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ADB extends $100M to develop small cities, towns in China

Updated: 2009-09-22 22:56

MANILA: The People's Republic of China's drive to develop smaller towns and cities in a balanced, environmentally sustainable way is getting support from a 100-million-US-dollars Asian Development Bank loan, the Manila-based bank announced on Tuesday.

The funds, approved by ADB's Board of Directors, will be used for infrastructure projects in several areas of China's northeast Liaoning Province. The province, with a population of nearly 43 million, is looking to revive its economy and provide new jobs in the wake of the closure of many state-owned heavy industries in recent years and a surge of migrants from the countryside as farm work declines, ADB said in news release.

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It said China's economy has grown rapidly over the past two decades, but the benefits have not been shared evenly with the average disposable income of urban residents about 3.3 times the average net income of farmers in 2006. At the same time, rapid and heavy urbanization strained resources and infrastructure leading to pollution problems.

As part of its current five-year national economic plan, the Government has earmarked the development of small cities and towns to generate jobs for rural migrants and to reduce the urban-rural income gap, while helping relieve the pressure on water, sanitation and other key services in the major cities, the bank said.

The demonstration project will support Liaoning Province's own five-year development plan by funding infrastructure development in about seven cities and towns, including roads, bridges, drainage, water and sanitation services.

It will also help build up the project and environmental management capacities of provincial, municipal and county agencies, and provide an example for sustainable development that can be replicated. The Liaoning Project is one of three small cities and towns development projects that ADB is financing (the others are in the north-eastern provinces of Hebei and Shanxi).

"This project will demonstrate to similar cities and towns in Liaoning, and other provinces, how they can achieve economically, socially and environmentally sustainable urban development," said Barry Reid, Senior Financial Analysis Specialist, in ADB's East Asia Department.

ADB's loan has a 26-year term with a six-year grace period with pricing based on ADB's LIBOR-based lending facility. It will cover 42.3 percent of the total project cost of $236.5 million.

City and county governments in Liaoning will provide the remainder, along with a 250,000-US-dollars grant from the ADB-administered Water Financing Partnership Facility, which has contributions from the governments of Australia, Austria and Norway.