp. 1007–5739. 5 L. Hui, 2018. Food Waste in China could feed 30–50 million. China Daily. 27 March 2018. 6 Government of the PRC. 2007. National Drinking Water Quality Standard (GB 5749-2006). Beijing. Above class III water is unfit for drinking according to the PRC’s Environmental Water Quality Standard (GB 3838-2002). 7 R. Osti. 2017. Strengthening Flood Risk Management Policy and Practice in the People’s Republic of China. Lessons Learned from the 2016 Yangtze River Floods. ADB East Asia Working Paper Series No. 11. Manila: Asian Development Bank. 8 A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

3 of natural creeks in low-lying areas. Jingziguan Town, Siwan Town, Taohe Township, and Dashiqian Township in the county are the most vulnerable to the recurring flood disasters.

10. Soil erosion and rocky desertification. The area in the Danjiangkou Reservoir watershed where active soil erosion is occurring covers about 3,369 km2, mostly in hilly areas around the reservoir in Xichuan County; this includes areas with intensive soil erosion (446.87 km2), moderate soil erosion (1,369.70 km2), and mild soil erosion (1,552.44 km2). The annual average soil erosion rate is 2,938 tons/km2; this has been exacerbated since the 1990s by unsustainable farming practices on 800 km2 of farmland in the county, where the erosion rate is 3,650 ton/km2. Soil erosion has significantly reduced agricultural productivity in Xichuan County, which is an agrarian county with a very low soil formation rate and highly permeable carbonate bedrock. This results in a highly fragile and vulnerable environment that is susceptible to rocky desertification, resulting in deforestation and soil erosion. The area in the county subject to extreme rocky desertification covers about 348.82 km2 (12.37% of the total area). Areas with active rocky desertification are located around Danjiangkou Reservoir—mainly in the Danjiang, Guan, Qi, Tao, and other river basins—and include 12 townships (Xijingguan, Siwan, Xihuang, Mao Tang, Shangji, Jinhe, Laocheng, Dashiqiao, Taohe, Shengwan, Cangfang, and Madeng).9

11. Ecosystem degradation. In addition to deforestation and serious soil erosion in rocky desertification areas, sedimentation resulting from water-induced soil erosion (topsoil erosion and landslides) has buried many natural and artificial wetlands and small creeks, including village ponds in the county. These small water systems have either disappeared completely or remain in poor condition, with a high level of eutrophication or algae blooms, causing significant degradation of terrestrial and aquatic ecosystems. This has also contributed to poor groundwater recharge, which in turn affects the quality of the drinking water supply in low-lying areas. The area around the reservoir, which is well known for its production of herbal plants, beautiful landscape, and forest scenery, is under threat from several factors, including soil erosion, rocky desertification, and poor (mainly hillslope) farming practices that result in poor economic returns.

12. Climate change. Climate change observations in Xichuan during 1961–2018 reveal ongoing warming with annual mean temperature increases of 0.04°C/10 years; climate change projections in the Han River basin shows continued increase in annual mean temperature, with a magnitude of 0.9–1.1°C by 2050. In Xichuan, the observed total annual precipitation shows no significant trend with large annual variability during 1961–2018. Mean annual precipitation is projected to increase over most regions in the Han River basin, including Xichuan, by a magnitude of up to more than 60 mm (about 6%), while 5-day rainfall is projected to increase by 25 mm by 2050, which may result in increased flood risk.

13. Opportunity. Poverty, declining water quality, and ecosystem degradation are the three most prominent issues among the development challenges in Xichuan County. The project provides an opportunity to adopt an integrated water resources management (IWRM) approach using a mix of structural and nonstructural measures to address these three key issues through each of the project components including (i) an institutional support and capacity building program; (ii) rural ecotourism development to promote greening, reduce soil erosion, and improve livelihoods through entrepreneurship development associated with ecotourism, including a market for eco- products; (iii) forest and fruit farming to replace unsustainable farming practices and reduce rocky desertification and soil erosion, increase farmers’ incomes, and use less fertilizer and pesticides to

9 G. Wangming, Z. Jinxing, and W. Jianhong. 2018. Artificial Afforestation Technology for Rocky Desertification Control in Xichuan County of South to North Water Diversion project. Forest Resources Management. Vol 3, pp. 44–48.

4 improve water quality; (iv) smart irrigation systems and automated fertilizer mixtures in drip irrigation systems to minimize water use, reduce energy consumption in irrigation, and reduce soil erosion; (v) soil and water conservation to mitigate rocky desertification, reduce sediment loads in rivers and creeks, and improve soil productivity; (vi) rural water supplies to improve public health and reduce the extraction of groundwater; (vii) wastewater and solid waste management systems to improve public health, reduce the amount of pollutants entering receiving waters, and improve terrestrial and aquatic ecosystems; (viii) river training, natural drainage restoration, and urban drainage improvement to mitigate flood risk and protect infrastructure; and (ix) community-based natural resource management for socioeconomic development and environmental sustainability.

14. The project will: (i) promote global and regional goods by contributing to (a) the PRC’s Intended Nationally Determined Contribution to ensure that its carbon emissions peak by 2030 through plantations, and (b) regional water distribution through water conservation and environmental protection for the water diversion project that supplies water to Beijing and other cities; (ii) implement the rural vitalization plan;10 (iii) demonstrate environmental conservation and advocate the need for IWRM on a river basin scale; and (iv) incorporate ecotourism that reflects cultural values.

15. Risk. There is a risk that the project may attract migrant workers with contagious diseases such as COVID-19 and other communicable diseases; therefore, local agencies should conduct proper monitoring provision as well as public awareness campaigns on COVID-19. The project area may also exceed the population, urbanization, industrialization, and climate change forecasts and thereby exert more pressure on water resources.

2. Government’s Sector Strategy

16. Water law. The Water Law of the PRC (revised edition) was passed during the 29th meeting of the Standing Committee of the Ninth National People’s Congress and implemented from 1 October 2002.11 The law focuses on IWRM on a watershed scale and emphasizes water saving, efficiency, and quality.12

17. River protection plan. In 2017, the State Council issued the Construction Plan of Comprehensive Management of Water Environment in Key River Basins including the Yangtze River basin, which stated the requirement to improve the quality of water environment.13

18. National fourteenth five-year plan, 2021–2025. The Fourteenth Five-Year Plan (2021– 2025) shapes the PRC’s objectives regarding a “green transformation,” through a stronger focus on high-quality development, people’s broader well-being, innovation, urban–rural development cooperation, improved natural resources management, and policy reforms to balance environmental protection and economic growth.14

19. Yangtze river economic belt. To manage the particular challenges facing the middle and upper reaches of the Yangtze River basin, the government formulated the YREB Development Plan, 2016–2030, which prioritizes ecological protection and promotion of green development as

10 Government of the PRC. 2018. National Strategic Plan for Rural Vitalization, 2018–2022. Beijing. 11 Government of the PRC. 2002. Water Law of the People’s Republic of China. Beijing. Government of the PRC. Beijing. 12 Government of the PRC. 2015. Water Pollution Prevention and Control Action Plan. Beijing. 13 China Daily. 2017. China Releases Yangtze Environmental Protection Plan. 22 July. 14 Government of the PRC. 2021. The Fourteenth Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Outline of Vision Goals for 2035. Beijing.

5 the guiding principle for YREB development.15 In this connection, the Asian Development Bank (ADB) and the government agreed to adopt a framework approach that provided about $2.0 billion of funding in the YREB during 2017–2020 to strategically program ADB’s lending support for development initiatives in the YREB.

20. Water pollution prevention and control action plan. The objectives of the plan (footnote 14) are to promote the implementation of an ecological civilization and improve the water environment. The action plan (2015–2030) involves 10 targets, which include controlling pollutant emissions, conserving water resources, enforcing environmental laws, strengthening water and environment management, defining, and implementing management responsibilities of all stakeholders, and strengthening public participation and social supervision.

21. National flood management strategy. The national government issued a flood control policy statement in 1998 that focused on embankment reinforcement; river dredging; ecological restoration using revegetation; flood control through dikes; and integrated flood risk management involving resource utilization, a combination of structural and nonstructural measures, a coordination mechanism, land use, and emergency response.16

22. Rural vitalization plan. In 2018, the national government released a rural vitalization plan for 2018–2022 (footnote 10), prioritizing rural areas as an integral part of economic development and considering poverty reduction, rural development, and green and inclusive growth.

B. Major Development Partners: Strategic Foci and Key Activities

23. ADB has supported the PRC in various sector development programs since 1987. Henan Province has signed agreements for foreign loans with a total contracted amount of $1.3 billion for more than 15 projects (in rural development, agriculture, river restoration and environment improvement) with ADB, the World Bank, and bilateral lenders. The table provides examples of projects financed by ADB and the World Bank that address environmentally sustainable growth, inclusive economic growth, regional integration and agriculture, natural resources, and rural development.

Major Development Partners Development Amount Project Name Duration Partner ($ million) Multisector/Urban Development ADB Loan 3865-PRC: Henan Integrated River Restoration 2019 (ongoing) 200.00 and Ecological Protection Project ADB Loan 3401-PRC: Henan Qihe River Environmental 2016 (ongoing) 150.00 Improvement and Ecological Conservation Project Loan 3296-PRC: Henan Sustainable Livestock Farming and ADB 2015 (ongoing) 69.00 Product Safety Demonstration Project Loan 2395-PRC: Henan Sustainable Agriculture and Productivity ADB 2007–2016 67.00 Improvement Project Loan 2207-PRC: Henan Wastewater Management and Water ADB 2005–2012 100.00 Supply Sector Project World Bank Climate-Smart Staple Crop Production Project 2014 30.00 World Bank Henan Ecological Livestock Project 2010–2015 80.00 ADB = Asian Development Bank, PRC = People’s Republic of China. Source: Asian Development Bank.

15 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 16 H. Wan. 2003. Policies and Measures on Flood Mitigation in [the People’s Republic of] China since 1998. Paper for the International Conference on Total Disaster Risk Management. Kobe, Hyogo, Japan. 2–4 December.

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C. Institutional Arrangements and Processes for Development Coordination

24. ADB is committed to sharing sector information and experiences in partnership with its developing member countries and other development agencies. In line with its support for the 2005 Paris Declaration and the 2008 Accra Agenda for Action, ADB has been harmonizing its policies, procedures, and practices with its key development partners through parallel implementation structures, technical working groups, and joint missions. In addition, ADB has been supporting global and regional efforts to enhance aid effectiveness.

25. In the PRC, the central government mainly coordinates development assistance. All development partners are requested to align their operations to support the implementation of a national development strategy as set out in the Thirteenth Five-Year Plan, 2016–2020 for inclusive and sustainable development and approved by the People's Congress.17 ADB's resident mission in the PRC also plays a key role in harnessing lessons in project design, implementation, and monitoring to be shared with other partners.

D. ADB Experience and Assistance Program

26. ADB’s country partnership strategy for the PRC, 2021–2025,18 focuses on innovative projects where ADB can promote an environmentally sustainable and less carbon-intensive economy. The strategy is closely aligned with the priorities of the PRC’s Fourteenth Five-Year Plan, 2021-2025, which includes integrated development models to close the urban-rural divide, covering a comprehensive rural transformation and modernization of the agriculture sector as well as the promotion of green and smart agriculture to attract employment and investment opportunities in rural areas.

27. ADB’s Strategy 2030 expands its vision toward a prosperous, inclusive, resilient, and sustainable Asia and the Pacific; and continues the focus on infrastructure investments particularly those that are green, sustainable, inclusive, and resilient; and tackling climate change and environmental sustainability (footnote 15).

28. Through 2020, ADB has provided 58 loans to the PRC for agriculture, natural resources, and rural development; a significant portion of this funding is allocated for water resources management, land restoration, forestation, and ecological improvement.

29. The project design has incorporated lessons from international practices related to rural vitalization and agricultural development, such as the importance of (i) climate-smart agricultural practices; (ii) improvement of farming technologies and marketing; (iii) help for farmers in improving their access to markets and product quality control; (iv) value chain development, resulting in the promotion of specialized agricultural products; (v) development, participation, and empowerment of farmers and farmer organizations; (vi) effective institutional arrangements and government management; (vii) sustainable operation and maintenance with capacity development; and (viii) monitoring and evaluation system for project performance.

17 Government of the PRC. 2015. Outline of the Thirteenth Five-Year Plan on National Economic and Social Development, 2016–2020. Beijing. 18 ADB. 2021. Country Partnership Strategy: People’s Republic of China, 2021–2025—Toward High-Quality, Green Development. Manila.

7 Problem Tree for Agriculture, Natural Resources, and Rural Development

Economic Growth is not Sustainable to Satisfy Rural Vitalization Plan in Yangtze River Economic Belt

Accelerated depletion of the natural resource base that serves as the foundation for Low agricultural productivity Effects the PRC's economic growth plan

egraded ecosystem in Xichuan County Core Problem D

Causes Degrading river morphology Deteriorating water quality Deteriorating riparian ecosystem

Irrigation runoff contains high River loses conveyance Unstable river bank slopes Untreated wastewater High sediment yields from Eutrophication in nutrients, pollutants and and quality and frequent flooding discharged into the river the watershed wetlands and village sediment ponds

Continued bank erosion Environmentally damaging Dumping of wastes in the No sewage system in rural Sparse vegetation in the Bad smell and algae and river bed farming practices such as use of river villages of Xichuan County watershed growths aggradation poor irrigation method, fertilizers, and pesticides

Activity on steep slopes, Inadequate water Inadequate solidwaste Loose soil and steep Capacity of Local deforestation and retention and management banks Government is low Farmer knowledge and desertification circulation farming practices are conventional

PRC = People’s Republic of China. Source: Asian Development Bank