Introduction

This is the first country programme evaluation (CPE) undertaken by the Independent Office of Evaluation of IFAD (IOE) for China since the inception of the Fund's operations in 1978 and its engagement in China in 1981. The CPE covers the period 1999-2013, which includes an assessment of three country strategic opportunities programme (COSOP) for China dated 1999, 2005 and 2011. The main CPE mission was undertaken in August-September 2013. A CPE national round-table workshop was held in Beijing on 17 July 2014 to discuss the findings and recommendations of the evaluation.

The two main objectives of the CPE were to: (i) assess the performance and impact of IFAD-funded operations in China during the period 1999-2013; and (ii) generate a series of findings and recommendations to serve as building blocks for formulation of the next results-based COSOP, to be prepared by IFAD and the Government of China following completion of the CPE.

The Agreement at Completion Point (ACP), reflects the understanding between the Government of China (represented by the Ministry of Finance) and IFAD Management (represented by the Programme Management Department). It comprises the summary of the main evaluation findings (Section B below), as well as the commitment by IFAD and the Government to adopt and implement the CPE recommendations within specific timeframes (Section C below). The implementation of the recommendations agreed upon will be tracked through the President's Report on the Implementation Status of Evaluation Recommendations and Management Actions, which is presented to the IFAD Executive Board on an annual basis by the Fund's Management.

This ACP will be submitted to the Executive Board of IFAD as an annex of the new COSOP for China. The ACP will also be incorporated in the final China CPE report, which will be discussed both by the Evaluation Committee and Executive Board of IFAD.

Main evaluation findings

The CPE concluded that the strongest points in the IFAD-financed project portfolio in China includes a generally high achievement of targets and efficiency, and valuable contributions to sustainable improvements in household income and assets as well as in food security and agricultural productivity. Additionally, IFAD has supported China in introducing more participatory and demand-driven approaches to grassroots development. However, the impact on developing sustainable rural organizations, and contribution to government policies and institutions has been less strong. Similarly, opportunities exist for greater achievements in natural resources and environmental management as well as rural financial services.

The CPE found some contributions in the promotion and scaling up of innovative approaches to smallholder agriculture development, especially at the local level. For instance, some innovations have been replicated and scaled up within the project areas and sometimes within the project provinces, but limited evaluative evidence was found that successful innovations travelled across provincial borders. The CPE offers two main explanations for this: (i) projects are implemented and financed by sub-national governments, who have little incentive to engage in and finance activities beyond their provinces; and (ii) partnership with other in-country partners including international financial institutions, who have the potential to scale up successful innovations is weak. The CPE also concludes that promoting and scaling up innovative approaches to smallholder agriculture development should be at the core of the IFAD-China partnership.

The performance of non-lending activities (partnership building, policy dialogue and knowledge management) is assessed as moderately satisfactory. There have been some achievements in policy dialogue at the sub-national level, such as scaling up of participatory village development plans, although more can be achieved in the future at the national level. Similarly, while partnership with sub-national authorities and the Ministry of Finance is strong, there are opportunities to expand partnership with other (technical) institutions at the national level (e.g., Ministry of Agriculture) as well as other multilateral development agencies.

Within the broader realm of South-South cooperation, which IFAD has recently been supporting, China has been sharing experiences and technologies to other developing countries. In the latter part of the CPE period, IFAD also increased its efforts in knowledge management within and outside the portfolio. These are positive developments. Yet, overall, more resources will be needed to ramp up its engagement in non-lending activities and South-South and triangular cooperation in the future.

All country strategies (i.e., COSOPs) were generally aligned to IFAD's overall mandate, the needs of the poor, and government policies. They were also relevant to the rural context at the time of issue. The 1999 COSOP was essentially a joint IFAD/WFP strategy, whereas the 2011 COSOP was prepared according the guidelines for Result-Based COSOPs introduced in 2006. The 2011 COSOP is particularly relevant, as it includes knowledge management and South-South cooperation as objectives, which is consistent with Government priorities. However, the CPE finds that more attention could have been given to assessing the consequences of out-migration and to the targeting strategies in order to ensure that poorer segments of the rural population are the main beneficiaries of IFAD's support. Furthermore, strategic objectives for policy dialogue, knowledge management, partnership building and promotion of innovation and scaling up are not adequately supported by plans and budgets.

Overall, the CPE concludes that the China-IFAD partnership is strong and the aggregate performance of loan portfolio, non-lending activities and COSOPs is satisfactory. The main challenge in the future partnership is to enhance the emphasis on non-lending activities, which will need to be linked to an adequate investment project portfolio that focuses on promoting innovation and scaling up.

In general, the CPE also concludes that the IFAD-China partnership is very important for both IFAD and the Government. It merits being strengthened with necessary adjustments as it moves forward, by taking into account the social-economic developments and growth in the country over time. In this regard, it is particularly significant that income per capita has risen over time. Yet, a large number of rural people (around 150 million) still live on less than US$1.25 per day, inequality remains significant, and market reforms need further intensification. This therefore provides the imperative for IFAD's continued engagement in China for the foreseeable future, taking into account the Fund's overall mandate and responsibility of rural poverty reduction in its developing Member States in all regions.

Agreement at completion point

The CPE makes an overarching recommendation that IFAD and the Government move forward to prepare a new COSOP for China, which will build on the findings and recommendation of this CPE and provide the foundations of the main areas of intervention in the context of a renewed partnership and cooperation between the Fund and China. The CPE makes six overarching recommendations that should be included into the new COSOP: (i) Targeting the portfolio in a changed rural context; (ii) Strengthen knowledge cooperation; (iii) Sharpen focusing on scaling up impact; (iv) Promote South-South and triangular cooperation; (v) Strengthen partnerships with Government and other in-country stakeholders; and (vi) Enhancing IFAD presence and capacity in the country including out-posting of the China CPM.

Recommendation 1: Targeting in a changed rural context

1. Geographical targeting – the middle way. The new COSOP should carefully consider the provinces, counties and villages to include in future IFAD-supported programmes, ensuring they are fully relevant both with IFAD's corporate policy on targeting and Government's priorities for rural poverty reduction. Particular attention should be devoted to villages with poverty and a production potential, which younger people are willing to exploit, making farming a business. These are not all necessarily very remote villages but villages with challenges in their natural resource environment while having production potential. An additional selection criterion should be the status and plans for village infrastructure. When identifying beneficiary villages/areas during design and/or implementation, a careful assessment would need to be made of the migration trends so as to avoid ending up with almost empty villages at project completion.
2. Socio-economic targeting – flexibility. Rural-urban migration is accompanied by two other trends. First, land consolidation with farm units getting bigger, thereby raising labour productivity and reducing the acceleration in the rural-urban income gap. Second, agricultural commercialization is growing with increased productivity to meet the demand of the rapidly growing population. This trend tends to favour scale – either large production units or smaller units, which join in cooperatives that assemble (and process) the produce and meet the quality and delivery requirements of buyers. There are large private or state corporations entering this process but they do not need to be assisted by the IFAD-supported portfolio. However, there are also younger farmers who wish to make farming a business. Some may be returning migrants who have accumulated some savings, which they now want to invest. They may start micro, with 15-25 mu, but with the ambition to grow small or perhaps medium size (50-200 mu). Even though they most likely are not below the poverty line, they need support for developing their production, financial management and marketing skills, and they need access to finance for inputs and farm equipment. If they succeed, they will create employment on-farm as well as off-farm in the local cooperative and processing entities. And poor households, retired farmers or households who have left obtain income from leasing their contract rights. This CPE recommends that the portfolio apply a flexible socio-economic targeting approach, ensuring these groups are not excluded as well in future programmes, but with somewhat differentiated packages. When supporting cooperative development it is also important to engage with the younger business-oriented farmers who are likely to be the leaders in development of cooperatives. It is seldom the poorest households who lead.
3. Supporting ethnic minorities. The other leg in the targeting strategy would be to continue supporting ethnic minorities in remote mountain and forest areas, which have not yet been integrated into the mainstream agricultural commercialization process. Their production systems are diverse (crops, forest products, fisheries, livestock) and largely organic. Productivity is low, but can be raised with organic methods, requiring knowledge more than inputs and hardware. And, there are niche markets for some of their products but market access can usually be a constraint. In such more stable homogenous communities, it would be appropriate to work with all community members, regardless of their poverty status.

Recommendation 2: Strengthen knowledge cooperation

The future IFAD-supported country strategy and activities should continue to include a specific objective and significant emphasis to knowledge cooperation. To ensure success and credibility in this area, IFAD will need to maintain an adequate lending programme in China, which will provide the basis for learning lessons and identifying good practices in promoting poverty reduction in remote rural areas. A programme of knowledge cooperation would also include attention to documenting and sharing experiences and lessons from China that can help towards scaling up success stories in the country and elsewhere, as well as proactively supporting activities and organizing events that will promote the transfer of IFAD's accumulated knowledge, good practices, and lessons in smallholder agriculture and rural development from other countries to China. With regard to the latter, one concrete area is rural finance, where IFAD's rich global experience can be of use in developing sustainable rural financial service instruments and products to support the poor in China gain reliable access to required levels of capital for both investments and consumption purposes. Finally, the new country strategy should clearly specify the human and financial resources that will be allocated to knowledge cooperation, especially the administrative budget that will be mobilized to satisfactorily achieve this priority.

Recommendation 3: Sharpen focusing on scaling up impact

IFAD's resources allocated to China are relatively limited as compared to the financial resources of the central Government, the private sector, and other donors. Therefore, to ensure that successful innovations promoted in the context of IFAD operations have a wider sustainable impact on rural poverty in the country, scaling up beyond individual counties and provinces/regions by others (e.g., the national Government, donors and the private sector) should represent a priority for the future. Attention to scaling up will also contribute to ensuring the sustainability of the benefits generated through IFAD operations. This will require both IFAD and the Government (both at central and provincial level) to: (i) pay attention and allocate dedicated resources to non-lending activities (knowledge management, partnerships and policy dialogue) in China; and (ii) ensure that scaling up objectives are clearly specified in the COSOP and project design, and progress assessed and reported in all supervision, mid-term review and project completion reports.

Recommendation 4: Promote South-South and triangular cooperation

IFAD should continue to play a facilitation role in promoting South-South and triangular cooperation between China and other Member States, in cooperation with other major development partners working in agriculture in the country. This would include, inter alia, activities related to knowledge sharing; facilitation of partnerships between China and other governments that have technical expertise needed for smallholder agriculture development in China; facilitating visits and training of Chinese officials and project staff in other countries and pertinent international/regional platforms; promoting investment cooperation in the context of IFAD operations; and identifying opportunities to promote the transfer of technology and experiences from China to other IFAD Member States, and vice-versa. It is further recommended that the next China COSOP clearly articulate the specific activities and measures of success, together with the required estimated budget in relation to South-South and triangular cooperation that IFAD will promote in line with the priorities of the country. The CPE further recommends that the IFAD Management, in consultation with the Government, explore opportunities for establishing within IFAD a dedicated facility for South-South and Triangular cooperation.