A Partnership Transformed Three Decades of Cooperation between the Asian Development Bank and the People’s Republic of China in Support of Reform and Opening Up This book is a history of the partnership between the Asian Development Bank (ADB) and the People’s Republic of China (PRC) spanning three decades. Since joining ADB in 1986, the PRC has evolved from being a poor and predominantly agrarian economy A PARTNERSHIP to an upper-middle-income manufacturing and services powerhouse that has become a leading international source of financial, technical, and knowledge cooperation. This historically unprecedented transformation has shaped every aspect of the ADB–PRC relationship. The successful partnership owes much to the PRC’s unique TRANSFORMED approach to developing its economy, and oers valuable lessons for other countries and development partners. TRANSFORMED A PARTNERSHIP Three Decades of Cooperation between the Asian Development Bank and the People’s Republic of China in Support of Reform and Opening Up About the Asian Development Bank ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in , it is owned by members— from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Robert Wihtol Robert Robert Wihtol ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org A PARTNERSHIP TRANSFORMED Three Decades of Cooperation between the Asian Development Bank and the People’s Republic of China in Support of Reform and Opening Up Robert Wihtol Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2018 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org Some rights reserved. Published in 2018. ISBN 978-92-9261-342-6 (print), 978-92-9261-343-3 (electronic) Publication Stock No. TCS189263-2 DOI: http://dx.doi.org/10.22617/TCS189263-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms- use#openaccess. This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Please contact [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Notes: In this publication, “$” refers to United States dollars. ADB recognizes “China” as the People’s Republic of China and “Russia” as the Russian Federation. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. On the front cover: A concentrated solar thermal power plant in the city of Delingha, Qinghai Province. The 50-megawatt power plant was financed under an ADB project and will generate 217 gigawatt- hours of clean energy annually, reducing about 195,000 tons of carbon emissions each year. Photo by CGN Delingha Solar Energy, Co. Ltd. Inside photos: Author’s photo by Kuvatapio; ADB photo library; ADB Records and Archives; ADB. 2016. 30 Years of ADB-PRC Partnership. https://www.adb.org/countries/prc/30-years-adb-prc-partnership; ADB and the Government of the People’s Republic of China, Ministry of Finance. 2002. Building the Future Together: Fifteen Years of PRC-ADB Cooperation, 1986–2001; People’s Bank of China and ADB. 1997. China–ADB: A Decade of Cooperation. China Financial Publishing House. ABOUT THE AUTHOR Robert Wihtol has worked on development issues in Asia and the Pacific for many years, as both an international civil servant and an academic. He holds a master’s degree (1975) from the University of Helsinki and a doctorate degree (1987) from the University of Oxford. He worked for the Asian Development Bank for 20 years, including as country director for the People’s Republic of China, director general of the Pacific Department, and director general of the East Asia Department. He currently teaches at the Asian Institute of Management in Manila and the Asia-Pacific Finance and Development Institute in Shanghai. He has numerous publications about development in Asia and the Pacific. CONTENTS About the Author iii Tables, Figures, and Boxes vi Foreword ix Acknowledgments xiii Contributors xv Abbreviations xvi Executive Summary xviii Chapter 1—Introduction 1 Supporting the PRC’s Reform and Opening Up 2 What Are the Success Factors? 3 Chapter 2—Opening Up and Joining ADB 6 The PRC Initiates Reforms 6 The PRC Joins ADB 8 Chapter 3—Working Together 10 Organizational Arrangements for Cooperation 10 The PRC Plays an Active Role 11 The ADB Annual Meeting Is Held in Beijing 13 An Interim Operational Strategy 13 Operational Summary 15 Chapter 4—Revitalized Reform 19 ADB’s First Operational Strategy 20 Lending Terms and Borrowing Policies 21 Responsibility for ADB Shifts to the Ministry of Finance 22 Operational Summary 23 The Technical Assistance Portfolio Builds Capacity 25 Technical Assistance Grants Also Support Innovation 27 Chapter 5—Regional Balancing and the Environment 29 The PRC Establishes Global Forums 30 ADB Establishes the PRC Resident Mission 31 ADB Enhances Policy Dialogue 32 ADB Establishes Regional Departments 34 The Economy and Portfolio Perform Well 34 ADB’s Second Operational Strategy 36 The First Country Assistance Program Evaluation 37 Operational Summary 38 The PRC Becomes a Major Supplier of Goods and Services 42 Contents¬v Chapter 6—Globalization and Regional Cooperation 52 The ADB Annual Meeting Is Held in Shanghai 53 The PRC Expands South–South Cooperation 54 Deepening Regional Cooperation 55 Strong Performance and New Challenges 58 A Revitalized Country Strategy and Program 59 The Second Country Assistance Program Evaluation 61 Operational Summary 62 Chapter 7—Stimulus and Redistribution 70 The Two-Way Partnership Expands Quickly 71 Nonsovereign and Private Sector Operations Also Expand 73 The Ministry of Finance: International Financial Institutions 75 ¡Foster Innovation A New Partnership Strategy 76 Operational Summary 78 Chapter 8—Global Partnership 82 The 19th National Congress of the Communist Party of China 83 Managing the Middle-Income Transition 84 A Country Partnership Strategy for Two-Way Partnership 86 The Third Country Assistance Program Evaluation 87 A Country Partnership Strategy for Transformation 89 Operational Summary 91 Chapter 9—A Success Story 96 Support for Reform and Opening Up 96 Success Factors 100 Chapter 10—Looking Ahead 103 Bibliography 108 Appendixes 115 1 Milestones in ADB–PRC Cooperation, 1985–2017 117 2 PRC Overview Charts 120 3 ADB and PRC: Charts and Tables 123 4 ADB’s Nonsovereign and Private Sector Operations 156 in the PRC Index 163 TABLES, FIGURES, AND BOXES Tables A1 Milestones in the ADB–PRC Cooperation, 1985–2017 117 A3.1 ADB Operational Approvals to the PRC, 129 by Year of Approval and Amount, 1986–2017 A3.2 Policy Notes Submitted by ADB to the PRC, 2004−2017 145 A3.3 The PRC’s Contributions to the PRC Poverty Reduction 148 and Regional Cooperation Fund and the Asian Development Fund, 2005−2017 A3.4 ADB-PRC Key Appointments: Executive Directors 149 Representing the PRC A3.5 ADB-PRC Key Appointments: Vice-Presidents 149 from the PRC A3.6 ADB-PRC Key Appointments: ADB Country Directors 149 A3.7 Projects Funded by the PRC Poverty Reduction 150 and Regional Cooperation Fund, 2005–2017 A4.1 ADB Nonsovereign Operations in the PRC 161 by Sector and Period, 1988–2017 Figures 3.1 Operational Approvals to the PRC by Sector, 1986–1991 15 3.2 Operational Approvals to the PRC by Geographical Region, 15 1986–1991 4.1 Operational Approvals to the PRC by Sector, 1992–1997 23 4.2 Operational Approvals to the PRC by Geographical Region, 23 1992–1997 5.1 Operational Approvals to the PRC by Sector, 1998–2002 38 5.2 Operational Approvals to the PRC by Geographical Region, 39 1998–2002 6.1 Operational Approvals to the PRC by Sector, 2003–2007 62 6.2 Operational Approvals to the PRC by Geographical Region, 63 2003–2007 6.3 ADB-Financed Expressway and Railway Projects 65 in the People’s Republic of China, 1989–2017 7.1 Operational Approvals to