47696 Public Disclosure Authorized MID-TERM EVALUATION OF CHINA’S 11TH 5 YEAR PLAN Public Disclosure Authorized Public Disclosure Authorized Poverty Reduction and Economic Management Unit East Asia and Pacific Region World Bank Public Disclosure Authorized CURRENCY EQUIVALENTS (As of December 18, 2008) Currency = Renminbi Currency Unit = Yuan (CNY) US$1.00 = RMB 6.845 FISCAL YEAR January 1- December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS 5YP - Five Year Plan BMI - Basic Medical Insurance BRICs - Brazil, Russia, India, China CHCs - Community Health Centers COD - Chemical Oxygen Demand CPI - Consumer Price Index EFA - Education for All IVDP - Integrated Village Development Program LICs - Low Income Countries MA - Medical Assistance M & E - Monitoring and Evaluation MDG - Millennium Development Goal MEP - Ministry of Environment Protection MICs - Middle Income Countries MOCA - Ministry of Civil Affairs MOF - Ministry of Finance MOLSS/ - Ministry of Labor and Social Security/Ministry of Human Resources (MOHRSS) and Social Security NCH - National Commission on Health NCMS - New Rural Cooperative Medical System NDRC - National Development and Reform Commission OECD - Organization for Economic Co-operation and Development PBOC - People’s Bank of China PPI - Producer Price Index R & D - Research and Development SAT - State Administration of Taxation SO2 - Sulphur Dioxide URBMI - Urban Residents Basic Medical Insurance Vice President: James Adams Country Director: David Dollar Sector Director: Vikram Nehru Task Team Leader: Louis Kuijs Table of Contents Executive Summary........................................................................................................... i 1. Introduction............................................................................................................... 1 Situation and Developments Prior to the Start of the 11th 5YP........................................................ 1 The 11th 5YP.................................................................................................................................... 6 2. Stable Operation of the Macro Economy and Improve Living Standards........ 11 Situation and Developments pre the 11th 5YP ............................................................................... 11 Key Objectives in the 11th 5YP on “Stable Macro Economy”....................................................... 12 Key Initiatives and Developments................................................................................................. 12 How Have Macro Policies Evolved during the 11th 5YP?............................................................. 16 Emerging Issues and Assessment .................................................................................................. 18 3. Optimizing and Upgrading of the Industrial Structure ...................................... 21 Background and Key Objectives ................................................................................................... 21 Progress with the Tasks of the 11th 5YP........................................................................................ 23 Progress in Meeting the Overall Targets of the 11th 5YP .............................................................. 27 Soundness of the Industrial Structure — How to Measure Progress over Time?.......................... 29 Concluding Remarks ..................................................................................................................... 34 4. Increasing Energy Efficiency................................................................................. 37 Background and Key Objectives ................................................................................................... 37 Main Initiatives.............................................................................................................................. 40 Key Results Achieved So far......................................................................................................... 45 Conclusions and Lessons............................................................................................................... 48 Recommendations ......................................................................................................................... 50 5. Coordinating Urban and Rural Development...................................................... 53 Background and Key Objectives ................................................................................................... 53 Measures Taken and Key Results.................................................................................................. 55 Emerging Themes and Recommendations..................................................................................... 69 6. Improving Basic Public Services ........................................................................... 75 A. Social Protection................................................................................................................... 75 Background and Key Objectives...................................................................................... 75 Overall Progress, Main Initiatives, and Key Results ....................................................... 77 Analysis of results, Conclusions, and Main Challenges Ahead....................................... 86 B. Health Services ..................................................................................................................... 90 Background and Key Objectives...................................................................................... 90 Main Initiatives and Overall Progress to Date ................................................................. 92 Factors Affecting the Achievement of the Objectives ................................................... 100 Conclusions and Lessons Learned ................................................................................. 102 C. Education Development..................................................................................................... 105 Background and Key Objectives.................................................................................... 105 Implementation Status of Main Tasks ........................................................................... 106 Conclusions.................................................................................................................... 111 7. Building a Resource Efficient and Environmentally Friendly Society ............ 115 Reducing Air, Water and Solid Waste Pollution ......................................................................... 115 Water Resources Efficiency and Safety....................................................................................... 123 Forestry and Eco-system Protection ............................................................................................ 126 Conclusions and Lessons............................................................................................................. 130 References...................................................................................................................... 135 Figures Figure 1 China’s GDP Per Capita Growth Has Been Very Rapid.................................................................. i Figure 2 This Has Allowed China to Catch up with Other Countries ............................................................ i Figure 3 China’s Capital-Intensive, Industry-led Economy in International Perspective 1/......................... iii Figure 4 Industry Still Outpaces Services ................................................................................................... vii Figure 5 Investment Still Outpaces Consumption ....................................................................................... vii Figure 1.1 China’s Growth Performance Is in a League of its Own.............................................................. 2 Figure 1.2 Human Development Also Progressed......................................................................................... 2 Figure 1.3 China’s Capital-Intensive, Industry-led Economy in International Perspective 1/....................... 4 Figure 2.1 Potential Growth Broadly Keeps Pace with Actual Growth ...................................................... 13 Figure 2.2 Overall Growth Target Seems in Easy Reach ............................................................................ 13 Figure 2.3 The Rise and Fall of Food Price Driven Inflation ...................................................................... 15 Figure 2.4 Although a Price-Wage Spiral is is Unlikely, Wage Growth has Remained Robust ................ 15 Figure 3.1 Share of Value-Added of Hi-Tech Industries in GDP, Realized and Targeted, 1995-2010....... 24 Figure 3.2 Percentage Shares of the Tertiary Industry in GDP and Total Employment, Realized and Targeted, 2000-2010................................................................................................................... 28 Figure 3.3 R&D Expenditure As Percentage of GDP, Realized and Targeted, 1995-2010......................... 28 Figure 3.4 Labor Productivity in China’s Industry, 1998-2006................................................................... 31 Figure 3.5 Capital Intensity in China’s Industry 1/ ..................................................................................... 31 Figure 3.6 Return to Capital of Chinese Industrial Enterprises,