Completion Report

Project Number: 37487-013 Loan Number: 2182 July 2017

People’s Republic of China: Zhengzhou‒Xi’an Railway Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – yuan (CNY)

At Appraisal At Project Completion 14 August 2005 20 January 2015

CNY1.00 = $0.1235 $0.1606 $1.00 = CNY8.1002 CNY6.2236

ABBREVIATIONS ADB – Asian Development Bank CRC – China Railway Corporation CRH – China Railway Highspeed EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan EMOP – environmental monitoring plan EMR – environmental monitoring report FCTIC – foreign capital and technical import center FIRR – financial internal rate of return ICB – international competitive bidding LAR – land acquisition and resettlement LIBOR – London interbank offered rate MOR – Ministry of Railways O&M – operation and maintenance PDL – passenger-dedicated line PRC – People's Republic of China SDAP – social development action plan SEIA – summary environmental impact assessment SEPA – State Environmental Protection Administration TA – technical assistance WACC – weighted average cost of capital ZXR – Zhengzhou–Xi’an railway ZXRC – Zhengzhou–Xi’an Passenger Dedicated Railway Line

Company

WEIGHTS AND MEASURES ha – hectare km – kilometer m2 – square meter mu – Chinese unit of measurement: 1 mu = 0.0666 hectares km/h – kilometer per hour t/y – tons per year

NOTES

(i) The fiscal year (FY) of the Government of the People’s Republic of China and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2016 ends on 31 December 2016.

(ii) In this report, "$" refers to US dollars.

Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Director R. Guild, Transport Division, EARD Team leader S. Saxena, Principal Transport Specialist, EARD Team member G. Gadiano, Senior Operations Assistant, EARD

N. Kim, Senior Environment Specialist, EARD S. Kotagiri, Social Development Specialist (Safeguards), EARD J. Macrohon, Associate Project Analyst, EARD J. Sluijter, Transport Economist, EARD P. Striednig, Railway Specialist, EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 9 D. Preliminary Assessment of Sustainability 10 E. Impact 11

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Chronology of Major Events 21 3. Project Costs and Financing Plan 23 4. Projected and Actual Contract Awards and Disbursements 25 5. Appraisal and Actual Project Implementation Schedule 26 6. Organizational Chart (At Completion) 27 7. Compliance with Loan Covenants 28 8. Contract Packages Financed by the Asian Development Bank 36 9. Economic Revaluation 39 10. Financial Reevaluation 44 11. Social Impact and Poverty Reduction 48 12. Land Acquisition and Resettlement 55 13. Environmental Impact Analysis 62

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

People’s Republic of China 2182-PRC Zhengzhou‒Xi’an Railway Project People’s Republic of China Ministry of Railways $400 million 1637

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

23 May 2005 31 May 2005 19 August 2005 22 August 2005 22 September 2005 3 April 2006 2 July 2006 22 August 2006 Two 30 June 2012 20 January 2015 Two LIBOR1-based 26 years 6 years Not Applicable

1 LIBOR = London interbank offered rate.

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9. Disbursements a. Dates Initial Disbursement

02 August 2007

Final Disbursement

11 December 2014

Time Interval

89 months

Effective Date

22 August 2006

Original Closing Date

30 June 2012

Time Interval

71 months

b. Amount ($ million)

Category Original

Allocation Last Revised

Allocation Amount

Canceled Net Amount

Available Amount

Disbursed Undisbursed

Balance 01 Equipment 271.78 320.55 7.61 320.55 312.94 7.61 02 Materials 105.85 79.45 0.00 79.45 79.45 0.00 03 Consulting Services 0.80 0.00 0.00 0.00 0.00 0.00 04 Unallocated 21.57 0.00 0.00 0.00 0.00 0.00

Total 400.00 400.00 7.61 400.00 392.39 7.61

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual Foreign Exchange Cost 1,364.61 218.29 Local Currency Cost 2,767.32 6,680.52

Total 4,131.93 6,898.81

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Asian Development Bank 400.00 392.39 China Development Bank 1,667.27 3,239.05 MOR, HPG, SPG 2,064.66 3,267.37

Total 4,131.93 6,898.81 HPG = Henan provincial government, MOR = Ministry of Railways, SPG = Shaanxi provincial government.

Source: China Railway Corporation.

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3. Cost Breakdown by Project Component ($ million)

Cost Appraisal Estimate

Actual

A. Base Cost 1. Railway works, facilities, and equipment 3,067.66 6,142.98 2. Administration, land acquisition, consulting services, and

environmental protection 424.09 576.50

Subtotal (A) 3,491.75 6,719.48 B. Contingencies

1. Physical contingencies 240.50 0.00 2. Price contingencies 146.25 0.00

Subtotal (B) 386.75 0.00 C. Interest during construction 253.43 179.33

Total 4,131.93 6,898.81 Numbers may not sum precisely because of rounding. Sources: China Railway Corporation, Zhengzhou‒Xi’an Passenger Dedicated Line Railway Company.

4. Project Schedule

Item Appraisal Estimate Actual

Detailed design completed Jul 2005 Sep 2004 Commencement of land acquisition and resettlement activities

Sep 2005 Dec 2005 (Shaanxi Province) and Mar 2006 (Henan Province

ADB-financed contracts awarded Oct 2005 Feb 2007 Commencement of track laying Sep 2007 Mar 2009 Land acquisition and resettlement completed

Sep 2008 Dec 2012

Civil works construction completed Sep 2009 Mar 2009 Track laying completed Mar 2010 Jun 2009 Telecommunications and signaling completed

Aug 2010 Jul 2009

ADB = Asian Development Bank Sources: China Railway Corporation, Zhengzhou-Xi’an Passenger Dedicated Line Railway Company.

5. Project Performance Report Ratings

Implementation Period Ratings

Development Objectives Implementation Progress

From 30 Sep 2005 to 28 Feb 2006 Satisfactory Satisfactory From 01 Mar 2006 to 31 Mar 2006 Satisfactory Unsatisfactory From 30 Apr 2006 to 31 May 2010 Satisfactory Satisfactory From 30 Jun 2010 to 31 Dec 2010 Satisfactory Highly Satisfactory Technical / Contract Awards / Disbursements / Financial

Management / Safeguards

From 1 Jan 2011 to 31 Dec 2014 On track

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D. Data on Asian Development Bank Missions

Name of Mission Date No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-Finding 14–25 Mar 2005 7 84 a,b,c,d,e,f,g Inception 14–19 Oct 2006 2 12 h,i Review 1 12–14 and 17–19 Nov 2007 2 12 h,i Midterm Review 3–11 Nov 2008 5 45 j,k,l,m,n Review 2 23–27 Nov 2009 2 10 j,m Review 3 26–30 Jul 2010 1 5 a Review 4 11–16 Dec 2011 1 6 a Review 5 22–27 Aug 2012 1 6 a Review 6 11–13 Dec 2013 1 3 n Review 7 13–16 Nov 2014 1 4 n Project Completion Review 24–28 April 2017 4 16 i,o,p,q,r

Note: a a = transport specialist (railways)/project team leader; b = principal transport economist; c = resettlement specialist,

d = environment specialist; e = financial specialist; f = economist; g = counsel; h = senior transport specialist (railways)/mission leader; i = associate project analyst; j = transport specialist/team leader; k = senior social development specialist (resettlement); l = transport specialist (for environment protection); m = operations officer; n = senior transport specialist; n = senior transport specialist/team leader; o = senior operations assistant; p = principal transport specialist/team leader, q = railway specialist; r = resettlement specialist (staff consultant).

I. PROJECT DESCRIPTION

1. People’s Republic of China (PRC) railway sector has been vital to the country’s economic and social development. The PRC’s vast area requires the movement of people and goods over long distances, and railways are an efficient and economic means of transport, with a competitive advantage in moving passengers and freight over medium to long distances. During 2003‒2015, the rail network expanded by 65%, from 73,000 kilometers (km) to 121,000 km. Passenger and freight railway traffic also grew substantially. The PRC has also developed the world’s longest high-speed rail network (19,000 km). The government’s plan for railway development prioritizes the expansion of the rail network and the construction of new rail lines in the central and western regions to enhance economic growth and reduce inequality.1 2. Planning for a high-speed rail network. High-speed express train services allow more trains to share tracks and improve rail transport capacity. But in the PRC, high-speed trains often had to share tracks with slower, heavy freight trains, in some cases with limited intervals between trains. To increase both speed and transport capacity, planners in the PRC proposed a passenger-dedicated high-speed rail network. After committing to conventional-track high-speed rail in 2006, the PRC began work on several passenger-dedicated high-speed rail lines. In 2007, the Qinhuangdao‒Shenyang high-speed railway line, which carried trains at a top speed of 250 kilometers per hour (km/h) along the Liaoxi Corridor in the Northeast, was the only passenger-dedicated high-speed railway line in the PRC. The PRC embarked on an ambitious high-speed railway program, and planned for a national grid composed of eight high-speed rail corridors, four running north–south and four east–west. The envisioned network, together with upgraded existing lines, would total 12,000 km in length. Most of the new lines followed the routes of existing trunk lines and were designated for passenger travel only. They became known as passenger-dedicated lines (PDLs); development plans have since been expanded from 8 to 16 corridors. 3. The project. The Zhengzhou‒Xi’an railway (ZXR) line was included in the Eleventh Five-Year Plan (2006‒2010) of the PRC, and considered a key investment to address the area’s inadequate transport infrastructure. 2 It is one of the eight passenger-dedicated corridors to be developed by 2020. The ZXR has a total length of 459 km, and connects Henan and Shaanxi provinces (both large regional centers). The ZXR is also the main east–west corridor linking Beijing, Shanghai, and other major cities and ports in the east with Baoji, Chengdu, Chongqing, Lanzhou, Urumqi, Xi’an, and other population and economic centers in the western region of the PRC. 4. The ZXR runs parallel with the Longhai railway line, which has the highest transport density in the PRC railways. During project appraisal, the Longhai railway line was at full capacity, with both freight and passenger transported on the same line. This resulted in limited train speeds and restricted traffic flow. The ZXR was designed to free capacity on the existing Longhai railway line by separating the passenger and freight corridors and enabling an increase in route density. The ZXR was expected to (i) reduce the cost of transport to and from the poor northern and northwestern part of Henan and Shaanxi; (ii) support the growth of freight and container traffic; and (iii) stimulate tourism and related industries, through the railway line’s associated developments. 1 Government of the People’s Republic of China, National Development and Reform Commission. 2001. Outline of the

Tenth Five-Year Plan. Beijing. and Government of the People’s Republic of China. 2004. Railway Development Plan. Beijing.

2 Government of the People’s Republic of China, National Development and Reform Commission. 2006. Outline of the Eleventh Five-Year Plan. Beijing. and Government of the People’s Republic of China.

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5. On 22 September 2005, the Asian Development Bank (ADB) approved a loan of $400 million from its ordinary capital resources to finance the project.3 The loan agreement was signed on 3 April 2006 and became effective on 22 August 2006, with an original closing date of 30 June 2012. The loan was closed on 20 January 2015, nearly 30 months after of the original loan closing date. At appraisal, the project was to comprise: (i) construction of 459 km of double-track electrified standard gauge class I passenger-dedicated railway between Zhengzhou and Xi’an; (ii) construction of 9 new railway stations complete with facilities; (iii) safety initiatives, including provision of modern technology and equipment for enhancing safety; (iv) an e- governance and operating dispatch information system; (v) provision of training on the use and maintenance of modern equipment; (vi) consulting services for construction supervision, monitoring and evaluation, and marketing and business development; and (vii) strengthening of institutional capabilities. The project design and monitoring framework is in Appendix 1 and the chronology of major events is in Appendix 2.

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 6. The project design aligned fully with government development priorities and ADB’s country strategy. 4 As a priority project in the plan, the project contributed to the PRC’s Western Development Strategy, which aims to narrow development disparities between western and coastal regions. ADB’s country strategy sought to promote pro-poor economic growth by enabling the poor to access the benefits of economic prosperity.5 In the railway sector, ADB’s country strategy focused on helping to (i) expand the railway system by constructing new lines in unserved, less-developed areas; (ii) modernize and increase capacity to improve efficiency on key national railway routes; (iii) commercialize railway operations to improve efficiency; and (iv) increase the competitiveness of railways in the transport sector through restructuring and reform. The project was one of several ADB-financed railway development assistance programs and projects in less-developed inland provinces. 7. The project design was sound. During preparation, the project alignment was assessed based on construction costs and environmental and socioeconomic considerations, such as access to natural resources; the impact of land acquisition and resettlement; and the preservation of cultural relics, historical sites, and protected areas. The design standards considered the need to integrate this railway line with other railway lines in the region. The interface (including physical connections, signaling, and communications) was designed to ensure uninterrupted transit for passenger trains. Train dispatching, ticket reservation, and other management information systems complied with national railway standards. B. Project Outputs 8. Railway infrastructure and associated facilities constructed along the Zhengzhou‒Xi’an railway corridor. Construction of the ZXR commenced on 25 September 2005, and all civil works were completed by July 2009. The completed project includes 459.53 km of double-track

3 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

People’s Republic of China for the Zhengzhou-Xi’an Railway Project. Manila. 4 ADB. 2004. Country Strategy and Program Update (2005-2007), The People’s Republic of China

https://www.adb.org/sites/default/files/institutional-document/32294/files/cspu-2004.pdf 5 Government of the People’s Republic of China. 2000. Western Development Strategy of the People’s Republic of

China. Beijing.

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electrified standard gauge passenger-dedicated railway line between Zhengzhou and Xi’an built to the new standards of high-speed train operations. It has 134 bridges with a total length of 252 km, and 38 tunnels with a total length of 77 km. Bridges and tunnels make up 72% of the alignment. The longest bridge is 5.30 km long, and the longest tunnel—the Qingdong tunnel—is 7.7 km long. Several safety initiatives, including provision of modern technology and equipment for enhancing safety, were introduced. Train operations use automatic block control systems. The signal system use a centralized traffic control system, which consolidates train routing decisions and ensures a higher level of safety. Equipment and facilities for power supply, signaling, a management information system, telecommunication, and train control systems were installed and fully commissioned. A modern train reservation and ticketing system comprising an operating dispatch information arrangement, which links the trains on the ZXR line with the national train reservation systems, has been implemented. The project built nine stations, including eight passenger stations and one passing station.6 9. The project design followed the Ministry of Railway (MOR) PDL technical standards and used a design speed of 350 km per hour (km/h).7 Train operations were initially conducted at 350 km/h, but after a train accident in Wenzhou the operational speed was reduced to 310 km/h. The design of the railway line includes several features that enhance railway safety and served to mitigate environmental impacts during project construction. Construction of the ZXR project was of high quality and has received multiple awards.8 The ZXR (i) used innovative techniques for subgrade settlement control and tunnel excavation in areas with loess (soil composed of fine, windblown sediment); (ii) piloted the application of pre-stressed continuous concrete bridges, ballastless track-laying, and associated equipment; and (iii) introduced modern communication and signaling technologies such as centralized traffic control systems. The project’s technical design, which was innovative and sound, was successfully implemented in accordance with prevailing national and international technical standards and best practices. 10. The MOR issued its provisional acceptance of the project in January 2010 after verifying construction quality and completing a transportation safety assessment. Before the ZXR line opened, public safety campaigns were conducted to familiarize people with safety issues related to the electrified railway. Local governments also established offices to assist in the safety efforts. During the project completion review, the telecommunications, signaling, electrification, and traffic control equipment were found to be in good operational condition. All integrated testing and commissioning were completed and the ZXR line began commercial operations on 6 February 2010. The design speed of 350 km/h has been achieved. Currently, 56 pairs of passenger trains per day are operating on the ZXR line. 11. With the completion of the Zhengzhou‒Xuzhou section and the expected completion of the Chengdu‒Xi’an section in 2017, the high-speed railway network will be able to connect many important destinations, allowing passengers to travel on high-speed trains over long distances. This has resulted in a considerable increase in railway traffic. It is projected that the ZXR will be handling 118 pairs of passenger trains per day by 2018 and 171 pairs of passenger trains by 2028.

6 The passenger stations included Gongyi South Station, Luoyang Longmen Station, Mianchi South Station,

Sanmenxia South Station, Huashan North Station and Weinan North Station, Lingbao West Station and Xingyang Station. Lintong Station is a passing station included for operational purposes (it is not used for passengers).

7 In 2013, the Ministry of Railways was dissolved and its duties turned over to the Ministry of Transport (safety and regulation), State Railways Administration (inspection), and China Railway Corporation (railway operations).

8 The ZXR has been awarded the PRC Railway’s Top 10 Excellent Scientific and Technology Achievements in the Twelfth Five-Year Plan in 2016, National Scientific Progress Second Prize in 2015, China Railway Engineering Corporation Scientific Technology Special Award in 2009, and China Railway Society Scientific and Technology Award First Prize in 2010.

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12. Two large intermodal logistics container terminals are under construction in Zhengzhou and Xi’an to attract high-value traffic on the railways. These logistics terminals will encourage private sector shippers and freight forwarders to use the railways for export and import of cargo to other parts of the PRC, ports in east and central Asia, Europe, and elsewhere. 13. Employment opportunities generated for poor and vulnerable groups. Local employment was promoted during project construction. At appraisal, it was anticipated that 353,000 person-years of work would be created per year during construction, with about 60% for unskilled laborers, of which 50% or more would be targeted to poor, resettlement-affected people, women, ethnic minorities, and other vulnerable people. Through coordination by construction headquarters and the anti-poverty sectors of the local governments along the ZXR line, a large number of non-technical employment opportunities were made available for local villagers, including women, during railway construction. Based on external monitoring reports, the project provided employment opportunities totaling 143,750 person-years; 21,550 person-years, or 15%, of employment was filled by villagers along the ZXR line, and mainly involved unskilled labor. Of the unskilled labor employment that was generated, 65% went to laborers from poor households, and 3,250 person-years (or 15%) went to women. The smaller amount of actual employment created and the lower percentage of unskilled work can be attributed to better construction organization and the increased mechanization of construction work. Local poor villagers employed in railway construction earned CNY60‒CNY100 per day. Therefore, the total income of local laborers was at least CNY258.6 million. Jobs generated during project construction helped reduce poverty and contributed to gender development in the project area. When the ZXR started operations, a total of 2,509 new jobs were offered in various positions in locomotive and vehicle operation, electrical engineering, maintenance and repair, and other station jobs such as security guards, attendants, and ticket conductors. By 2016, total employment relating to ZXR operations had reached 3,571. 14. Corporate governance promoted. The Zhengzhou‒Xi’an Passenger Dedicated Railway Line Company (ZXRC), the project company, was established on 18 January 2006 with MOR and the Henan and Shaanxi provincial governments as shareholders. During project preparation, it was planned that ZXRC would be responsible for construction and operation. Although ZXRC is an independent company that managed construction of the railway line, operation of the ZXR has not been separated from MOR as anticipated at appraisal; MOR was dissolved in 2013, with its operational functions now managed by China Railway Corporation (CRC). 15. The railway operation is governed by an agreement between MOR and ZXRC under which the ZXRC owns the project assets, assumes responsibility for debt payment, and gains revenues from track access fees, while the Zhengzhou and Xi’an railway bureaus are responsible for train service and maintenance operations. 16. Institutional capacity strengthened. At appraisal, an institutional strengthening component was included to enhance construction supervision, monitoring and evaluation, marketing and business development, and overall institutional capacity of ZXRC. However, the amount for engaging consulting services was re-allocated to the equipment category in July 2014 (the inputs needed for institutional strengthening were made available by another ADB-financed railway project). 9 Also, MOR was already implementing a long-term training program for managing the passenger-dedicated railway systems using domestic funding, so project funds were not needed.

9 ADB. 2008. Project Completion Report for the Ganzhou‒Longyan Railway Project. Manila.

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C. Project Costs 17. The project cost at completion was $6,898.81 million, 67% higher than the appraisal estimate of $4,131.93 million. A portion of the increase in dollar terms was caused by a difference in the exchange rate, which changed from $1 = CNY8.1 at appraisal to $1 = CNY6.22 at completion. 18. In local currency, the project cost at completion was CNY42,935 million, 28% higher than the appraisal estimate of CNY33,456 million. The ZXR was one of the PRC’s initial high-speed railway line projects (only one high-speed line, the Qinhuangdao‒Shenyang railway line, was built previously), and MOR had a limited database of unit costs. The cost increase can be attributed to a change in design specification following appraisal—a higher proportion of the track was built on elevated structures to avoid using arable land for railway construction and to ensure safety. 19. The original financing plan included an ADB loan of $400.0 million (9.7% of the total project cost), a loan of $1.67 billion from a domestic bank (40.4% of the project cost), and counterpart funds of $2.06 billion (49.9% of the project cost). Upon project completion, ADB financed $392.39 million (5.70% of the project cost). 20. Actual counterpart funds included an equity investment of $3,267.37 million (47.36% of the project cost), and loans and railway bonds from domestic banks of $3,239.05 million (46.95% of the project cost). The MOR and the Henan and Shaanxi provincial governments provided sufficient counterpart funds to complete the project as scheduled. The project costs and financing plan are in Appendix 3. D. Disbursements 21. All ADB-financed contract packages were procured following international competitive bidding (ICB) procedures for materials and equipment. The MOR and ZXRC formed a capable team to process and prepare withdrawal applications in accordance with ADB’s Loan Disbursement Handbook, and the overall disbursement control was satisfactory. The total value of awarded contracts is $392.39 million. The project had loan savings of $7.61 million, which were canceled on 20 January 2015. The initial disbursement was made on 02 August 2007, and the final disbursement on 11 December 2014. The executing agency applied the appropriate disbursement procedures and ADB’s disbursement process was efficient. The loan closing date was extended twice and the loan account was closed on 20 January 2015, almost 3 years after the original closing date of 30 June 2012. The projected and actual contract awards and disbursements are in Appendix 4. E. Project Schedule 22. At appraisal the project was expected to be implemented over 6 years, from August 2005 to December 2011. Physical completion was envisaged on 31 December 2011, with loan closing originally scheduled for 30 June 2012. The project implementation was smooth and well ahead of the original schedule. Construction of civil works began on 25 September 2005 and was completed on 20 March 2009. Track laying for the main line commenced by sections in 5 March 2009 and was completed on 29 June 2009. The installation of telecommunications, signaling, and electrification equipment was completed in 30 July 2009. Land acquisition and resettlement activities began in December 2005 in Shaanxi, and in March 2006 in Henan, with most relocation activities completed in 2009. Final relocation activities and last compensation payments were completed in December 2012. The acceptance tests commenced in May 2009, and trial operation

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started in September 2009, both earlier than originally planned. A preliminary acceptance opinion was issued by an acceptance committee of the MOR in January 2010. Commercial operations of the ZXR began in February 2010. As requested by the government, the loan closing date was extended twice, from 30 June 2012 to 30 June 2013, and subsequently to 31 December 2014. 23. After the rail accident in Wenzhou in 2011, the MOR decided to further review and revise the technical safety criteria and conduct dynamic stability testing of the delivered equipment, resulting in disbursements delays. 10 A second extension was needed because technical specifications for important rescue and restoration equipment took considerable time to finalize. The appraisal and actual project implementation schedule is in Appendix 5. F. Implementation Arrangements 24. The implementation arrangements were appropriate. MOR served as the executing agency responsible for overall project implementation. The Foreign Capital and Technical Import Center (FCTIC), under MOR, coordinated the project management office's tasks and was responsible for procurement, withdrawals, and reporting to ADB. 25. ZXRC was established in January 2006, with headquarters in Zhengzhou, and was responsible for project implementation. ZXRC managed the construction of the project railway, opened the line for operations in February 2010, and developed and implemented adequate business development mechanisms and accounting and reporting systems. 26. ZXRC is headed by a general manager assisted by an adequate number of suitably qualified professional staff with experience in railway engineering, financial and administrative matters, and implementation of projects financed by international financial institutions. The company established onsite construction management offices along the project route. During construction, ZXRC comprised five departments—general administration, engineering, safety and quality control, material and equipment, and finance and accounting. The organizational chart (at completion) is in Appendix 6. 27. ZXRC was responsible for environmental management and supervision during implementation. Effective institutional arrangements were established to implement the environmental management plan (EMP). During construction, the safety and quality control department closely coordinated with the engineering management unit under ZXRC in implementing environmental management matters and supervising contractors with regard to compliance with environmental safeguards as required in the EMP. An environmental protection steering team led by a ZXRC deputy general manager was established to supervise EMP implementation. Local environmental monitoring stations were engaged to monitor onsite surface water, air quality, and noise. The Third Railway Design Institute was engaged as an independent external monitor to oversee overall project environmental monitoring, and periodically submit a monitoring report to ADB. From the start of commercial operations in February 2010, the Zhengzhou and Xi’an railway bureaus assumed responsibility for all environmental monitoring in their respective sections. 28. ZXRC set up land acquisition and resettlement (LAR) offices in Zhengzhou and Xi’an to coordinate with local governments and government entities in Henan and Shaanxi provinces to implement the resettlement plan. The affected county and/or district governments established

10 On 23 July 2011, two high-speed trains travelling on the Yongtaiwen railway line collided on a viaduct in the suburbs

of Wenzhou, Zhejiang Province, PRC.

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relevant steering groups and coordinating offices for the LAR work and involved other relevant government agencies (e.g., finance bureaus; land resource bureaus; poverty reduction offices; the All-China Women’s Federation; and health, civil affairs, and ethnic affairs bureaus). The Research Institute of Foreign Capital Introduction and Utilization of Southwest Jiaotong University was engaged to carry out independent monitoring and evaluation of LAR implementation. 29. The Zhengzhou and Xi’an railway bureaus are responsible for operation and maintenance (O&M). ZXRC continues to own the infrastructure. Until 2015, ZXRC was responsible for collecting ticket fares from passengers and paying the railway bureaus for train operations. Beginning in 2016, the railway bureaus have assumed the responsibility of collecting all passenger ticket revenues and paying ZXRC track access charges. G. Conditions and Covenants 30. All covenants were complied with. The project railway was built in accordance with the national technical standards, as assessed during the preliminary acceptance tests in 2009. Tariffs were set in accordance to national standards. Connecting railway lines either have been completed, such as the Beijing‒Guangzhou and Zhengzhou‒Xuzhou PDLs, or are to be completed soon, such as the Chengdu‒Xi’an and Boaji‒Lanzhou PDLs. Access roads connecting the passenger stations to city centers and nearby counties or villages were constructed and made operational. Two large intermodal logistics terminals are presently under construction in Zhengzhou and Xi’an. Covenants related to safeguards requirements were followed, and the project’s reporting requirements were generally complied with, including the submission of progress reports and external monitoring reports for environment, resettlement, and socioeconomic impact. The project accounts and related financial statements were audited annually by an independent auditor—the PRC’s National Audit Office Audit Service Center for Foreign Loan and Assistance Projects—and audit reports were periodically submitted to ADB in a timely manner. Loan review mission reports found that all major loan covenants that were due have been complied with (project-specific loan covenants are in Appendix 7). H. Related Technical Assistance 31. ADB-financed project preparatory technical assistance (TA) of $500,000 equivalent was provided on a grant basis from ADB’s TA Special Fund to help the government assess the project’s technical, environmental, financial, economic, social, and institutional feasibility.11 The TA helped the government review and strengthen the feasibility study, the environmental impact assessment, and the resettlement plan to satisfy the requirements for ADB financing of the project. The TA started in September 2004 and was completed in June 2005. The performance of the TA consultants was satisfactory. I. Consultant Recruitment and Procurement 32. Financed by counterpart funds, a consortium composed of DE-Consult, Deutsche Bahn International, and Parsons Brinckerhoff, under the Third Railway Survey and Design Institute Group Corporation, was engaged for a total of 4,328 person-months. The consortium, occasionally together with other national supervision companies, was responsible for (i) design and survey; (ii) construction supervision, electrification and signaling engineering, and environmental protection measures; and (iii) the independent monitoring of environmental safeguards and resettlement implementation. In addition, various consulting service

11 ADB. 2004. Xi'an-Zhengzhou Passenger Railway Development. Manila.

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assignments—including materials testing, terrain survey, design review, risk assessment, geotechnical drilling, and testing and commissioning—were entrusted or outsourced to national design institutes, consultants, and relevant institutes during project implementation. Consultant engagement was timely and followed procedures acceptable to ADB. 33. ADB-financed procurement packages followed the ICB method and ADB's Procurement Guidelines (1999, as amended from time to time). Relevant sections of ADB's anticorruption policy were incorporated in the bidding documents and contracts. The CRC was responsible for the procurement of ADB-financed contracts and engaged a national procurement agent to assist with procurement activities. ADB financed 52 ICB contracts for a total of $392.39 million. All civil works were financed by counterpart funds. All bids were processed on time and within the project implementation schedule. The ADB-financed packages are listed in Appendix 8. J. Performance of Consultants, Contractors, and Suppliers 34. The overall performance of consultants, contractors, and suppliers was satisfactory. The preliminary and final engineering designs were completed on time and in accordance with national railway standards. Onsite supervision, internal and external monitoring, and periodic inspections were conducted effectively. Civil works contractors performed well and successfully constructed challenging tunnels and bridges. Risk management was exercised and systematic measures taken to ensure worker safety at construction sites. Material and equipment suppliers also performed well and all equipment was installed and commissioned as required. The project passed the MOR’s preliminary construction quality check in December 2009. The ZXR is fully operational as a PDL for high-speed trains, and the design speed has been achieved. K. Performance of the Borrower and the Executing Agency 35. The performance of the borrower and MOR (as the executing agency) and ZXRC (implementing agency) was satisfactory. As assessed at appraisal, an adequate organizational framework was established for efficient and timely project management. MOR exercised coordination and monitoring of project progress. FCTIC was responsible for day-to-day project management and facilitated project implementation. FCTIC, with assistance from the consultants, prepared the required progress reports. The project accounts and financial statements were audited by an external chartered accountant acceptable to ADB, and the audit reports were submitted to ADB as required. MOR and FCTIC facilitated and supported all ADB review missions during implementation and at completion. L. Performance of the Asian Development Bank 36. Overall, the performance of ADB was satisfactory. The project was administered and supervised from ADB headquarters with active assistance from the ADB PRC Resident Mission. During implementation, ADB provided substantial guidance and support to the government and FCTIC in all aspects of project implementation, such as promptly reviewing all procurement and safeguards documents and evaluation reports. ADB conducted 1 inception mission, 8 project review and administration missions and 1 project completion review mission. ADB was closely involved in identifying and resolving potential problems relating to project implementation, particularly the safeguards issues. The role of ADB in promptly advising on project implementation and technical issues was well recognized by the government.

9

III. EVALUATION OF PERFORMANCE

A. Relevance 37. The project was highly relevant to the government’s Western Development Strategy and the Railway Development Plan, which sought to scale up investment in railway networks in the PRC’s western regions, to boost economic growth, and increase opportunities for people to improve their living standards.12 It was also consistent with ADB country and sector strategies, which focused on reducing railway network constraints and promoting sustainable economic growth in poor areas not served by railways. 38. The project significantly promoted pro-poor economic growth and poverty reduction along the railway line and in the region, confirming its rationale. The project represented a continuation of ADB’s sustained involvement in the sector. The project aligned with ADB’s country strategy and program for the PRC, both at the time of approval and for the current period, which has prioritized inclusive growth and balanced development.13 39. In addition, MOR has been implementing institutional reforms to provide the means to improve the commercial viability of operations. B. Effectiveness in Achieving Outcome 40. The project was effective in achieving its intended outcome to develop an efficient, safe, reliable, and affordable railway system in the region and promote local economic development. 41. At appraisal, the railway capacity in the project area connecting the cities of Zhengzhou and Xi’an was highly limited. The existing Longhai railway line, handling both freight and passenger traffic, was fully saturated. This limited speeds and restricted traffic flow, and there was an urgent need to release capacity on the Longhai railway line to support the growth of freight traffic, while simultaneously improving passenger transport services. The project has successfully transferred passenger traffic to the high-speed ZXR line and supported the growth of freight traffic on the Longhai line. In so doing, it supported industrial development, stimulated tourism, generated employment, increased mobility and living standards, and reduced poverty. 42. The project has significantly reduced travel time and costs. Travel time from Zhengzhou to Xi’an has been reduced from 8 hours to 2.5 hours, and from Beijing to Xi’an via Zhengzhou from 15 hours to 4.4 hours. People from the project area can now easily travel to the major cities in the PRC by high-speed train. Traveling by train has become faster, safer, and more convenient, and has become the preferred mode for people frequently traveling between different destinations within and beyond the project area. C. Efficiency in Achieving Outcome and Outputs 43. The project is rated efficient based on the economic and financial reevaluation, which found the ZXR both economically and financially viable.

12 Government of the People’s Republic of China.2004. Railway Development Plan of the People’s Republic of China.

Beijing. 13 ADB. 2016. People’s Republic of China: Country Partnership Strategy (2016‒2020). Manila.

10

44. Economic reevaluation. The reevaluated economic internal rate of return (EIRR) is 13.12%, lower than the 17.43% estimated at appraisal, because of the (i) higher capital cost; and (ii) the absence of economic benefits related to freight operation, and lower initial passenger traffic compared with appraisal estimates. The higher unit value of time based on the latest average wage of residents contributed positively. The project is considered economically viable, with an EIRR of 13.12% compared to the economic opportunity cost of capital of 9.0%. A sensitivity analysis was carried out to test the impact of (i) a decrease in forecasted traffic, and (ii) an increase in O&M costs; it found the project will continue to be economically viable given a 10% decrease in passenger traffic or a 20% increase in O&M costs. A 20% benefit reduction will reduce the EIRR to 12.0%. The economic reevaluation is in Appendix 9. 45. Financial reevaluation. The financial internal rate of return (FIRR) after tax was recalculated at 4.24%, lower than the 7.0% estimated at appraisal. This is mainly due to the higher capital cost, and lower initial passenger traffic. The actual applied tariff is very close to the appraisal estimate. The after-tax weighted average cost of capital (WACC) in real terms was calculated using the actual capital mix and costs of various financing sources. The WACC was recalculated at 3.17%, slightly higher than the appraisal estimate. The FIRR is higher than the WACC, and the project is considered financially viable, but with a small margin. The sensitivity analysis indicated that adverse changes in O&M costs or revenue levels would reduce the FIRR below the WACC. The financial reevaluation is in Appendix 10. D. Preliminary Assessment of Sustainability 46. The project is considered likely sustainable. The ZXR is technically and financially sound and will be self-sustaining. The ZXR is 50 km shorter than the existing Longhai railway line. Being a high-speed PDL, it will continue to attract passenger traffic due to the benefits it offers in time savings. The ZXR line was planned because the Longhai line, which has the highest transport density in the PRC railways, was fully saturated. Once the ZXR line became operational, it successfully attracted passenger traffic from both the east and west due to time and cost savings. The railway’s capacity and competitive advantages over road and waterway transport make it the preferred mode of transportation for passengers. 47. The project was designed using proven technologies, used good-quality construction, and was provided with adequate capacity to accommodate demand. The project introduced technologies such as a centralized traffic control system, which enable train movements to be dispatched and controlled more efficiently and reliably, while accommodating the increased speeds without compromising safety. The ZXRC has the necessary capacity to efficiently operate and maintain the project facilities. Operation of the ZXR has been integrated into the national railway network through established railway administration bureaus that demonstrate the capacity to operate efficiently, provide adequate rolling stock, and maintain assets in good condition. 48. The completion of the wider high-speed railway network is allowing passengers to travel longer distances and is resulting in a higher patronage of the railway line. The passenger train services on this line have steadily increased and are expected to continue growing, enabling ZXRC’s profitability to continue to improve. 49. In early 2013, the PRC government announced institutional reform measures in the railway sector. The reforms included the dissolution of MOR and the merging of MOR’s functions of planning and policy making with the Ministry of Transport; establishment of a state railway administration, responsible for railway standards development and supervision of rail transport safety; and the establishment of CRC, which succeeded MOR for other functions. The thrust of

11

the reforms was to separate government functions from business operations, improve transport planning and railway safety, diversify the investment channels, speed railway construction, and advance modern logistics development. These reforms are expected to have a profoundly positive impact on the project’s long-term sustainability. E. Impact 50. The project aimed to promote equitable and sustainable economic growth and development by providing increased connectivity and affordability. 51. Socioeconomic impact. The project has had a significant impact on regional socioeconomic development. The ZXR passes through some of the poorest areas in the PRC. Socioeconomic data show that conditions in the project area have improved during the project implementation period. Rapid economic growth and increased fiscal revenues have improved living standards and local incomes, particularly for the poor. Per capita rural income in the project area increased from CNY2,575 in 2004 to CNY7,575 in 2011. With better fiscal capacity, governments at all levels continue to invest in public infrastructure to provide road access to villages, drinking water, and telephone and electricity services. The ZXR provides affordable, much faster and safer transport services than were previously available, particularly benefitting the poor. The upgraded services have improved local mobility and changed both lifestyles and social behaviors. 52. The project area has 12 major tourism attractions. Despite the rich tourism potential, poor accessibility previously constrained tourism development. ZXR has stimulated the development of industry and tourism in the region, as all major tourist sites can now be accessed with 1 day of travel. Tourism income grew by 130% from 2009 to 2015. After the ZXR became operational, tourism income increased by as much as 60% in a single year. 53. Access to railway facilities was recognized as a precondition for external investment in the region. Following project implementation, external investment has increased significantly in areas previously without a railway connection, while a growing number of enterprises have started or expanded operations along the railway line; these impacts generate jobs and long-term socioeconomic development. 54. Local employment was promoted during construction. The project provided 143,750 person-years of employment opportunities, of which 21,550 person-years, or 15%, were filled by villagers along the ZXR line, mostly in the form of unskilled labor. Of the unskilled labor employment generated, 14,000 person-years, or 65%, went to laborers from poor households, and 3,250 person-years, or 15%, went to women. Local poor villagers employed in railway construction earned CNY60‒CNY100 per day, and the total income of local laborers was at least CNY258.6 million. The main ethnic minority group in the project area (the Hui) share the benefits of the ZXR; they are located in the cities of Xi’an and Zhengzhou, and integrated with the Han people. 55. The ZXR has provided affordable, time-saving, and safer transport service for local people and migrant laborers. The cost of high-speed train travel from Zhengzhou to Xi’an is only CNY200, and the journey takes just 2.5 hours; this contrasts with 13 hours by bus. A detailed assessment of the implementation of the social development action plan is in Appendix 11. 56. Land acquisition and resettlement impact. The LAR commenced in December 2005 and relocation activities were completed in December 2012. The project permanently

12

expropriated 22,470.5367 mu of land, or 89.07% of the 25,229 mu planned in the original resettlement action. 14 There were 6,677 households and 20,030 people affected by land expropriation (including people affected by both land expropriation and demolition), a reduction from 8,444 households and 25,331 people in the original plan. 57. During implementation, land of residents along the railway line was temporarily occupied for the disposal of soil, road construction, and storage of construction equipment. When the project was completed, 12,659.28 mu of land that was temporarily expropriated was turned over to the provinces (9,447.47 to Henan Province, and 3,181.81 to Shaanxi province). The area of houses demolished totaled 1,110,613.21 square meters, an increase of 13.48% compared with the original 978,712 square meters. The project affected 84 enterprises and 15 schools along the railway line. 58. At completion, resettlement funds for land expropriation and housing demolition totaled CNY2.4 billion, an increase of 21.25% above the CNY2 billion estimated at appraisal. Of the total, 22.7% was used as compensation for land use (14.99% for expropriation of farm land, and 7.71% for other lands); 31.39% for compensation for ground attachments; 22.09% for resettlement resulting from housing demolition; 4.97% for temporary land occupation; 7.16% for land reclamation; 2.91% for management; and 8.05% for other expenses.15 The affected schools have all been rebuilt, while affected businesses were compensated and are back in production. The income of rural households in the project area grew at rates of 138% to 365% during 2004 to 2011; higher growth rates were particularly found in poorer areas. The income of households affected by land acquisition recovered, and per capita annual income rose by 73% during 2006 to 2014. A detailed analysis of social impacts and poverty reduction is in Appendix 11, and the land acquisition and resettlement analysis is in Appendix 12. 59. Environmental impact. The project was classified as environment category A. A summary environmental impact assessment was prepared and disclosed on the ADB website in 2005. The proposed railway alignment passed several environmentally and culturally sensitive areas. The final alignment was adjusted during project preparation, and constructed to protect environmentally sensitive areas. In addition, the engineering structure of the railway was modified to mitigate potential environmental impacts along the line: 55% of the entire railway alignment was lifted through the use of bridges. Five annual environmental monitoring reports were prepared and submitted to ADB, despite the project being classified as category A for the environment. The environmental assessment was carried out based on available information and data. 60. Overall implementation of environmental management for the project appears satisfactory based on the available evidence; the institutional setting and arrangements were appropriate. Detailed and site-specific plans for water, soil, protection of relics, and conservation plans were developed and implemented effectively. A range of good engineering practices incorporating environmental protection measures were implemented. At the time of the project completion review, there were no pending issues in terms of environmental safeguards-related grievances and non-compliance issues. The environmental impact analysis is in Appendix 13.

14 A mu is a Chinese unit of measurement (1 mu = 666.67 m2). 15 Ground attachments include water wells, water pumps or irrigation wells, etc.

13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 61. Overall, the project is rated successful. The project was highly relevant to the government’s overall development objectives and ADB’s country partnership strategy. The project’s primary objectives were realized: improving transport conditions in the corridor, facilitating regional trade, and enhancing MOR’s institutional capacity. The project has also brought significant socioeconomic benefits to the local residents, especially poor people. 62. In the PRC, a major strategic reason to build PDLs such as the ZXR was to free existing lines for freight capacity. This was urgently needed in the case of the Longhai railway line that existed at the time the project was planned. Diversion of passenger traffic to the ZXR line has enabled more freight trains to use the Longhai line, resulting in the facilitation of domestic commerce, and yielding additional revenues that contribute to the corridor’s economic benefits. 63. Increased connectivity between two major provincial capitals in the PRC has enhanced commercial interaction and stimulated the economy. The ZXR line also connects a number of medium-sized and smaller cities in less developed central and western parts of the PRC via the high-speed rail network. These cities are now much more accessible and thus more attractive destinations for investment. 64. The project is economically and financially viable. The reevaluated FIRR (4.24%) and EIRR (13.12%) confirmed the project’s financial and economic viability. Despite the similarity of the FIRR to the WACC, the ZXR can potentially increase its tariff based on the market situation, in line with the flexible tariff policy, which will greatly improve the financial performance. B. Lessons 65. Cost estimates at appraisal. The project costs at completion differed from the appraisal estimates, in part because this was one of the PRC’s initial high-speed railway projects, and the methodology for calculating the estimated costs was not well developed. In addition, the cost of various construction materials was not correctly estimated, the project design was changed to include a high proportion of elevated track, and commodity prices increased, all of which contributed to an overall increase in the project cost. 66. Piloting new technologies. Being one of the initial projects related to high-speed railway development in the PRC, the project enabled MOR (now CRC) to pilot various new technologies related to high-speed railway construction. The project also introduced the concept of a separate PDL on a high-density route with many technical, operational, safety, economic, and financial benefits. The project provided valuable experience and helped subsequent development of a large high-speed railway program in the PRC. 67. Schedule. Commercial operations of the ZXR began in February 2010. The loan closing date was extended twice, until 31 December 2014, mainly to accommodate the procurement of rescue and restoration equipment. This should have been avoided, with the procurement package financed domestically and ADB funding used to fund prior procurement, which would have enabled timely closing of the loan.

14

68. Dedicated passenger lines. The piloting of a separate PDL (para. 66) worked well, allowing the PRC to increase passenger train speeds and free capacity on mixed-use lines for freight traffic. 69. Stakeholder consultation. Sufficient consultation and participation with stakeholders helped promote responsibility for and ownership and dissemination of project benefits. During processing and implementation, consultation meetings with stakeholders at various levels were held on the project’s design, construction, safeguards, job opportunities, and gender and social impacts. These meetings included hundreds of participants at village, town, county, and city levels. Local governments along the project alignment pursued economic development activities in association with the project, including tourism, urbanization and town zoning, and the creation of employment opportunities. Extensive, continued consultations during project implementation promoted the sense of ownership and responsibility for the project among participants, and helped improve the project design. C. Recommendations

1. Project Related 70. Future monitoring. The PRC’s railway sector reforms are ongoing and will inevitably affect the CRC’s organization and management, including sustainability of various projects. It is important for ADB to monitor developments in the railway sector and their implications for the financial sustainability and efficiency and effectiveness of various projects. This can be done through dialogue between ADB and the CRC during country programming and loan and TA processing and implementation. 71. Financial sustainability. The ZXRC should (i) consider applying a flexible tariff policy in accordance with market conditions, with particular emphasis on improving competitive services through the national dedicated passenger rail network; (ii) focus on controlling operational costs while improving efficiency; (iii) explore potential business growth opportunities, optimize service standards, and enhance mutual cooperation with business partners in the project area; and (iv) monitor the project’s financial performance, including traffic growth, operating ratios, tariffs, and other factors affecting the financial status of the project. 72. Time for the project performance evaluation. It is recommended that the project performance evaluation be undertaken in 2018.

2. General 73. Project costs. Actual project costs increased versus costs at appraisal. A more rigorous verification of cost estimates based on the feasibility study and preliminary design by the design institute is needed at the project processing stage. The increase in costs in this project resulted in part from the use of new technologies and designs, because this was one of the initial high-speed rail projects in the PRC. For future projects, there should be a more detailed assessment of the cost implications of technology improvements. 74. Timely disbursements. The implementation of railway projects comprises civil works and installation of equipment. ADB financing for railway projects is largely focused on goods and equipment, and the disbursement of loan proceeds tends to be delayed, because the procurement of equipment usually takes place during the later stages of project implementation. Under this

15

project, the first disbursement occurred 10 months after loan effectiveness. ADB and the PRC should carefully consider disbursements while planning implementation of a project. 75. Role of the railway project company. At the time of project design, it was anticipated that the project company (ZXRC) would be involved in both the construction and operation of the railway line. However, the project company was only responsible for the construction phase, with operations entrusted to the regional railway bureaus. The project company was responsible for revenue collection during the initial phase, but this procedure changed in 2016, with CRC taking over revenue collection, and subsequently allocating access charges to the ZXRC.16 The role of the project company during the operations should be reexamined, and if possible strengthened to enable them to provide a larger role in ensuring efficient operation, using the expertise gained during construction.

16 These are charges that aim to recover a portion of the railway infrastructure costs from the train operating revenue.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets/Indicators

Data Sources and Reporting

Mechanisms

Assumptions and Risks

Appraisal Actual Impact AssumptionsImproved transport system in the region that supports socioeconomic development and the western development strategy

GDP is forecast to increase during 2010‒2020 at 6% per annum for Henan and Shaanxi provinces and 7%‒8% per annum for the project area

GDP in the project area increased during 2010‒2015 at an average 12% per annum, and at 9% for Henan and Shaanxi provinces.

Provincial and county/city statistics offices Project performance management system at inception, completion, and 3 years thereafter with emphasis on socioeconomic improvement impacts Annual reporting by the project company

Government investment projects are implemented as planned. Complementary activities are implemented. The government is committed to reducing poverty in the western region, based on the Western Development Strategy. Investment of the Ministry of Railway (MOR), Henan provincial government (HPG), Shaanxi provincial government (SPG), and local governments in the railway sector is implemented according to their plans.

Per capita rural

income in the project area increased from CNY2,575 in 2004 to CNY3,450 in 2010 and CNY5,620 in 2020.

Per capita rural income in the project area increased from CNY2,575 in 2004 to CNY7,575 in 2011.

Poverty incidence in

the project area reduced from 12.1% in 2003 to 6% in 2015 (Shaanxi province) and from 8.1% in 2003 to 4% in 2015 (Henan province

The poverty incidence rate in 2015 was 13.1% in Henan Province, and 10.7% in Shaanxi Province.

All poverty villages

along the alignment provided with road access (187), telephone access (163), and electricity (24) by 2009.

Road access, telephones and electricity were provided to the villages.

Outcomes Reevaluation of the

economic internal rate of return at midterm review and project completion MOR statistics and operating data before and after the project Progress reports Project administration missions and project completion report

Assumptions An efficient,

safe, reliable, and affordable railway transport system is developed in the region.

Economic internal rate of return maintained at about 17.4%

The economic internal rate of return at project completion was 13.12%.

The demand forecast materializes; no cost overruns experienced. Assumed economic growth rates materialize. Traffic forecasts for the ZXR are realized. Passengers and freight operators realize the benefit of using the railways.

Passenger traffic volume increased from 53 pairs of passenger trains in 2004 to 140 pairs in 2020

Passenger traffic volume on ZXR was 56 pairs of trains in April 2017, projected to increase to 118 in 2018 and 171 in 2020.

Freight traffic volume increased from 89 million tons in 2004 to 150 million tons in 2020

Freight traffic volume reached 42 million tons in 2016 and is projected to increase to 100 million tons in 2020.

Appendix 1 17

Design Summary Performance Targets/Indicators

Data Sources and Reporting

Mechanisms

Assumptions and Risks

Appraisal Actual Interregional traffic

between the People’s Republic of China (PRC) and Central Asia and Europe increased from 59 million tons in 2004 to 400 million tons in 2020.

Post evaluation-surveys and reports from MOR Accident statistics from Public Security Bureau and hospitals

Risk Local governments may not have sufficient budget to implement the tourism and local area development plan.

Travel time reduced

from (i) Zhengzhou to Xian, from present 8 to 3 hours; (ii) Beijing to Xian, from present 15 to 8 hours

Travel time between (i) Zhengzhou and Xian reduced from 8 hours to 2.5 hours; (ii) Beijing and Xian via Zhengzhou reduced from 15 hours to 4.4 hours

Cost of travel

reduced from 28 fen/km to 15 fen/km in 2012 (100 fen = 1 CNY)

Cost of travel on the ZXR PDL averages 49 fen/km in 2017.

Number of road

accidents reduced by 10 % in 2012

Number of road accidents reduced by 55% in Shaanxi and by 76% in Henan from 2006 to 2012.

Local economic

development particularly tourism is promoted.

Number of tourists visiting the project area increased from 370,000 in 2011 to 800,000 in 2020

Number of tourists and related businesses not available. Tourism income in the project area, however, grew by 130% between 2009 to 2015.

Local government statistics

By 2015, the number

of shops, tourist centers, hotels, and businesses established in the vicinity of station areas increased by 50%.

The number of shops, tourist centers, hotels and businesses increased significantly near stations.

Outputs 1. Railways

infrastructure and associated facilities improved along the Zhengzhou-Xian railway corridor.

Transport capacity expanded in the Zhengzhou-Xian corridor by 16 billion ton-km for freight and 5 billion pass-km for passengers, in 2011

Freight transport capacity on the existing Longhai was 4.46 billion ton-km in 2011. Passenger numbers remained low in the first years of operation, reaching 6.6 billion pass-km in 2013, and 9 billion pass-km in 2016.

PAMs and PCRs PAMs, progress reports, and PCR Regular resettlement monitoring by an independent institute engaged by the project company

Risk Construction may be delayed due to its complexity. Assumption Completion of equipment procurement and installation at project opening Assumption Adequate land for new house sites is available

459 km of railway line and 9 stations are constructed;

459 km of railway line and 9 stations were constructed; equipment

18 Appendix 1

Design Summary Performance Targets/Indicators

Data Sources and Reporting

Mechanisms

Assumptions and Risks

Appraisal Actual equipment procured

and installed for train operations

procured and installed, and train operations started ahead of schedule.

within villages for resettlement.

Implementation of land acquisition and resettlement plan; about 1,782 ha of permanent land and 569 ha of temporary land acquired; about 16,000 people are relocated and compensated by Aug 2008

The RRP estimates were preliminary, and resettlement plan estimates were adjusted. The project expropriated 22,470.5 mu of land permanently. This is 11% less than the planned 25,229 mu of the original resettlement plan. At the same time, people affected by land expropriation has decreased to 6,677 households and 20,030 people from 8,444 households and 25,331 people in the original plan. 12,659.2 mu of the land was temporarily expropriated. All compensation rates were at or above appraisal levels and all compensation was paid in full by 2012, when the last resettlement activities were concluded.

Environmental monitoring reports, PAMs, and PCR Monitoring reports of the social development action plan, PAMs and PCR Monitoring by the Health Bureau

Risks Relocation may not be done satisfactorily. Viable alternative employment may not be found for affected people. Assumption Mitigation measures are adequate to address environmental impacts. Assumption Commitment of MOR/Project Company and contractors to implementation of mitigation measures. Assumption Mitigation measures are adequate to address social impacts. Risk The capacity of the Health Bureau may not be sufficient to implement mitigation measures.

Number of schools,

enterprises and infrastructure replaced

All 15 affected schools have been rebuilt and all 84 enterprises are back in operation.

Environment at the

project site is protected and adverse environmental impacts minimized by implementing mitigation measures as included in the EIA and summary EIA. Mitigation measures included in civil works’ contracts.

All environmental mitigation measures were implemented and included in civil works contracts.

Project’s adverse

impacts on the poor, women, and ethnic minorities is minimized by implementation of

Adverse impacts were minimized by (i) improved access to markets and affordable goods and services, (ii) training to develop

Appendix 1 19

Design Summary Performance Targets/Indicators

Data Sources and Reporting

Mechanisms

Assumptions and Risks

Appraisal Actual the social

development action plan

local resources and generate employment and income-enhancing opportunities, (iii) job opportunities during construction and operation, (iv) income recovery support programs for people affected by resettlement, and (v) promotion of local tourism development.

Control of HIV/AIDS and health risks for construction workers and service providers; indicators include number of clinics, number of patients, number of posters, and number of testing units

Prevention and control activities regarding infectious diseases, sexually transmitted diseases, and HIV/AIDS were part of the training of the laborers.

2. Employment

opportunities generated for poor and vulnerable groups to raise incomes and living standards, and reduce poverty

353,000 person-years of construction-related employment are generated, of which the poor, including women, capture 50% of unskilled labor

Due to increased mechanization of construction, only 143,750 person-years of construction-related employment were generated, with 21,550 person-years, or 15%, filled by villagers living along the ZXR line, mainly in the form of unskilled labor. Of the latter, 65% went to laborers from poor households, and 15% to women.

Progress reports Monitoring by the project company and external monitoring agency

AssumptionsThe poor are qualified to capture these job opportunities. Provincial government approval will be given in a timely manner. Risks Adequate funds are not invested in marketing.

3. Corporate governance promoted

An effective marketing program is developed to attract passenger and tourists along the ZXR ZXR operations separated from MOR operations A debt-to-equity ratio of not more than 65:35, an operating ratio of not more than 70%, a debt-service coverage ratio of not less than1.2, and a

Due to the change in the operating model, ZXR is not operating the trains on the line and thus is not responsible for marketing. The initial plan to assign the operation of trains to ZXR was not realized. The operating ratio was 77% in 2015 and 75% in 2016. After changes to the new access charging model and the consequent impact on ZXRC revenue in 2016, the operating ratio improved to 36% in 2017

PAMs, progress reports, and PCR Financial statements of the project company, midterm review, and PCR

MOR may interfere in the project company operations. Assumptions Revenue forecast materializes as originally envisaged and project implemented without cost overrun or implementation delays, including approval of project tariff rates. Consultant recruitment is timely and performance of the consultants good in providing consulting

20 Appendix 1

Design Summary Performance Targets/Indicators

Data Sources and Reporting

Mechanisms

Assumptions and Risks

Appraisal Actual financial rate of

return of 7%. and will remain low:18% in 2025 and 12% in 2030.

services to project company.

The operating ratio computation does not include interest expense, which is a considerable amount for ZXRC. Beginning in 2017, the debt service coverage will reach 1.4 (in compliance with the loan covenant). ZXRC’s debt–to-equity ratio was consistently below the 65:35 threshold (1.86) throughout the reevaluation period.

Institutional capacity of the project company strengthened

20 person-months of international consulting services will be provided for business development and marketing, and institutional strengthening

CRC is already implementing a long-term training program for managing the passenger-dedicated railway systems using domestic funding. As a result the consulting services component was cancelled and the budget allocation transferred to the equipment category to cover shortfalls.

Consultant’s reports Progress reports

Activities with Milestones Inputs ADB: $392.41 million, of which:

$ 79.45 million for trackwork $312.96 million for equipment

MOR, HPG, SPG: $ 3,267.37 million China Development Bank$3,239.05 million

1. Civil works: construction started in September 2005 and completed by July 2009

2. Materials and equipment procured from February 2007 to December 2011

3. Resettlement completed by December 2009

4. Consulting budget was reallocated to cover the shortfall for equipment category

5. Track laying: started by March 2009 and completed by June 2009 6. Telecommunications and signaling completed by July 2009

ADB = Asian Development Bank, CRC = China Railway Corporation, EIA = environmental impact assessment, GDP = gross domestic product, ha = hectare, HPG = Henan provincial government, km = kilometer, MOR = Ministry of Railways, mu = Chinese unit of measurement: 1 mu = 0.0666 hectares, PAM = project administration manual, pass-km = passenger kilometers, PCR = project completion report, PDL = passenger-dedicated line , RP = resettlement plan RRP = report and recommendation of the President, SPG = Shaanxi provincial government, ZXR/ ZXR PDL = Zhengzhou–Xi’an railway/ Zhengzhou–Xi’an railway passenger-dedicated line, ZXRC = Zhengzhou–Xi’an Passenger Dedicated Railway Line Company. Note: The national poverty line was raised to CNY2,300 per year in 2011, which caused the difference in the statistical data. According to the new standards, the poverty incidence has declined from 21.4% in 2011 to 10.7% in Shaanxi Province alone. Source: Asian Development Bank and China Railway Corporation.

Appendix 2 21

CHRONOLOGY OF MAJOR EVENTS

Date Events 2004 21 May Project preparatory technical assistance approveda 9 Sep Project FSR approved 4 Oct Zhengzhou Xi’an Railway Company (preparatory group) was established 22 Dec Soil and erosion protection plan approved

2005 14–25 Mar Loan fact-finding mission fielded 22 Apr Land use pre-examination approved for Shaanxi Province by the Ministry

of National Land and Resources 13 May Management review meeting held 21 Jun Environmental impact assessment approved 19–22 Aug Loan negotiations held 22 Aug Land use pre-examination approved for Henan Province by the Ministry

of National Land and Resources 22 Sep Board consideration and loan approval 25 Sep Civil works construction commenced (government-financed portion) 21 Dec Land acquisition and resettlement activities in Shaanxi Province

commenced

2006 3 Jan Zhengzhou Xi’an Railway Company, the executing agency, was established

18 Jan Business license for the Zhengzhou Xi’an Railway Company obtained 17 Mar Land acquisition and resettlement activities in Henan Province

commenced 3 Apr Loan agreement between the PRC government and ADB signed 20 Jun Staff review meeting held 23 Jun Project preparatory technical assistance closed 22 Aug Loan declared effective 14–19 Oct Loan inception mission fielded

2007 14 Feb Construction land use approval issued for Henan Province by the Ministry

of National Land and Resources 30 May First disbursement 12–14 and 17–19 Nov Review mission fielded

2008 8 Jan ADB no objection to finance 25 sets of railway rescue and restoration

equipment 3–11 Nov Midterm review mission fielded

2009 18 Jan Construction of bridges completed 5 Mar Track laying started 15 Mar Construction of tunnels completed 20 Mar Construction of subgrade works completed May–Dec Acceptance inspection 29 June Track laying completed 30 Jul Signaling, electrification, power supply and communication system

completed 1 Sep Testing of entire line started 23–27 Nov Review mission fielded Dec Majority of relocation activities completed 28 Dec Trial operation started

2010 Jan Preliminary acceptance opinion of the project issued by MOR 6 Feb Commercial operation started May Restoration of remaining land 26–30 Jul Review mission fielded

22 Appendix 2

Date Events 2011 15 Apr Request from Ministry of Finance to extend loan closing date from 30

June 2012 to 30 June 2013 (1st extension) 6 Sep ABD no objection to extend loan closing date to 30 June 2013 11–16 Dec Review mission fielded

2012 22–27 Aug Review mission fielded 27 Aug Request from MOR to extend loan closing date form 30 June 2013 to 31

December 2014 (2nd extension) 19 Sep ADB no objection to extend loan closing date to 31 December 2014 Dec Final relocation activities completed

2013 11–13 Dec Review mission fielded

2014 16 Jul CRC request to reallocate the budget from the consulting services

category to the equipment category 31 Jul ABD no objection on reallocation of loan proceeds 13–16 Nov Review mission fielded 18 Dec Final disbursement

2015 20 Jan Actual loan closing date

2017 24–28 Apr Project completion review mission fielded

ADB = Asian Development Bank, CRC = China Railway Corporation, FSR = Feasibility Study Report, MOR = Ministry of Railways, PRC = People’s Republic of China. a ADB. 2004. Xi'an‒Zhengzhou Passenger Railway Development. Manila (TA 4340). Sources: Asian Development Bank, Zhengzhou‒Xi’an Passenger Dedicate Railway Line Company, and China Railway Corporation.

Appendix 3 23

PROJECT COSTS AND FINANCING PLAN

Table A3.1: Project Costs ($ million)

At Appraisal At Completion Item

Cost

ADB

% of Cost

MOR/CRC/ HPG/SPG/

CDB % of Cost

Cost

ADB % of Cost

MOR/CRC/ HPG/SPG/

CDB % of Cost

A. Base Costa 1. Civil works 2,015.14 0.00 0.0 2,015.14 100.00 4,415.70 0.00 0.00 4,415.70 100.00 2. Railway trackwork 255.26 105.85 41.5 149.41 58.50 618.82 79.45 12.80 539.37 87.20 3. Buildings and facilities 69.64 0.00 0.0 69.64 100.00 226.06 0.00 0.00 226.06 100.00 4. Signaling and communications 329.55 156.17 47.4 173.38 52.60 305.75a 131.90 43.10 173.85 56.90 5. Electric power and traction 182.79 49.89 27.3 132.90 72.70 441.08 139.13 31.50 301.95 68.50 6. Safety component 49.58 20.47 41.3 29.11 58.70 0.00 0.00 0.00 0.00 0.00 7. E-governance and MIS 78.98 32.61 41.3 46.37 58.70 62.75 41.91 66.80 20.84 33.20 8. Land acquisition and resettlement 181.43 0.00 0.0 181.43 100.00 518.94 0.00 0.00 518.94 100.00 9. Other equipment and facilities 30.61 12.64 41.3 17.97 58.70 0.00 0.00 0.00 0.00 0.00 10. Administration, Consulting

Services, and Miscellaneous 210.69 0.80 0.4 209.89 99.60 53.27 0.00 0.00 53.27 100.00

11. Environmental Protection. Mitigation, and Monitoring

31.97 0.00 0.0 31.97 100.00 4.29 0.00 0.00 31.97 100.00

12. Temporary facilities and transitional works

56.11 0.00 0.0 56.11 100.00 72.82 0.00 0.00 72.82 100.00

Subtotal (A) 3,511.75 378.43 10.8 3,133.32 89.20 6,719.48 392.39 5.80 6.327.09 94.20 B. Contingencies 1. Physical Contingencies 240.50 0.00 0.0 240.50 100.00 0.00 0.00 0.00 0.00 0.00 2. Price Contingencies 146.25 21.57 14.8 124.68 85.20 0.00 0.00 0.00 0.00 0.00 Subtotal (B) 386.75 21.57 5.6 365.18 94.40 0.00 0.00 0.00 0.00 0.00 C. Interest during Construction 253.43 0.00 0.0 253.43 100.00 179.33 0.00 0.00 179.33 100.00

Total (A+B+C) 4,131.93 400.00 9.7 3,731.93 90.30 6,898.81 392.39 5.70 6.506.42 94.30

ADB = Asian Development Bank, CDB = China Development Bank, CRC = China Railway Corporation, HPG = Henan Provincial Government, MIS = management information system, MOR = Ministry of Railways, SPG = Shaanxi Provincial Government. Note: Exchange rate used: $1 = CNY6.2236 at completion date of 20 January 2015. a Actual cost includes contracts for safety component. b Actual cost includes contracts other equipment and facilities. Source: Asian Development Bank, Zhengzhou Xi’an Passenger Dedicate Railway Line Company, and China Railway Corporation.

24 Appendix 3

Table A3.2: Financing Plan ($ million)

Cost At Appraisal At Completion Asian Development Bank 400.00 392.39 China Development Bank 1,667.27 3,239.05 MOR, HPG, SPG 2,064.66 3,267.37

Total 4,131.93 6,898.81 CRC = China Railway Corporation, HPG = Henan Provincial Government, MOR = Ministry of Railways, SPG = Shaanxi Provincial Government. Source: Asian Development Bank, China Railway Corporation.

Appendix 4 25

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENTS

Table A4.1: Contract Awards Schedule

Year By Year Cumulative

Projected Actual Projected Actual 2007 43.10 43.10 2008 83.13 126.23 2009 146.99 273.22 2010 273.39 0.00 273.39 273.22 2011 49.11 50.22 322.50 323.44 2012 71.42 68.78 393.92 392.39 2013 0.00 0.00 2014 0.00 0.00

Source: Asian Development Bank.

Table A4.2: Disbursement Schedule

Year By Year Cumulative

Projected Actual Projected Actual 2007 6.42 6.42 2008 36.18 42.60 2009 180.86 223.46 2010 273.73 50.27 273.73 273.73 2011 9.19 9.19 282.92 282.92 2012 9.54 11.65 292.47 294.57 2013 25.81 60.96 318.28 355.53 2014 81.93 36.86 400.00 392.39

Source: Asian Development Bank.

26 Appendix 5

APPRAISAL AND ACTUAL PROJECT IMPLEMENTATION SCHEDULE

Activities 2004 2005 2006 2007 2008 2009 2010 2011

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1. Detailed design, engineering and documentation

Planned

Actual

2. Prequalification and tendering Planned

Actual

3. Land acquisition and resettlement Planned

Actual

4. Civil works and buildings Planned

Actual

5. Track laying Planned

Actual

6. Telecommunications and signaling Planned

Actual

7. Trial operations Planned

Actual

Source: Asian Development Bank and Zhengzhou–Xi’an Passenger Dedicated Railway Line Company.

Appendix 6 27

ORGANIZATIONAL CHART (AT COMPLETION)

Deputy Director Deputy Director Deputy Director

General Director Board

Com

prehensive D

epartment

Engineering

Managem

ent D

epartment

Technica

l E

quipment

Departm

ent

Stations O

ffice

Safety and Q

uality D

epartment

Zhengzhou

Headquarters

Xi´an

Headquarters

Planning and F

inancial D

epartment

Responsible for labor and salary, hum

an relations, public

relations and logistics

Responsible for E

ngineering m

anagement and

information

collection

Responsible for

technical issues and equipm

ent

Responsible for station

buildings

Responsible for w

ork safety and engineering

quality

Partially responsible

for land acquisition, construction progress

supervision

Partially responsible

for land acquisition, construction progress

supervision

Responsible for

planning, contract m

anagement,

statistics, materials,

financial affairs

28 Appendix 7

COMPLIANCE WITH LOAN COVENANTS

Schedule Para. No. Description Remarks/IssuesLA, Article IV, Sections 4.01

(a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental and railway practices. (b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 6 to this Loan Agreement.

Complied.

LA, Article IV, Sections 4.02

The Borrower shall make available, and/or cause MOR to make available, promptly as needed, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project facilities.

Complied.

LA, Article IV, Sections 4.03

(a) In the carrying out of the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to ADB, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and ADB. (b) The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. The Borrower shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Complied.

LA, Article IV, Sections 4.04

The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Complied.

LA, Article IV, Sections 4.05

(a) During the Project implementation period, the Borrower shall cause MOR and/or the Project Company to (i) maintain, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by external auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 (six) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Complied.

Appendix 7 29

Schedule Para. No. Description Remarks/Issues(b) The Borrower shall enable ADB, upon ADB's request, to discuss the financial statements for the Project of MOR and/or the Project Company and their financial affairs related to the Project from time to time with the auditors of MOR and/or the Project Company, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of MOR or the Project Company unless MOR or the Project Company shall otherwise agree.

LA, Article IV, Sections 4.06

The Borrower shall enable ADB's representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Complied. Annual review missions were fielded.

LA Article IV, Sections 4.07

The Borrower, through MOR, shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, railway and maintenance and operational practices.

Complied.

LA, Article IV, Sections 4.08

(a) The Borrower shall cause MOR to prepare, and shall furnish to ADB, all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the goods and services financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of the Project Company; and (v) any other matters relating to the purposes of the Loan. (b) Without limiting the generality of the foregoing, the Borrower shall cause MOR to prepare, and shall furnish to ADB quarterly reports on the execution of the Project during the construction period and reports on the operation and management of the Project facilities as ADB may reasonably request. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. (c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, the Borrower shall cause MOR to prepare, and shall furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the Project Company’s performance and the accomplishment of the purposes of the Loan.

Complied.

LA, Schedule 6 1 Project Executing Implementing Agency MOR shall be the Project Executing Agency, responsible for overall implementation of the Project. The Project Company shall be the Implementing Agency, responsible for day-to-day implementation of the Project through the on-site

Complied. The Project Company, Zhengzhou‒Xi'an Railway Passenger Dedicated Line Co., Ltd., was established on 18 Jan 2006.

30 Appendix 7

Schedule Para. No. Description Remarks/IssuesConstruction Management Units set up along the route of the Project Railway. The Project Company shall manage and operate the Project Railway after completion of the construction, and develop and implement adequate and transparent business development mechanisms and accounting and reporting systems. The Project Company shall employ an adequate number of suitably qualified professional staff, well experienced in railway engineering financial and administrative matters and with past experience in implementing similar projects.

LA, Schedule 6 2 Role of FCTIC. FCTIC shall coordinate the Project management activities undertake the procurement of the goods and services financed under the Project, apply for withdrawals, monitor utilization of Loan proceeds, and report to ADB.

Complied. FCTIC has been in charge of all procurement and disbursement-related activities.

LA, Schedule 6 3 Counterpart Financing. Without prejudice to the generality of Section 4.02 of the Loan Agreement, the Borrower, through MOR, shall provide on a timely basis all funds and resources necessary for construction operation and maintenance of the Project Railway and cover any Project cost overrun.

Complied. Counterpart financing was provided by Henan Provincial Government, Shaanxi Provincial Government, and the China Development Bank.

LA, Schedule 6 4 In the event that MOR or the Project Company plan to (a) make any change in the ownership of the Project facilities, or of the Project Company, or (b) make any sale, transfer, or assignment of MOR’s or the Project Company’s direct or indirect interest in the Project Railway, or (c) lease out or contract out, or otherwise modify the Project Company’s responsibilities for construction, operation and maintenance of the Project Railway, the Borrower shall, at least six months prior to implementation of such transaction, consult ADB and obtain ADB’s consent. The Borrower shall ensure that such transaction be implemented in a legal and transparent manner.

Complied.

LA, Schedule 6 5 Construction Quality. The Borrower shall cause MOR and the Project Company to ensure that the Project Railway is constructed in accordance with the Borrower's national technical standards, and that construction supervision, quality control and contract management are carried out in a satisfactory manner.

Complied. Tests were done to ensure that equipment passes the field dynamic stability experiment and performance tests to avoid rail accidents.

LA, Schedule 6 6 Connecting Railway Lines. The Borrower shall cause MOR and the Project Company to ensure that (i) the capacity enhancement operations for the connecting railway lines are completed by commencement of the commercial operations of the Project Railway, and (ii) necessary measures are promptly taken to minimize any capacity constraint on such connecting railway lines, once identified during the operation of the Project Railway, in order to ensure smooth flow of the traffic generated by the Project Railway.

Complied. Connecting railway lines have been constructed and the operational capacity been enhanced to ensure smooth flow of traffic over the railway network.

LA, Schedule 6 7 Container Traffic. The Borrower shall cause MOR to construct two extra-large container terminals respectively in Zhengzhou and Xi'an by

Complied. Two large intermodal logistics container terminals are under

Appendix 7 31

Schedule Para. No. Description Remarks/Issuescommencement of the commercial operations of the Project Railway.

construction in Zhengzhou and Xi’an.

LA, Schedule 6 8 Supply of Rolling Stock. The Borrower shall cause MOR and the Project Company to provide sufficient rolling stock, at all times, for effective operation of the Project Railway.

Complied.

LA, Schedule 6 9 Passenger Safety. The Borrower shall cause MOR and the Project Company to ensure the safety of passengers on the Project Railway in accordance with the relevant laws and regulations of the Borrower.

Complied.

LA, Schedule 6 10 Safety Dissemination. The Borrower shall ensure that the Project Company, in cooperation with the local governments at the prefecture, city and county levels, formulate and implement appropriate public safety campaigns through media, public announcements, household contacts and schools to familiarize people living along the Project Railway route with safety issues related to railways.

Public safety campaigns were organized during the construction period.

LA, Schedule 6 11 Station Access Roads. The Borrower shall cause the local governments at the prefecture, city and county levels to (i) construct the station access roads in a timely manner prior to the commencement of commercial operations of the Project Railway, (ii) apply ADB's Policy on Involuntary Resettlement (1995) and Policy on Indigenous Peoples (2003) in construction of such roads, and (iii) carry out any land acquisition and resettlement activity in accordance with the Resettlement Plan, as set out therein.

Complied. (i) Station access roads were constructed in a timely manner, and completed in Jun 2010; (ii) and (iii) the same compensation standards are applied to these roads.

LA, Schedule 6 12 Tariffs. (a) The Borrower shall ensure that MOR and the Project Company set the passenger tariffs, with respect to the Project Railway, at rates sufficient to ensure compliance with financial covenants stipulated in paragraph 13 of this Schedule, and full cost recovery including the management cost of the Project Company and the working (operation and maintenance) costs of the Project Railway, depreciation, debt service, taxes and a reasonable profit. (b) The Borrower shall also ensure that the Project Company, in consultation with MOR, carries out a tariff study six months prior to the trial operation of the Project Railway and advises ADB of the tariffs applied during such trial operation.

Generally complied with. Tariffs were set to ensure cost-recovery and debt service.

LA, Schedule 6 13 The Borrower shall cause the Project Company to (i) establish and maintain an internal audit unit, the composition and the terms of reference of which shall be acceptable to ADB, to undertake timely audit of Project accounts in accordance with generally accepted accounting principles, and (ii) submit to ADB its audited accounts and financial statements during construction and in the first three years of commercial operations of the Project Railway within six months of the end of each relevant fiscal year.

Complied. The last Audit Report for FY2014 was received on 1 July 2014 through the PRC Resident Mission. No issues were reported.

LA, Schedule 6 13 Except as ADB may otherwise agree, the Borrower Company to maintain, for each of its shall cause the Project fiscal years commencing from the second fiscal

Generally complied with. (i) Operating ratio

measures are in place

32 Appendix 7

Schedule Para. No. Description Remarks/Issuesyear of commencement of the commercial operations of the Project Railway, (i) an operating ratio of not more than 70 per cent, (ii) a debt service coverage ratio of at least 1.2, and (iii) a debt to equity ratio of not more than 65:35 to ensure operating efficiency and financial sustainability.

and the existing trend indicates that this will be achieved by 2020.

(ii) Debt service coverage ratio of 1.2 was achieved.

(iii) The debt-to-equity ratio is 55:45.

LA, Schedule 6 14 Reform Measures.

The Borrower shall take necessary measures to continue to implement its national Railway Development Plan (2004) including (i) separation of the core railway operations from non-core transportation business operations in three large specialized railway companies, (ii) rationalization of staff, and (iii) encouragement of the Project Company to outsource some of its activities.

ZXRC was established in January 2006.

LA, Schedule 6 15 Anticorruption Measures.The Borrower shall cause MOR to ensure that (i) a supervisory body is established for prevention of undue interference in business practices and adequate resources are made available for its effective operation and (ii) a leading group of officials from the Discipline Unit and Supervision Department of the MOR is located in offices involved in the bidding construction and other operational activities under the Project. The Borrower shall also cause MOR and the Project Company to initiate liaison meetings with the Prosecutor's Office, on a needed basis, where warnings about or information on corrupt practices can be discussed.

Complied.

LA, Schedule 6 16 Environmental Measures.The Borrower shall cause MOR, HPG, SPG and the Project Company to ensure that (i) the Project is designed, constructed, operated and maintained in accordance with the environmental laws and regulations of the Borrower and the Environmental Policy (2002) of ADB, (ii) the Environmental Management Program (EMP) and the mitigation measures included therein, as specified in the Environmental Impact Assessment and the Summary Environmental Impact Assessment prepared for the Project, are properly implemented, (iii) any environmental permits, licenses and clearances are obtained in a timely manner, (iv) any adverse impact on the environment that may arise from the Project implementation activities is promptly mitigated or minimized in accordance with the EMP, and (v) implementation of the EMP, including any safety breaches, violation of environmental standards and corrective, measures taken thereto, is reported semi-annually to ADB.

Complied. Contract with TSDI was signed in Sep 2006 to do the environmental monitoring. TSDI has been independently monitoring the environmental protection and mitigation measures and has reported to ADB through progress reports and annual external monitoring reports. During review missions, it was observed that environmental protection measures were carried out satisfactorily during trial operations.

LA, Schedule 6 17 Land Acquisition and Resettlement.The Borrower shall cause MOR, HPG, SPG and the Project Company to ensure that (i) the Resettlement Plan is carried out promptly and efficiently in accordance with its terms, all applicable laws and regulations of the Borrower, and ADB's Policy on Involuntary Resettlement, (ii) all affected people,

Complied. The resettlement plan was carried out efficiently.

Appendix 7 33

Schedule Para. No. Description Remarks/Issuesincluding ethnic minorities, are given adequate opportunity to participate in resettlement planning and implementation particularly in entitlements and income restoration measures as set out in the Resettlement Plan, (iii) affected people are compensated and assisted, in accordance with the Resettlement Plan, prior to displacement from their houses, land and assets such that they will be at least as well of as they would have been in the absence of the Project, (iv) adequate and appropriate support is provided for enterprise relocation, (v) affected people receive priority for employment in Project construction, (vi) special measures are implemented for vulnerable groups, including ethnic minorities, and (vii) civil works contracts under the Project include requirements to comply with the Resettlement Plan, the applicable laws and regulations of the Borrower and ADB's Policy on Involuntary Resettlement, to the extent applicable to such contracts.

LA, Schedule 6 18 The Borrower shall cause MOR, HPG, SPG and the Project Company to ensure that (i) funds needed for land acquisition and resettlement, including those for cost overruns, are allocated and disbursed in a timely manner, (ii) the Resettlement Plan is updated and submitted to ADB within three months of completing the detailed design, and(iii) ADB is promptly advised of any substantial changes in the resettlement impacts and, if necessary, a revised resettlement plan is submitted to ADB for concurrence.

Complied. There were no significant changes between preliminary design and detailed design. No changes in LAR impacts.

LA, Schedule 6 19 The Borrower shall also ensure that (i) MOR HPG, SPG and the Project Company effectively supervise the Resettlement program, and (ii) the Project Company and the Land Acquisition and Resettlement (LAR) Offices and Land Administration Bureaus (LABs) at the prefecture and county levels are responsible for implementing the resettlement activities.

Complied. The resettlement program was supervised in an efficient manner.

LA, Schedule 6 19 The Borrower shall cause MOR, HPG, SPG and the Project Company to ensure that (i) all affected people are provided with adequate information and regularly consulted in advance of signing household compensation agreements and prior to taking other decisions that affect their livelihoods and living conditions as a result of the Project, and (ii) the Project Company and the LAR Offices and LABs at the prefecture and county levels maintain proper records of consultation and grievances, and make such records available to the external monitor or ADB on request.

Complied. This was efficiently monitored and information was regularly provided to affected people.

LA, Schedule 6 19 The Borrower shall cause MOR, HPG, SPG and the Project Company to encourage affected households to participate in the design and planning of resettlement activities.

Complied. There was active participation from affected people.

LA, Schedule 6 20 The Borrower shall cause MOR and the Project Company to ensure that (i) adequate staff and resources are committed to supervising and monitoring the implementation of the Resettlement Plan, and providing to ADB quarterly reports on implementation

Complied. Adequate staff and resources were provided.

34 Appendix 7

Schedule Para. No. Description Remarks/Issuesand a resettlement completion report, (ii) an independent agency acceptable to ADB is engaged by the Project Company to monitor progress semi-annually and to evaluate results through annual survey updates during two years after the completion of resettlement, and forward reports to MOR, the Project Company and ADB, and (iii) data are disaggregated by gender, and monitoring focuses on gender impacts and vulnerable groups are incorporated.

LA, Schedule 6 21 Poverty Reduction. The Borrower shall ensure that MOR and the Project Company cause the contractors involved in Project implementation to maximize employment of local poor persons, including ethnic minorities, who meet the job and efficiency requirements for construction of the Project Railway. Such workers shall be provided adequate on-the-job training. The Borrower shall ensure that MOR and the Project Company implement the Project in accordance with the Social Development Action Plan and monitor the Project's impact on poverty with the assistance of domestic consultants, and provide annual monitoring reports to ADB during the Project implementation period.

Complied. Employment included local people, including ethnic minorities.

LA, Schedule 6 22 Gender and Development.The Borrower shall cause MOR and the Project Company (i) to implement the Project in accordance with the Social Development Action Plan and take all necessary actions to encourage women living in the Project area to participate in planning and implementation of the Project; and (ii) to cause the contractors involved in Project implementation to comply with all applicable laws and regulations of the Borrower concerning gender equality. The Borrower shall ensure that MOR and the Project Company monitor the effects of the Project on women through collection and compilation of gender-disaggregated data, where relevant, including in the Resettlement Plan, the Social Development Action Plan and the Project Performance Management System referred to in paragraph 25, Schedule 6 of the Loan Agreement.

Complied. SDAP was implemented effectively.

LA, Schedule 6 23 Health Concerns. The Borrower shall cause MOR and the Project Company to ensure that (i) contractors involved in Project implementation disseminate information on the risks of socially transmitted infections including HIV/AIDS, to the workers they employ under the Project and to local communities, through public awareness campaigns, and (ii) adequate health and treatment facilities are made available nearby. The Borrower shall cause MOR, the Project Company, HPG and SPG to ensure that similar information is disseminated in consultation with the Health Bureaus in Henan and Shaanxi, to railway operators.

Complied. This was efficiently implemented.

LA, Schedule 6 24 Project Performance Monitoring and Evaluation.The Borrower shall cause MOR and the Project Company to monitor and evaluate the Project impact to through a Project Performance Monitoring System be established, as agreed between the Borrower and ADB, to ensure that the Project facilities are managed

Complied.

Appendix 7 35

Schedule Para. No. Description Remarks/Issuesefficiently, benefits are maximized and social impacts are monitored. The Borrower shall also cause MOR and the Project Company to establish baseline and target values for a set of indicators for evaluating Project performance, as agreed between the Borrower and ADB, and measure the Project indicators, and compare to the baseline values, at the inception of Project implementation, at completion of the Project and three years thereafter. Where relevant, indicators shall be disaggregated by gender and ethnic group. Reports summarizing the key findings of such monitoring shall be submitted to ADB in a timely manner.

LA, Schedule 6 25 ADB, MOR and the Project Company shall jointly carry out a midterm review of the Project in 2008, covering all institutional, administrative, organizational, technical, environmental, social, poverty reduction, resettlement, economic, financial and other relevant aspects that may have impact on the performance of the Project and its continuing viability. The midterm review shall examine progress in sector reforms, policy development, resettlement, environment, impact on ethnic minorities, vulnerable groups and women, and compliance with the assurances stated in this Loan Agreement.

Complied. Midterm review mission was fielded Nov 2008.

LA, Schedule 5 Fielding of Consultants.The selection, engagement and services of the international consultants shall be subject to the provisions of the Schedule in the LA and the provisions of the "Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers" dated January 2005. The international consultants shall be selected and engaged as a firm by MOR using the QCBS method and simplified technical proposal in accordance with the procedures outlined in Schedule 5 of the LA.

The consulting services component was cancelled and the budget allocation transferred to the equipment category to cover a shortfall.

ADB = Asian Development Bank, FCTIC = Foreign Capital and Technical Import Center, FY = financial year, HPG = Henan Provincial Government, MOR = Ministry of Railways, PRC = People’s Republic of China, SDAP = Social Development Action Plan, SPG = Shaanxi Provincial Government, TSDI = Third Survey & Design Institute, ZXRC = Zhengzhou–Xi’an Passenger Dedicated Railway Line Company.

36 Appendix 8

CONTRACT PACKAGES FINANCED BY THE ASIAN DEVELOPMENT BANK

PCSS No.

Contract Description Procurement

Mode Contractor Supplier

Final Contract Cost

Amount Equivalent

A. Materials

0001 Rail (1st batch), 60 kg/m, 25 m ICB China Railway Material Group Co., Ltd.

CNY183,920,000 $26,413,257

0002 Rail (2nd batch), 50 kg/m, 25 m ICB China Railway Material Group Co., Ltd.

CNY3,973,012 $566,391

0007 Rail (4th procurement), 60 kg/m, 100 m and 25 m ICB China Railway Material Group Co., Ltd.

CNY44,020,947 $6,352,183

0008 Third procurement of rail, 60 kg/m, 100 m (Lot 1) ICB China Railway Material Group Northeast Co.

CNY89,223,250 $12,986,765

0044 Rail (fifth batch) Lot 1 (60 kg/m, 100 m) ICB China Railway Material Group Co., Ltd.

CNY68,753,026 $10,064,855

0045 Rail (fifth batch) Lot 2 (60 kg/m, 100 for mainline) ICB China Railway Materials Import & Export Co., Ltd.

CNY78,589,440 $11,504,822

0046 Rail (fifth batch) Lot 3 (60 kg/m, 100 for mainline and 60 kg/m, 100 m)

ICB World Tender Industrial Limited CNY79,003,440 $11,562,909

B. Equipment

0003 Lot 104: Catenary measuring system equipment of comprehensive inspection train, 1 set

ICB Yardway Ltd. €3,990,000 $5,916,773.68

0004 Lot 106: Signal measuring system equipment of comprehensive inspection train, 1 set

ICB China National Electric Import & Export Corp.

CNY11,423,940 $1,652,624

0005 Lot 102: Track measuring system equipment of comprehensive inspection train, 1 set

ICB CMEC International Trading Co., Ltd. $1,054,828

0006 Inspection system equipment and comprehensive inspection train, Lot 103 – wheel / rail force

ICB Transportation Technology Center, Inc.

$1,169,375

0009 H-type steel poles for contact system & pre-stress concrete poles with rails in web plate for contact

ICB China Railway Material Group Co., Ltd.

CNY27,479,847 $4,027,771

0010 H-type steel poles for contact system & pre-stress concrete poles with rails in web plate for contact

ICB Beijing Century Splendor Trading Limited

CNY37,708,523 $5,546,160

0011 H-type steel poles for contact system & pre-stress concrete poles with rails in web plate for contact

ICB China Railway First Group Goods & Materials

CNY35,874,270 $5,257,664

0012 H-type steel poles for contact system & pre-stress concrete poles with rails in web plate for contact

ICB China Railway Tenth Group Shandong Lutie

CNY45,088,279 $6,618,785

0013 H-type steel poles for contact system & pre-stress concrete poles with rails in web plate for contact

ICB Beijing Century Splendor Trading Limited

CNY891,451 $130,711

0014 Termination equipment for overhead lines fittings of overhead contact system

ICB Loric Import & Export Corp. Ltd. CNY6,161,932 $913,805

0015 Termination equipment for overhead lines section insulator (56 sets

ICB China National Electric Import & Export Corp.

CNY431,548 $63,543

Appendix 8 37

PCSS No.

Contract Description Procurement

Mode Contractor Supplier

Final Contract Cost

Amount Equivalent

0016 Termination equipment for overhead lines lot 103: 27.5 kV outdoor single pole

ICB Beijing Century Splendor Trading Limited

CNY901,341 $132,686

0017 Termination equipment for overhead lines lot 104: contact wire

ICB NKT Cables Ltd. Changzhou CNY7,809,091 $1,146,749

0018 Termination equipment for overhead lines lot 105: messenger wire

ICB Shenyang Beiheng Copper Co., Ltd. CNY6,000,692 $882,266

0019 Termination equipment for overhead lines lot 106: aluminum conductor steel

ICB Beijing Golden Fuli Electro-Mechanics CNY1,587,541 $232,994

0020 Termination equipment for overhead lines lot 107: rod insulator and suspension

ICB Beijing Golden Fuli Electro-Mechanics Dev’t.

CNY930,265 $136,484

0021 Termination equipment for overhead lines lot 108: composite insulator (4,801 sets)

ICB Beijing Dongqiao Mechanical Electrical & Chem

CNY1,372,585 $201,840

0022 Railway rescue and restoration (8 sets) equipment ICB Kirow Ardelt AG €34,365,575 $44,850,762

0023 Lot 101, messenger wire 1,168.89 km electrification project

ICB Wenzhou E&T Foreign Trade Co. Ltd. CNY44,897,577 $6,602,881

0024 Lot 102, porcelain insulator 47,945 sets electrification project

ICB Beijing Golden Fuli Electro-Mechanics Dev Co

CNY18,428,646 $2,711,615

0025 Lot 103, porcelain insulator for negative wire 16,507 sets, electrification project

ICB Beijing Golden Fuli Electro-Mechanics Dev Co

CNY3,644,145 $535,166

0026 Lot 104, isolating switch and load switch, 343 sets, electrification project

ICB China CMIIC Engineering Corporation CNY18,264,037 $2,685,560

0027 Lot 105, composite insulator, 12,844 sets electrification project

ICB World Tender Industrial Limited CNY10,133,546 $1,484,159

0028 Lot 106, aluminum conductor steel core aluminum stranded wire 2,027.65 km, electrification project

ICB China Railway Materials Import & Export Co., Ltd.

CNY24,387,908 $3,580,136

0029 Lot 107, contact wire for siding track 90.61 km, electrification project

ICB Yunnan Copper Furukawa Electric Co., Ltd.

CNY4,529,105 $666,051

0030 Lot 112 commodity: overhead line component (Shaanxi), electrification project

ICB Consortium of Beijing Century Splendor Trading

CNY34,876,126 $5,126,343

0031 Lot 116, AC/DC system, 137 units electrification project ICB CCECC International Trading Co., Ltd. CNY2,567,070 $376,998

0032 Lot 117, current transformer, 100 units electrification project

ICB China National Electric Import & Export Corp.

CNY3,576,000 $526,470

0033 Lot 119, traction transformer (Shaanxi), 12 sets electrification project

ICB Consortium of Beijing Century Splendor Trading

CNY47,404,200 $6,950,372

0034 Lot 120, auxiliary transformer, 78 units electrification project

ICB China National Electric Import & Export Corp.

CNY4,862,200 $715,827

0035 Lot 121, voltage transformer, 60 units electrification project

ICB China National Electric Import & Export Corp.

CNY2,580,000 $379,750

0036 Lot 110, surge arrester, 617 units electrification project ICB CCECC International Trading Co., Ltd. CNY4,340,755 $638,455

0037 Lot 114, circuit breaker, 20 units electrification project ICB World Tender Industrial Limited CNY11,186,000 $1,641,602

38 Appendix 8

PCSS No.

Contract Description Procurement

Mode Contractor Supplier

Final Contract Cost

Amount Equivalent

0038 Lot 115, high voltage electrical disconnector 68 units, electrification project

ICB Shandong Machinery Import & Export Corp

CNY5,299,000 $779,863

0039 Lot 111, overhead line component (Henan), electrification project

ICB Consortium of Beijing Century Splendor Trading

CNY89,706,675 $13,181,777

0040 Lot 113, GIS switchgears, 295 sets electrification project ICB XJ Group Corporation $13,858,104

0041 Lot 122, auto transformers, 72 sets electrification project ICB World Tender Industrial Limited CNY65,936,008 $9,686,603

0042 Lot 109, 27.5kV single phase copper-core cable and cable accessory, electrification project

ICB CCECC International Trading Co., Ltd. CNY79,175,519 $11,613,862

0043 Lot 118, traction transformer (Henan), 28 sets electrification project

ICB China National Heavy Machinery Corporation

CNY92,854,400 $13,624,489

0047 Lot 101 (re-bidding of Lot 108) contact wire for main line, 1,078 km)

ICB NKT Cables Ltd. Changzhou CNY112,362,813 $16,492,063

0048 Lot 101, 2,880 mt. telescope railway crane matching wagon and other related equipment

ICB Kirow Ardelt GMBH €34,426,259 $44,551,742

CNY34,965,420 $5,672,780

0049 Lot 101, 23 groups of material conveyor and hooper units

ICB China Railway Maintenance Large Maintenance Machinery Co.

CNY167,996,659 $27,031,823

0050 Lot 102, 7 sets of rail flaw detection vehicle ICB Joint Venture of Baoji CSR Times Engineering

$10,331,240

CNY112,120,022 $18,017,049

0051 1 set of mobile track re-profile machine ICB China Railway Large Maintenance Machinery Co.

CNY78,641,471 $12,813,305

0052 12 sets of industry endo-scope ICB Weilin Company Limited $751,200

AC/DC = alternating current/direct current, GIS = geographic information system, ICB = international competitive bidding, kg/m = kilogram per meter, km = kilometer, kV = kilovolt, m = meter, mt = metric ton. Source: Asian Development Bank and Zhengzhou–Xi’an Passenger Dedicated Railway Line Company

Appendix 9 39

ECONOMIC REVALUATION

A. General

1. The Zhengzhou‒Xi’an Railway (ZXR) project was constructed as an electrified double-track passenger-dedicated line (PDL) with a design speed of 200 kilometers per hour (kph) with reserve capability for passenger trains operating at up to 300 kph. The route length is 459.53 kilometers (km), which is unchanged from appraisal. Civil works construction commenced on 25 September 2005 and was completed, along with all subsequent equipment installation and commissioning, on 30 July 2009. Excluding Zhengzhou and Xi’an stations, 8 new passenger stations and one passing station were constructed.1 Trial operations started on 28 December 2009, with commencement of commercial operations on 6 February 2010.

B. Traffic Forecast

2. The ZXR project is an integral part of the national PDL railway network, which totaled 19,838 km as of 2015. The national network on which the China Railway Highspeed (CRH) trains operate will encompass 20,000 route-km by 2020, along four east–west and four north–south routes, incorporating cutting-edge technology for signaling, telecommunications, automatic train control systems, and safety equipment. ZXR is also an integral part of the Lanzhou–Lianyungang (Longhai) railway corridor, which connects the western and central People’s Republic of China (PRC) with the country’s eastern and coastal regions. The ZXR project is a corridor development project between Zhengzhou and Xi’an. At appraisal, the ZXR was envisioned to free capacity on the existing Longhai railway line by separating corridors for passenger and freight for high-density routes. The project was envisioned to enhance the capacity for railway transportation for both passenger trains and freight trains along the Zhengzhou–Xi’an corridor through the (previous) mixed-service Zhengzhou–Xi’an (Zhengxi) section of the Longhai railway line, and the new ZXR PDL project.

3. Table 1 presents comparative freight and passenger traffic projections at appraisal and reevaluated based on actual freight traffic on the Longhai railway line, and passenger traffic on the ZXR line from 2012 to 2016. During appraisal, freight traffic for the Longhai railway line was forecast by commodity (i.e., coal, petroleum products, iron and steel, fertilizers, intermodal containers, and other commodities) in two categories differentiated by their economic impact: (i) traffic diverted from other modes, mainly from other national railway routes and roads, based on an assessment of the relative service and cost competitiveness of the Zhengxi section; and (ii) generated traffic that is attributable to the additional freight-carrying capacity created on Zhengxi section by shifting existing passenger trains to the ZXR. At appraisal, the freight volume on the Zhengxi section was forecast to increase from about 16.14 billion ton-km in 2011 to 49.02 billion ton-km in 2031, with average annual growth rate of 5.7%. The reevaluated freight traffic is based on the ratio of the actual number of trains operating on the ZXR to the planned number of trains, which provides a measure of realization of ZXR output in terms of freed capacity on the Zhengxi section. The detailed computation is in Table 2. Passenger traffic was forecast based on similar factors.

4. The reevaluated freight traffic in 2011 is 4.46 billion ton-km, which is projected to increase to 44.24 billion ton-km in 2031. The reevaluated traffic in the first 5 years is considerably lower than estimated at appraisal because of the low number of passenger trains put into service on the 1 The passenger stations included New Gongyi Station, Luoyang South Station, New Mianchi Station, New Sanmenxia

Station, New Huashan Station and New Weinan Station, New Lingbao Station and New Xingyang Station. New Lintong Station is a passing station, which is included for operational purposes but not for passengers.

40 Appendix 9

ZXR, which freed less capacity than expected for additional freight trains on the Zhengxi section. Because of the incomplete PDL high-speed rail network, only 7 pairs of CRH trains were operating in 2011, which was only 16% of the planned number of trains at appraisal (Table 2). By 2017, however, with the improvements in the network, 93% of the CRH trains planned for ZXR were operating. Passenger traffic is forecast to grow from 3.42 billion passenger-kilometers (pass-km) in 2011 to 39.41 billion pass-km in 2017, and 75.94 billion pass-km in 2031, with an average annual growth rate of 4.8% from 2017 to 2031.

Table A9.1: Comparison of Traffic Forecasts

Item 2011 2016 2021 2026 2031 Appraisal Forecast Freight Traffic: Tons (million) 50.19 74.92 97.62 118.93 152.44 Ton-km (billion) 16.14 24.09 31.40 38.25 49.02 By commodity (billion ton-km): Coal 4.16 6.21 8.09 9.86 12.64 Petroleum products 1.41 2.10 2.74 3.34 4.27 Iron and steel 2.12 3.16 4.12 5.01 6.43 Fertilizers 0.93 1.38 1.80 2.20 2.81 Intermodal Containers 1.29 2.58 4.50 7.33 12.58 Others 6.24 8.66 10.15 10.51 10.29 Passenger Traffic: Number (million) 31.12 41.77 56.92 78.35 100.15 Passenger-kilometers (billion) 15.65 25.80 35.02 41.74 50.37 Revised Forecast Freight Traffic: Tons (million) 13.87 42.90 101.44 118.13 137.57 Ton-km (billion) 4.46 13.80 32.62 37.99 44.24 By commodity (billion ton-km): Coal 1.15 3.56 8.40 9.79 11.41 Petroleum products 0.39 1.20 2.85 3.32 3.85 Iron and steel 0.59 1.81 4.28 4.98 5.80 Fertilizers 0.26 0.79 1.87 2.19 2.54 Intermodal Containers 0.36 1.48 4.68 7.28 11.35 Others 1.72 4.96 10.55 10.44 9.29 Passenger Traffic: Number (million) 6.74 30.31 58.42 66.60 75.94 Passenger-kilometers (billion) 3.42 18.11 29.38 33.50 38.20 ton-km = ton kilometers. Note: Data after 2016 is projected. Sources: Asian Development Bank and Zhengzhou-Xi’an Passenger-Dedicated Railway Line Company.

Appendix 9 41

Table A9.2: Train Pairs on the Zhengzhou–Xi’an Railway

Year At Appraisal

(Planned) Reevaluated

(Actual) Percent Realization 2011 45 7 16% 2012 50 29 58% 2013 55 31 56% 2014 60 31.5 53% 2015 65 33 51% 2016 70 55 79% 2017 75 70 93% 2018 80 75 94% 2028 110 105 95%

Note: 2018 and 2028 data are projected. Sources: Asian Development Bank and Zhengzhou‒Xi’an Passenger-Dedicated Railway Line Company.

C. Economic Reevaluation 5. Cost. Financial costs were converted to economic costs following the same methodology used at appraisal. The economic evaluation at appraisal was based on a comparison of with- and without-project scenarios, using constant 2005 economic prices. The project costs consisted of capital costs, operation and maintenance (O&M) costs, and the costs for equipment replacement and infrastructure rehabilitation to be undertaken during the evaluation period. Because CRH Electric Multiple Units (EMUs) are provided by the China Railway Corporation, the cost of rolling stock was estimated based on dry-lease terms, carrying opportunity cost of capital at 8% with a 20-year economic life. The project’s initial investment, incremental replacement, and overhaul cost of equipment and infrastructure were revalued in economic prices by separating the cost items into tradable materials, non-tradable materials, labor, and land. The prices were expressed in CNY using the domestic price numeraire with a shadow exchange rate factor of 1.01 for foreign exchange effects. A shadow price was used to put an economic value on the wages paid to unskilled labor, but not on wages for skilled labor because no clear surplus of skilled workers exists. A shadow wage rate factor of 0.67 was used to convert the financial wage rate to an economic opportunity cost of labor.

6. Benefits. The economic benefits consist of (i) passenger and freight transport cost savings to passengers and freight shippers for diverted freight and passenger traffic; (ii) generated passenger transport benefits estimated by the difference in the economic cost of railway and bus transport; (iii) time savings in diverted passenger and freight traffic based on the value of time estimated from the net income of local residents and average value of freight; (iv) net economic value calculated on the basis of the economic value per additional ton of each commodity of generated traffic as a result of the construction of the ZXR; (v) net economic value of generated tourist days by estimating the number of tourists and their average expenditure, and considering the cost of providing the tourist services; and (vi) avoided road construction and maintenance costs, accident costs, and shipper savings due to increased railway competition. The salvage value was calculated based on the economic life of each project component. D. Economic Internal Rate of Return Reevaluation 7. The reevaluated economic internal rate of return (EIRR) is 13.12%, lower than the 17.43% estimated at appraisal (Table A9.3). This is mainly due to the 67% increase in initial investment and reduced economic benefits during the initial years related to lower initial passenger traffic on

42 Appendix 9

the ZXR, which also resulted also in reduced freight traffic. Because the EIRR is higher than the economic opportunity cost of capital of 9%, the project is considered economically viable. 8. A sensitivity analysis was carried out to test the impacts of (i) a decrease in traffic from the forecasted volumes, (ii) an increase in projected O&M costs, and (ii) a decrease in benefit valuation (Table A9.3). According to this analysis, the project will remain economically viable with a 10% decrease in traffic or 20% increase in O&M costs. The EIRR will decrease to 12.0% with a 20.0% benefit reduction, and will be 14.1% with all other benefits excluded.

Table A9.3: Economic Reevaluation (CNY million)

Costs Benefits

Year

Capital

O&M

Total Passenger

Traffic Freight Traffic

Other Benefits

Total

Net Benefits

At Appraisal 2005 (2,889) (2,889) (2,889) 2006 (3,832) (3,832) (3,832) 2007 (6,779) (6,779) (6,779) 2008 (7,369) (7,369) (7,369) 2009 (6,779) (6,779) (6,779) 2010 (1,828) (1,828) (1,828) 2011 (3,332) (3,332) 634 5,859 1,567 8,060 4,7282012 (3,220) (3,220) 695 6,530 874 8,099 4,8782013 (3,429) (3,429) 761 7,243 919 8,923 5,4932014 (3,699) (3,699) 834 8,001 966 9,801 6,1022015 (3,974) (3,974) 914 8,808 1,015 10,737 6,7622016 (4,228) (4,228) 1,002 9,668 1,066 11,736 7,5082017 (4,466) (4,466) 1,099 10,584 1,119 12,802 8,3362018 (4,779) (4,779) 1,204 11,563 1,175 13,943 9,1642019 (4,777) (4,777) 1,273 12,376 1,205 14,854 10,0782020 (2,016) (5,058) (7,073) 1,347 13,237 1,263 15,847 8,7742021 (5,247) (5,247) 1,424 14,162 1,324 16,911 11,6642022 (5,441) (5,441) 1,506 15,145 1,388 18,040 12,5592023 (5,635) (5,635) 1,593 16,192 1,455 19,240 13,6052024 (5,831) (5,831) 1,685 17,309 1,525 20,519 14,6882025 (2,359) (6,154) (8,514) 1,782 18,504 1,599 21,884 13,3712026 (6,175) (6,175) 1,884 19,783 1,676 23,343 17,1682027 (6,314) (6,314) 1,993 21,154 1,757 24,904 18,5902028 (6,605) (6,605) 2,107 22,626 1,841 26,575 19,9702029 (6,836) (6,836) 2,229 24,805 1,984 29,017 22,1812030 (4,618) (7,437) (12,055) 2,357 27,172 2,080 31,609 19,5542031 16,389 (6,980) 9,409 2,493 29,747 2,180 34,420 43,829Economic internal rate of return = 17.43% Economic net present value at 12% = 15,239

Reevaluation 2005 (649) (649) (649) 2006 (7,010) (7,010) (7,010) 2007 (10,019) (10,019) (10,019) 2008 (9,010) (9,010) (9,010) 2009 (9,213) (9,213) (9,213) 2010 (2,784) (2,784) (2,784) 2011 (3,002) (3,002) 138 1,619 1,567 3,324 322 2012 (3,569) (3,569) 147 6,276 874 7,296 3,727 2013 (5,391) (5,391) 550 6,207 919 7,677 2,285 2014 (6,401) (6,401) 660 5,324 966 6,950 549 2015 (5,729) (5,729) 701 5,418 1,015 7,135 1,406 2016 (3,691) (3,691) 767 8,832 1,066 10,665 6,974 2017 (3,809) (3,809) 968 11,055 1,119 13,143 9,333 2018 (3,931) (3,931) 1,173 11,712 1,175 14,060 10,129

Appendix 9 43

Costs Benefits

Year

Capital

O&M

Total Passenger

Traffic Freight Traffic

Other Benefits

Total

Net Benefits

2019 (4,057) (4,057) 1,213 13,183 1,205 15,601 11,543 2020 (1,816) (4,187) (6,003) 1,254 13,925 1,263 16,442 10,439 2021 (4,321) (4,321) 1,296 14,716 1,324 17,336 13,015 2022 (4,459) (4,459) 670 15,568 1,388 17,627 13,168 2023 (4,602) (4,602) 1,385 16,480 1,455 19,321 14,719 2024 (4,749) (4,749) 1,432 17,460 1,525 20,418 15,669 2025 (2,125) (4,901) (7,027) 1,481 18,515 1,599 21,594 14,567 2026 (5,058) (5,058) 1,531 19,651 1,676 22,858 17,800 2027 (5,220) (5,220) 1,583 20,876 1,757 24,216 18,996 2028 (5,387) (5,387) 1,637 22,198 1,841 25,677 20,290 2029 (5,559) (5,559) 1,717 23,626 1,984 27,326 21,766 2030 (4,161) (5,737) (9,898) 1,801 25,171 2,080 29,052 19,154 2031 14,766 (5,921) 8,845 1,890 26,844 2,180 30,914 39,760 Economic internal rate of return = 13.12% Economic net present value at 12% = 3,857 ( ) = negative, CNY = yuan, O&M = operation and maintenance. Source: Asian Development Bank and China Railway Corporation.

Table A9.4: Sensitivity Analysis

Scenario

Change

(%)

EIRR

Economic NPV

(CNY million)

Switching Value

(%)a At Appraisal

Base Case 17.4% 15,239

Costs 10 15.9% 10,648 33 Generated Freight Benefits (80) 16.4% 12,302 415 Total Freight Benefits (10) 16.1% 10,157 30 Passenger Transport Benefits (50) 16.8% 12,877 323 Delay implementation by 1 year 15.8% 9,540 NPV declines by 37% Reduce SERF by 20% (20) 16.2% 9,968 58 Reevaluation

Initial investment 10 12.4% 0.076 15.6 Total Costs 10 12.6% 0.050 24.0 Generated Freight Benefits (15) 12.0% (0.074) (16.0) Total Freight Benefits (10) 12.0% (0.112) (10.6) Passenger Transport Benefits (50) 12.7% (0.009) (132.2)

( ) = negative, CNY = Chinese Yuan, EIRR = economic internal rate of return, NPV = net present value at 12%, SERF = shadow exchange rate factor. a Switching value indicates percentage change in a variable required for the NPV to become zero. Source: Asian Development Bank estimates and China Railway Corporation.

44 Appendix 10

FINANCIAL REEVALUATION

A. Basic Assumptions 1. The financial internal rate of return (FIRR) for the Zhengzhou‒Xi’an Railway (ZXR) Project was reevaluated based on financial and operational information obtained from the Zhengzhou-Xi’an Railway Company (ZXRC) and several revenue and cost assumptions. The capital cost was based on actual expenditures incurred for the project, excluding interest and other financial charges during construction. All revenues and expenses were expressed in 2015 prices. The calculation period and evaluation at appraisal covered the construction (2005‒2011) and operation (2012‒2031) periods. Costs for equipment replacement and infrastructure rehabilitation expected to occur during the evaluation period were included, and the residual value was calculated based on the economic life of fixed assets. 2. The operation of the ZXR was originally assigned to the ZXRC with the Zhengzhou and Xi’an railway bureaus running the trains. ZXRC would collect the fares and compensate the railway bureaus for their services, include transport and infrastructure maintenance. This arrangement was in effect from 2012 to 2015; beginning in 2016, CRC opted to have the railway bureaus collect the passenger fares and pay ZXRC a track access fee, pursuant to the revenue allocation system used by CRC nationally. ZXRC owns the project assets and is responsible for the debt service. ZXRC’s role is similar to that of a landlord collecting access charges for use of its assets by railway administrations, roughly in line with the European Union model of separating tracks from operations. 3. Until 2016, project revenues consisted mainly of ZXR passenger revenues and track access fees. No freight traffic is operating on the ZXR. The company’s current revenue generating capacity is closely related to the number of trains operating on its track. During the first 5 years (2011 to 2015) the number of trains was lower than estimated at appraisal, resulting in a 16% to 55% realization of planned traffic. The low realization resulted in lower-than-expected revenues. 4. At reevaluation, no increase in the appraisal tariffs was assumed. Beginning in 2016 the track access fee is estimated based on the actual 2016 payment. Expenses include electric power and communication expenses, overhead and administrative expenses, depreciation expense, interest charges, business and income taxes, fixed costs for facility maintenance, variable costs during the first 5 years in the form of interline payments to other railway bureaus for use of their track by trains originating from ZXR, and other miscellaneous expenses. Periodic track maintenance and infrastructure rehabilitation will be required every 7 years of operation, at a cost of CNY2.0 billion in 2020, CNY2.36 billion in 2025, and CNY4.62 billion in 2030. B. Financial Internal Rate of Return 5. The after-tax weighted average cost of capital (WACC) in real terms was calculated using the actual capital and cost mix of various financing sources (Table A10.1), including (i) the London interbank offered rate (LIBOR)-based fixed swap rate of 4.7% plus a spread of 60 basis points for the Asian Development Bank (ADB) loan with a tenor of 26 years, including a grace period of 6 years; (ii) interest rate of 5.5% for loans from the China Development Bank for 20 years, including a grace period of 6 years; and (iii) an 8% opportunity cost of capital for equity. The WACC was recalculated at 3.17%, close to the appraisal estimate of 3.00%.

Appendix 10 45

Table A10.1: Reevaluated Weighted Average Cost of Capital (CNY million)

Item

ADB Loan

Domestic

Loan

CRC Equity

Henan and Shaanxi Equity

Total Weight 0.0569 0.4695 0.3984 0.0752 1.00 Nominal cost 0.0530 0.0550 0.0800 0.0800 Tax rate 33% 33% 0.00 0.00 Tax adjusted nominal cost 0.0355 0.0369 0.0800 0.0800 Inflation rate 2.0% 2.5% 2.5% 2.5% Real cost 0.015206 0.011561 0.053659 0.053659 Weighted component 0.000865 0.005428 0.021377 0.004036

Weighted Average Cost of Capital = 3.17%ADB = Asian Development Bank, CRC = China Railway Corporation. Source: Asian Development Bank and China Railway Corporation.

6. The after-tax FIRR was recalculated at 4.24%, lower than the 7.00% estimated at appraisal (Table A10.2). This difference was mainly due to the (i) higher capital investment (CNY30.86 billion versus CNY42.94 billion, a 39% increase); (ii) lower initial passenger traffic; and (iii) change in ZXRC’s function, from operator to landlord, which resulted in reduced total revenues over the 20-year evaluation period, from CNY214.33 billion to CNY147.77 billion (43%).

Table 10.2: Financial Internal Rate of Return at Appraisal and Reevaluated (CNY million)

Year Capital

Investment

Operation and

Maintenance Cost

Overhaul Expenses

Project Revenues

Business Tax

Corporate Income Tax

Net Cash Flow after

Income Tax

At Appraisal 2006 (3,027.42) (3,027.42) 2007 (4,015.96) (4,015.96) 2008 (7,105.16) (7,105.16) 2009 (7,723.00) (7,723.00) 2010 (7,105.16) (7,105.16) 2011 (1,915.30) (375.81) 891.92 (28.87) (109.66) (1,537.72) 2012 (1,605.08) 3,911.31 (126.75) (276.23) 1,903.25 2013 (1,712.72) 4,270.42 (138.36) (379.09) 2,040.25 2014 (1,826.60) 4,648.35 (150.60) (485.46) 2,185.70 2015 (1,947.23) 5,047.88 (163.53) (596.09) 2,341.03 2016 (2,075.28) 6,041.40 (195.76) (893.53) 2,876.82 2017 (2,213.72) 6,539.43 (211.85) (1,028.98) 3,084.88 2018 (2,356.01) 7,070.36 (229.08) (1,173.28) 3,311.98 2019 (2,373.25) 7,159.26 (231.94) (1,217.40) 3,336.67 2020 (2,390.24) (2,112.80) 7,244.73 (234.75) (1,260.15) 1,246.79 2021 (2,407.04) 8,089.94 (262.13) (1,479.45) 3,941.32 2022 (2,423.66) 8,178.62 (264.98) (1,524.69) 3,965.29 2023 (2,440.14) 8,265.11 (267.79) (1,568.93) 3,988.25 2024 (2,456.46) 8,349.78 (270.54) (1,612.33) 4,010.45 2025 (2,472.68) (1,513.00) 8,432.96 (273.23) (1,655.02) 2,519.04 2026 (2,488.82) 9,401.04 (304.58) (1,947.58) 4,660.06 2027 (2,504.87) 9,490.36 (307.49) (1,979.36) 4,698.64 2028 (2,520.89) 9,516.58 (308.36) (1,990.80) 4,696.53 2029 (2,545.77) 9,615.03 (311.54) (2,022.17) 4,735.55 2030 (2,570.93) (4,840.50) 9,714.69 (314.75) (2,053.66) (65.14) 2031 (2,596.43) 10,836.64 (351.09) (2,358.68) 22,692.64

Financial Internal Rate of Return before Corporate Tax = 9.4%Financial Internal Rate of Return after Corporate Tax = 7.0%

Weighted Average Cost of Capital = 3.0%

46 Appendix 10

Year Capital

Investment

Operation and

Maintenance Cost

Overhaul Expenses

Project Revenues

Business Tax

Corporate Income Tax

Net Cash Flow after

Income Tax

Reevaluation 2005 (720.00) (720.00) 2006 (7,780.00) (7,780.00) 2007 (11,120.00) (11,120.00) 2008 (10,000.00) (10,000.00) 2009 (10,225.79) (10,225.79) 2010 (3,089.67) (3,089.67) 2011 (2,235.39) 991.92 (1,243.47) 2012 (2,908.79) 1,040.00 (6.00) (1,862.79) 2013 (4,947.49) 3,762.00 (33.00) (1,152.49) 2014 (6,142.64) 4,276.00 (7.00) (1,859.64) 2015 (5,444.37) 4,554.00 (9.00) (881.37) 2016 (3,232.83) 3,176.00 (11.00) (45.83) 2017 (1,497.78) 4,168.41 (41.68) (318.38) 2,310.57 2018 (1,568.02) 5,357.55 (53.58) (518.51) 3,217.44 2019 (1,581.20) 5,774.94 (58.90) (597.70) 3,537.14 2020 (2,016.00) (1,594.68) (2,016.00) 6,224.85 (64.76) (682.93) 1,866.47 2021 (1,608.49) 6,709.81 (71.21) (774.68) 4,255.44 2022 (1,622.62) 7,232.55 (78.29) (873.43) 4,658.21 2023 (1,637.09) 7,796.01 (86.07) (979.72) 5,093.13 2024 (1,651.90) 8,403.37 (94.64) (1,094.13) 5,562.71 2025 (2,359.00) (1,667.06) (2,359.00) 9,058.05 (104.05) (1,217.27) 3,710.67 2026 (1,682.59) 9,763.73 (114.40) (1,349.81) 6,616.94 2027 (1,698.48) 10,524.39 (125.78) (1,492.47) 7,207.66 2028 (1,714.76) 11,344.31 (138.29) (1,630.25) 7,861.02 2029 (1,731.43) 12,228.11 (152.04) (1,778.88) 8,565.77 2030 (4,618.00) (1,748.49) (4,618.00) 13,180.76 (167.16) (1,939.21) 4,707.89 2031 (1,765.97) 14,207.63 (183.79) (2,115.08) 37,428.58

Financial Internal Rate of Return before Corporate Tax = 5.17%Financial Internal Rate of Return after Corporate Tax = 4.24%

Weighted Average Cost of Capital = 3.17% ( ) = negative, CNY = yuan. Note: Reevaluated project revenue for 2031 includes residual value of fixed assets. Source: Asian Development Bank and China Railway Corporation. 7. A sensitivity analysis was conducted to test the impact of variations in project revenues, operation and maintenance costs, and capital investment (Table A10.3). Since the FIRR in the base case is marginally higher than the WACC, the adverse changes tested all yielded a FIRR lower than the WACC. There is room for an appropriate increase of access charges to make the project more robust.

Appendix 10 47

Table 10.3: Sensitivity Analysis

Scenario Change in Variable After Income Tax FIRR At Appraisal Base Case 7.0 (i) Lower revenues 10% 5.3 (ii) Capital cost overrun 10% 5.8 (iii) Higher operating costs 10% 6.5 (iv) Implementation delay 1 year 6.2 (v) Combination of (i), (ii), and (iv) 5.0 (vi) Combination of (i), (ii), (iii), and (iv)

4.1

Reevaluation Base Case 4.2 Increase capital cost 10% 3.7 Increase operating expenses by 10% 10% 3.9 Reduce operating revenue by 10% 10% 3.3 Delay implementation by one year 1 year 4.0

FIRR = financial rate of return. Source: Asian Development Bank and China Railway Corporation.

C. Compliance with Financial Loan Covenants 8. The loan agreement required that, after the second full year of commercial operations, the ZXRC must maintain (i) an operating ratio of not more than 70%, (ii) a debt-service coverage ratio of at least 1.2, and (iii) a debt–equity ratio of not more than 65:35 to ensure operating efficiency and financial sustainability. 9. In 2013, the second full year of operations, the company reached an operating ratio of 94%, and cost increases subsequently pushed the ratio to 104%. However, the operating ratio improved to 77% in 2015 and 75% in 2016. With the change of ZXRC revenues to access charges, the operating ratio—which does not include ZXRC’s substantial interest expenses—substantially improved to 36% in 2017, and will remain very low for the remaining years of the reevaluation period, reaching 18% in 2025 and 12% in 2030. 10. Substantial operating losses during the first 5 years of operation (2012 to 2016) caused ZXRC’s debt service coverage to be negative for 3 years and less than 0.4 for 2 years. However, beginning in 2017, the debt service coverage will reach 1.4, making it compliant with the loan covenant. The debt service coverage ratio will improve to 2.1 in 2020 and 5.3 in 2025. 11. ZXRC’s debt-to-equity ratio has consistently stayed below the 65:35 threshold (1.86) throughout the reevaluation period. In 2012, the first full year of commercial operations, the debt-to-equity ratio was 1.29; it reached in 1.80 in 2016, is expected to reach 1 (representing 50:50) in 2018, and remain below 1 thereafter. 12. The three loan covenants regarding financial performance of the ZXR project have generally been complied with.

48 Appendix 11

SOCIAL IMPACT AND POVERTY REDUCTION

A. Introduction 1. Construction of the 459-kilometer (km) Zhengzhou‒Xi’an Railway (ZXR) commenced in September 2005 and all civil works were completed by July 2009. After a trial period, full operations started in February 2010. The ZXR is a key component of the eight passenger-dedicated lines (PDLs) to be completed by 2020. It connects not only the large regional centers of Zhengzhou and Xi’an, but is a vital link in the railway network as well, connecting cities in the Western regions (such as Baoji, Lanzhou, Urumqi and Chengdu) with major cities and ports such as Shanghai in the east. The ZXR traverses 5 prefecture-level cities encompassing 22 counties (cities and districts) in Henan and Shaanxi Provinces. Among those, 6 counties and 725 villages were designated as national and provincial poverty counties. 2. The poverty and social analysis conducted during project planning indicated that construction and operation of the ZXR would (i) improve access to markets and affordable goods and services; (ii) help create the conditions necessary for developing local resources and generating employment and income-enhancing opportunities to raise living standards in the project area; (iii) generate job opportunities during construction and operation for the poor, ethnic minorities, women, and other vulnerable groups, and provide training for skills development; (iv) support HIV/AIDS awareness and prevention programs; (iv) support income recovery programs for people affected by resettlement; (v) provide awareness and prevention programs for safety during construction and operation; and (vi) promote local tourism development. A social development action plan (SDAP) was developed during project preparation to enhance the project benefits. B. Socioeconomic Growth in the Project Area 3. Construction of the ZXR has contributed to regional socioeconomic development. Since the inception of the project in 2005, project investments, the purchase of construction materials, and spending on workers’ housing and living expenses have supported socioeconomic development in the project area. Socioeconomic conditions in the project area improved rapidly between commencement of construction and operations. From 2004, the year before commencement of construction, to 2011 (1 year after start of operations), gross domestic product (GDP) growth rates in the project area ranged from 136% to 557%. Counties and county-level cities with the lowest GDP rates in 2004 benefited the most, and have some of the highest growth rates (Table A11.1).

Appendix 11 49

Table A11.1: Gross Domestic Product Growth in the Project Area (CNY billion)

CNY = Chinese yuan. Source: All China Data Center. 4. In the same period, government fiscal revenue growth rates ranged from 213% to 706% (Table A11.2).

Table A11.2: Government Fiscal Revenue in the Project Area (CNY million)

Province City/County 2004 2005 2007 2009 2011 Growth (%) Henan Zhengzhou City

Xingyang County 402.3 535.9 761.0 1,016.2 1,408.4

250

Gongyi City 701.1 1,003.4 1,469.6 1,585.2 2,232.1 218 Luoyang City Yanshi City 350.1 591.3 901.6 1,113.8 1,095.4 213 Yiyang County 113.6 150.6 265.6 368.6 506.6 346 Xin’an County 345.9 374.2 860.7 1,050.7 1,305.5 277 Sanmenxia City Mianchi

County 226.8 351.1 610.6 850.7 1,212.1

434

Shan County 150.1 221.3 382.1 572.1 790.2 426 Lingbao City 226.8 301.1 544.8 777.1 1,079.8 376

Shaanxi Weinan City

Tongguan County 47.7 51.7 61.0 121.3 226.7

375

Huayin City 55.8 169.2 303.4 484.8 450.0 706 Hua County 132.1 103.4 174.1 260.8 447.5 239 Xi’an City

Total 2,752.3 3,853.2 6,334.5 8,201.3 10,754.3 346 CNY = Chinese yuan. Source: All China Data Center.

Province City/Country 2004 2005 2007 2009 2011 Growth (%) Henan Zhengzhou City 137.7 16.6 248.6 330.8 497.9 262

Xingyang County 11.1 14.5 23.9 31.5 43.2 289

Gongyi City 19.1 23.3 29.0 35.2 46.8 145 Luoyang City 90.5 111.2 159.5 200.1 270.2 199 Yanshi City 16.2 18.5 26.7 33.5 38.2 136 Yiyang County 3.1 4.5 7.6 10.7 15.4 397 Xin’an County 9.1 11.8 16.8 22.0 30.4 234 Sanmenxia City 27.4 33.5 51.8 70.2 103.0 276 Mianchi County 4.5 6.2 9.8 13.5 17.4 287 Shan County 3.5 4.0 5.8 9.1 11.8 237 Lingbao City 10.5 12.5 18.8 24.2 39.8 279

Shaanxi Weinan City 24.7 31.2 42.4 65.5 102.8 316

Tongguan County 0.9 0.7 0.8 1.6 2.6 189 Huayin City 1.3 1.9 2.3 4.0 5.8 346 Hua County 1.4 3.6 4.2 6.4 9.2 557 Xi’an City 109.5 127.0 176.3 272.4 386.4 253

Total 470.5 421 824.3 1130.7 1,620.9 269

50 Appendix 11

5. Construction and operation of the ZXR assists local governments in attracting external investment. New development areas have been constructed close to the railway stations and along the rail line. Two large logistic terminals in Zhengzhou and Xi’an were constructed during the project. The project freed capacity for freight operations on the old line while enhancing mobility through more rapid passenger transport on the PDL, and thereby has contributed to enhanced industrial development in the project area by (i) promoting access to resources, talent, technology and capital for enterprises; (ii) optimizing the allocation of social resources; and (iii) enhancing the competitiveness of enterprises. External investment in the project area has increased significantly following project commencement; large increases are apparent during 2005–2007, when construction peaked, and again during 2009–2011, during completion and initial operations (Table A11.3).

Table A11.3: External Investments in the Project Area (capital utilized in CNY million)

CNY = Chinese yuan. a including counties and districts in jurisdiction. Source: CEIC. 6. Locally procured construction materials and supplies also contributed to local revenue generation and provided additional job opportunities in the project area. Total expenditures on locally purchased construction materials were CNY6.118 billion, including CNY1.568 billion for river sand, CNY1.96 billion for stone materials, and CNY2.59 billion for other construction materials. Other materials such as reinforcing steel bars and cement were also sourced locally. Contractors and construction workers spent around CNY800 million on personal consumption. Another important source of income from the project is the rent of office space to the 12 engineering bureaus engaged in the project. Material procurement and personal consumption stimulated local economic development, provided indirect job opportunities, and increased the income of local people, including poor families in the project area. C. Increased Rural Income and Poverty Alleviation of local farmers 7. Rapid economic growth and increased fiscal revenues of local governments has significantly improved living standards and the income of local people, particularly the poor. Per capita income of rural households in the project area grew at a rate of 138%–365% from 2004 to 2011 (Table A11.4). A trend analysis of rural income growth from 2005 to 2015 in the counties and districts along the railway alignment indicates that rural income grew faster in poor areas than in other areas, thus gradually narrowing the income gap and balancing economic development in the project area.

Province Prefecture Levela 2004 2005 2007 2009 2011 Henan Zhengzhou 242.0 335.4 1,001.1 1,624.0 3,100.0

Luoyang 89.0 114.2 636.7 915.4 1,768.0Sanmenxia 57.5 72.0 187.0 263.5 631.4

Shaanxi Weinan 12.7 24.6 34.4 44.7 50.1Xi’an 275.9 571.1 1,115.6 1,218.7 2,005.2

Total 677.1 1,117.3 2,974.8 4,066.3 7,554.7

Appendix 11 51

Table A11.4: Annual Per Capital Net Income of Rural Households (CNY)

8. The topography along the ZXR is dominated by mountains and a loess plateau along the Yellow River. Transport in the project region was inconvenient, while villagers typically live in traditional cave-type dwellings. Annual monitoring reports from 2007‒2009 indicate that the ZXR construction provided an opportunity to improve living conditions for affected people. 9. In addition to positive impacts of ZXR construction, such as local consumption and provision of services, and compensation for land acquisition and resettlement, incomes of affected poor families increased significantly and relatively quickly, providing opportunities for the poor to accumulate financial resources to develop other forms of income, rather relying solely on income from agricultural sources. In combination with the programs implemented by local poverty-alleviation offices, the financial resources provided through the project have served to assist poor families. Employment opportunities provided to poor families were estimated at 2.8 million person-days, with service income received by poor people of about CNY168 million; per capita income varied from CNY8,000 to CNY80,000 for laborers from poor families. D. Job Creation 10. Many non-technical employment opportunities were made available for local villagers, including women, during railway construction. Based on external monitoring reports, the project provided employment opportunities totaling 143,750 person-years, with 21,550 person-years, or 15%, filled by villagers living along the ZXR line, mainly in the form of unskilled labor. Of the unskilled labor employment generated, 65% went to laborers from poor households, and 15% to women. 11. The small amount of actual employment created and the lower percentage of unskilled workers (as compared to appraisal estimates) can be attributed to the higher degree of mechanization of construction than was anticipated. Poor villagers, including women, employed in construction earned CNY60‒CNY100 per day, and collectively earned at least CNY258.6 million. Jobs generated during project construction helped reduce poverty and contributed to gender empowerment in the project area.

Province City/County 2004 2005 2007 2009 2011 Growth (%)

Henan

Zhengzhoua Xingyang County 3,874.8 4,557.0 6,549.0 7,973.0 10,846.4 180 Gongyi City 4,777.0 5,458.0 7,088.0 8,481.0 11,392.3 138 Luoyanga Yanshi City 3,862.0 4,337.0 6,030.0 7,355.0 9,826.0 154 Yiyang County 2,165.0 2,436.0 3,450.0 4,170.0 5,348.0 147 Xin’an County 2,649.0 3,001.0 4,125.0 5,112.0 7,575.0 186 Sanmenxiaa Mianchi County 2,725.4 3,315.0 4,406.0 5,569.0 7,668.6 181 Shan County 2,338.7 2,662.0 3,598.0 4,510.0 6,160.4 163 Lingbao City 2,958.1 3,374.0 4,700.0 5,872.0 8,062.7 173

Shaanxi

Weinana Tongguan County 1,749.0 1,852.0 2,341.0 3,524.0 5,382.0 208 Huayin City 1,575.0 1,703.0 2,409.0 3,621.0 5,389.0 242 Hua County 1,178.0 1,425.0 2,371.0 3,600.0 5,480.0 365

CNY= Chinese yuan. a Prefecture level. Source: CEIC Data Center https://www.ceicdata.com.

52 Appendix 11

12. When the ZXR started operations, a total of 2,509 new jobs were offered in locomotive and vehicle operation; electrical engineering; maintenance and repair; and station jobs such as security guards, attendants, and ticket conductors. By 2016, total employment relating to ZXR operations had reached 3,571 positions. E. Tourism Development 13. The project area has many tourism destinations. The opening of the ZXR offered advanced transport infrastructure for tourism development and integration of destinations such as Xi’an, Luoyang and Zhengzhou. Tourism resources along the ZXR include several national key cultural relic protection units, 28 national 4A and 12 national 5A tourism destinations, and one national historic cultural town; destinations include the Terracotta Army (Xi’an) and the Longmen Grottos (Luoyang). Tourist administrations cooperated with the railway bureaus and airlines to develop multimodal transportation packages. Tourists can now arrive by plane in Xi’an or Zhengzhou and take daytrips to the other city, or other destinations such as Luoyang. Tourism income increased from CNY106 billion in 2009 (prior to ZXR operations) to CNY169.1 billion in 2011. Especially significant are the increases in the project areas of Sanmenxia and Weinan, which formerly were not easily accessible; there tourism income doubled in just 2 years (Table A11.6).

Table A11.5: Tourism Income in the Project Area

CNY = Chinese yuan. a including counties and districts in jurisdiction. Source: Local Statistics Bureaus Bulletins. F. Safe and Affordable Mobility 14. The ZXR is in a relatively mountainous area at the edge of the loess plateau of Henan Province; some locations were connected through conventional trains, but buses were the prevailing transport mode. The ZXR provided affordable, more rapid and safer transport services for local people and visitors. While a conventional train service was available in some cities, the ZXR increased the accessibility of passenger train services. The cost of train travel on the ZXR PDL is around 30% higher than travel by bus, but travel time by train between Zhengzhou and Xi’an was reduced by 50%. To destinations along the ZXR line, time savings are as much as 75% compared with bus travel (Table A11.6). The reduced travel times are encouraging travelers to choose rail over bus travel, because the higher fare is outweighed by other savings (e.g., in accommodation cost). With the continuous extension of the passenger-dedicated train system in the People’s Republic of China, passengers can travel to other destinations more comfortably, at stable prices. Day-journeys to more distant economic centers, such as Beijing or Shanghai, have become feasible. Consequently, rail passenger transport has led to a significant reduction in air passenger numbers from local airports such as Luoyang.

Province Prefecture Levela

Tourism Income(CNY billion)

Increase (%)

2009 2011 2013 2015 (2009‒2011) (2011‒2013) (2013‒2015)Henan Zhengzhou 39.8 58.0 80.1 100.4 46 38 25

Luoyang 26.0 34.8 48.5 78.0 34 39 61 Sanmenxia 4.7 11.7 17.6 22.5 117 50 28

Shaanxi Weinan 5.1 11.6 21.2 32.3 127 83 52 Xi’an 29.7 53.0 81.1 107.3 78 53 32

Total 106 169.1 248.5 243.9 60 47 37

Appendix 11 53

Table A11.6: Travel from Zhengzhou (Downtown to Project Counties/Cities)

Distance (km)

Train Pricea

Train Time

Bus Price

Bus Time

Province City Train Bus CNY (min) (CNY) (min) Gongyi 60 65 42.5 30 35 120 Luoyang 100 116 59.5 37 55 120 Mianchi 180 193 84.5 59 67 150 Sanmenxia 223 248 114.5 69 90 190 Lingbao 280 293 134.5 80 95 210 Shaanxi Huashan 345 360 174.5 98 120 325 Weinan 405 416 204.0 119 135 300 Xi’an 465 485 229.0 139 170 325

CNY= Chinese yuan, km = kilometer, min = minutes. a For second-class travel. Sources: China Railway Corporation ticket booking website, Ctrip bus portal, and the Zhengzhou-Xian Passenger Dedicated Railway Company. 15. The new train stations at ZXR’s major destinations have been converted to transport hubs, with direct access to local bus, Bus Rapid Transit (BRT), metro and airport links, thus further contributing to a fully-fledged multimodal transport system providing a wide range of choice of transport modes for differing needs and levels of affluence. G. Gender Development 16. The construction and operation of the ZXR has promoted gender development in the project area. A total of 3,250 person-years in labor went to women during the ZXR construction period. The women were mainly engaged in support services at the construction sites, such as cleaning and maintaining equipment, cooking and performing sanitation work. Surveys conducted by the external monitor indicated female workers found the work intensity at construction sites was much lower compared with housework, while the income was higher. While women accounted for just 15% of the total local unskilled labor hired, construction provided women along the railway with opportunities in terms of equal employment and equal pay for equal work. Women’s awareness and attitudes (e.g., regarding participation in village social affairs, and work other than housework) as well as their social status, income levels and participation in the market economy all improved. 17. In the first phase (2005‒2007) of construction, 23,000 women participated in training carried out by women’s federations to develop their practical skills and awareness. Other activities that were carried out by the women’s federations included “March 8 Rights Protection Week”, involving activities against domestic violence against women, with 14 legal consultation stations, involving almost 10,000 persons, set up along the railway line. In 15 communities mediation centers were established to provide counseling services to women to help in resolving domestic violence issues. Special funds were set up to grant women loans to start their own businesses. Labor fairs encouraging women’s employment were held in several counties. 18. Training courses on agricultural and forestry technology were held 110 times in Lingbao City alone, with 12,660 persons trained; in addition, 28 training bases and 24 demonstration bases were established. Lingbao City had the highest participation rate by women in the construction of the ZXR during 2007 (50%). 19. The main ethnic minority group in the project area (the Hui) are mainly settled in Xi’an and Zhengzhou Cities and integrated with the Han people. The Hui people are also benefiting from the ZXR. No other concentrated ethnic communities are found in the project area.

54 Appendix 11

H. Labor Safety, Control of HIV/AIDS and Sexually Transmitted Diseases, and Human Trafficking

20. The contractors had previous experience in labor management. Each contractor established a set of management systems, including with regards to construction safety, safety quality training, safety quality reporting, safety production accumulation, and health management. The awareness of laborers regarding safety was improved, and the principle of “safety first” promoted through regular training. All required safety discipline, construction and hazard warning signs were erected at construction sites, and the wearing of safety helmets, respirators and other safety gear strictly enforced. 21. According to external monitoring reports, contractors were attentive to the health of workers, especially migrant workers. Prevention and control activities on infectious diseases, sexually transmitted diseases, and HIV/AIDS were included in training to ensure the physical and mental health of the laborers. 22. Both internal and external monitoring were undertaken. The external monitor submitted three SDAP monitoring reports during 2007‒2009. I. Conclusion 23. Based on available information, SDAP implementation was in accordance with SDAP planned activities and resulted in positive impacts. However, the monitoring reports were limited to qualitative rather than quantitative information.

Appendix 12 55

LAND ACQUISITION AND RESETTLEMENT

A. Introduction 1. The Zhengzhou‒Xi’an Railway (ZXR) project was included in the Eleventh Five-Year Plan (2006–2010) of the People’s Republic of China (PRC), and considered a key investment to address the area’s inadequate transport infrastructure. It is one of eight passenger-dedicated corridors in the PRC to be developed by 2020. The ZXR has a total length of 459 kilometers (km), and connects Henan and Shaanxi provinces, which are both large regional centers. The ZXR is also the main east–west corridor linking Beijing, Shanghai, other major cities and ports in the east, with Xi’an, Baoji, Lanzhou, Urumqi, Chengdu, Chongqing, and other economic centers in the western region. 2. The Ministry of Railways (MOR), in consultation with the Land Resource Department and provincial and local governments, prepared the resettlement plan based on the preliminary design study, relevant national laws, and the Policy on Indigenous People (1998) and the Policy on Resettlement (1995) of the Asian Development Bank (ADB). The resettlement objective was to ensure that compensation and entitlements provided to affected people were adequate to at least maintain their "without-project" standard of living, with the prospect of improvement. The resettlement plan was not updated, because the land acquisition and resettlement (LAR) impacts did not change significantly during the detailed design. 3. ADB conducted the project completion review mission 8 years after construction completion. By then, insufficient data and information were available to enable a thorough LAR evaluation to be made. In addition, the executing and the implementing agencies had been restructured, and staff reassigned. The limited information obtained from the project completion review mission and the records of monitoring reports prepared during 2007‒2009, including the 2014 resettlement completion report, were used to prepare this report. B. Scope of Land Acquisition and Resettlement 4. The resettlement plan indicated construction of the ZXR would involve land acquisition, house demolition, and relocation of affected persons. Total land acquisition was estimated at 25,229 mu, of which about 63% was under cultivation, 8% orchard, 11% housing plots, 2% forest, 4% grassland, and 12% wasteland. 1 The number of persons affected by loss of land was estimated at 25,331, assuming total loss of cultivated land based on average per capita landholdings. About 978,712 square meters (m2) of structures were estimated to be affected, of which 79% were residential. A total of 38,958 people were estimated be affected by relocation. The project also required 46,426 m2 of schools and 302,087 m2 of factories and other enterprises to be relocated. The project was expected to temporarily occupy about 8,940 mu of land. 5. According to the monitoring reports of the independent external monitoring and evaluation institution, the LAR commenced in December 2005 and relocation activities were completed in December 2012. The ZXR LAR covered 410 villages, 71 towns, 22 counties (city or district), and five municipalities in Henan and Shanxi provinces. The project permanently expropriated 22,470.5 mu of land. This is 11% less than the planned 25,229 mu under the original resettlement plan. At the same time, people affected by land expropriation (including people affected by both land expropriation and demolition) decreased to 6,677 households (from 8,444 in the original plan) and 20,030 people (down from 25,331 people).

1 A mu is a Chinese unit of measurement (1 mu = 666.67 m2).

56 Appendix 12

6. A total of 12,659.2 mu of the land was temporarily expropriated, including 9,477.4 mu in Henan province and 3,181.8 mu in Shaanxi province, for the processing and disposal of soil, access road construction, and storage of construction equipment and material. This constitutes an increase of 42% compared to the 8,940 mu estimated at appraisal. When the project was completed the land was largely returned to its former uses. 7. The houses demolished by the project covered a total area of 1,110,613.2 m2, an increase of 13% compared with the original estimate of 978,712 m2; 5,429 households (accounting for 23,326 people) were affected by the demolition, 27% less than the estimated 7,472 households and 38,958 people. Among the demolished houses, ordinary houses accounted for 973,331.3 m2, makeshift houses for 108,769.7 m2, and makeshift sheds for 28,512.1 m2. The real demolition area of Henan Province was 749,133.6 m2, and of Shaanxi Province 361,479.5 m2 (Table A12.1). The project also affected ground attachments, public facilities and other infrastructure, including 116,872.2 m2 of enclosures, 2,824 wells (including water wells, motor-pumped wells, and irrigation wells), enclosures (54,659.2 m2), and water supply pipes (63,693.4 meters) along the railway line. 8. The project affected 99 enterprises and schools, including 84 buildings of different enterprises and 15 primary and middle schools.

Table A12.1: Summary of Land Acquisition and Resettlement Impacts

Henan Province Shaanxi Province Total Actual Actual Actual as % of as % of as % ofImpact Planned Actual Planned Planned Actual Planned Planned Actual PlannedA. Land Acquisition (mu) 17,339.0 16,569.4 96% 7,960.0 5,901.1 74% 25,299.0 22,470.5 89% B. Temporary Land Requirement (mu) n.a. 9,477.4 n.a. n.a. 3,181.8 n.a. 8,940.0 12,659.2 142% Affected Households

5,300 5,183 98% 3,144 1,494 48% 8,444 6,677 79%

C. Building Demolition (m2)

685,997.0

749,133.7

109%

292,715.0

361,479.6

123%

978,712.0

1,110,613.0

113%

Households Demolished

4,530 3,280 72% 2,941 2,149 73% 7,471 5,429 73%

D. Affected Persons 1. by land acquisition 15,898 15,548 98% 9,433 4,482 48% 25,331 20,030 79% 2. by house relocation 22,648 14,100 62% 16,310 9,226 57% 38,958 23,326 60%

m2 = square meter, mu = Chinese unit of measurement (1 mu = 0.0666 hectares), n.a.= data not available. Source: Zhengzhou‒Xi’an Passenger Dedicated Railway Company.

C. Resettlement Policy and Compensation 9. LAR was implemented based on the resettlement plan; the 2004 Land Administration Law and subsequent implementing rules; Regulations on Housing Demolition, Decree No. 28 issued

Appendix 12 57

by the PRC State Council in 2008; and other major government rules, regulations, and agreements.2 10. The compensation rates for the permanent acquisition of land estimated at appraisal ranged from CNY15,000 to CNY30,000 per mu in Henan and Shanxi provinces and were differentiated as vegetable fields, irrigated land, dryland, forest land, construction and unused land. The actual compensation rates either matched or were higher than the estimated rates in the resettlement plan (Table A12.2).

Table A12.2: Compensation Rates for Permanent Requisition of Land (in CNY10,000 per mu, prefecture average)

Vegetable Field

Irrigated Land

Dry Land

Forest Land

Construction Land

Unused Land

Province Prefecture P A P A P A P A P A P AHenan Zhengzhou 2 3.7 3 3.7 2 3.7 2 3.7 2.5 3.7 1.5 3.7 Luoyang 2 2.1 3 3 2 2.1 2 2.1 2.5 2.5 1.5 2.1 Sanmenxia 2 2.5 3 3 2 3.1 2 2.5 2.5 2.5 1.5 1.9 Shaanxi Weinan 2 2.2 3 3 2 2 2 2.5 2.5 2.5 1.5 2.5 Xi’an 2 3 3 n.a. 2 2.1 2 n.a. 2.5 n.a. 1.5 n.a.

A = actual, CNY= Chinese yuan, mu = Chinese unit of measurement (1 mu = 0.0666 hectares), P = planned. Source: Completion Report of Resettlement in Land Requisition and Demolition 2014. 11. Compensation for the loss of house plots and houses or structures was paid at replacement cost, directly to the affected persons. Compensation rates for house demolition were higher than planned rates due to the long period between preparation and implementation, and reflects the economic development levels of the affected regions. For brick and concrete structures, rates were CNY150 to CNY480 per m2; and for brick and timber structures, CNY150 to CNY390 per m2. 12. Compensation rates for temporary use of land ranged from CNY730 to CNY1,000 per mu in both Henan and Shaanxi provinces. Different rates were paid for irrigated land, vegetable land and dryland. 13. Cash compensation was provided to the 84 affected enterprises. It included compensation for land, demolition of structures, and movement; and compensation for lost production due to interruption. After receiving compensation, all the affected enterprises found suitable places to rebuild and resume production. While some opted to self-relocate, others were assisted by local governments. The total compensation cost for enterprises was CNY3,410,926,678. 14. Significant attention was paid to the relocation and rebuilding of primary and middle schools, for which rebuilding-related compensation totaled CNY16,168,086. The relocation had the positive effect of replacing old and badly equipped school buildings with new ones, and providing appropriate teaching facilities. 2 Specifically: (i) agreements on the ZXR’s construction among the MOR and the Henan and Shaanxi provincial

governments (2005); (ii) Implementation Agreement on Land Acquisition and Resettlement for the Zhengzhou‒Xi’an Passenger Dedicated Line within Henan Province and an Implementation Agreement on Land Acquisition and Resettlement for the Zhengzhou‒Xi’an Passenger Dedicated Line within Shaanxi Province between the Zhengzhou-Xi’an Passenger Dedicated Railway Line Company (ZXRC) and the Land Resource Bureaus of Henan and Shaanxi provinces, signed on December 30, 2005 and April 21, 2005, respectively; (iii) approvals of the preliminary land use procedures by the provincial land resource bureaus of February and April 2005, approvals of preliminary procedures on land use in Henan and Shaanxi by the national land resource department (National Land Resource Department Preliminary Hearing No. (2005) 85); and (iv) approval of Land Use Procedures for Henan Province (National Land Resource Department Letter No. (2007) 89) and Shaanxi Province in 2009.

58 Appendix 12

D. Resettlement Measures and Income Restoration 15. The resettlement approaches for house relocation and new house rebuilding varied according to the local context. Displaced persons moved into new houses that were either self-constructed in the villages or constructed by local governments in concentrated resettlement sites. Compensation was paid prior to land acquisition and house demolition, which greatly facilitated the LAR process. Prior payment reduced affected villagers’ doubts and provided them with the required funds to meet their resettlement needs. Compensation was mainly used to rebuild livelihoods, build new houses, make productive investments, and contribute to savings. 16. To make sure that affected persons could restore their incomes and livelihoods effectively, several measures were taken, with the cooperation of local governments: (i) ensuring compensation made to all affected persons was adequate and timely; (ii) resettling affected persons near their original habitations so as not to disrupt their farming, production mode, lifestyle and social networks; iii) restoring temporary land occupation in a timely manner and recovering public facilities and infrastructure affected by the Project; (iv) providing skills training to affected persons, with cooperation from relevant departments of local governments (e.g., labor bureau, poverty alleviation office, and women federation) to enable them to generate income from other sources; (v) ensuring affected persons were given priority when laborers were hired for unskilled jobs; and (vi) developing local fruit and vegetable production, and tourism opportunities by taking advantage of unique local climate and geographical conditions. 17. Both scattered resettlement and collective resettlement were provided to affected households that had to relocate. In scattered resettlement affected persons selected new house plots by themselves and rebuilt new houses on their own, with some support from local governments, including subsidies for movement and transition, movement rewards, and assistance with provision of utilities and land leveling. 3 Under collective resettlement the government arranged unified house plots for house reconstruction. A total of 64 concentrated resettlement sites were arranged and constructed, 39 of which are situated in Henan, and 25 in Shaanxi, comprising 3,670 households that opted for concentrated resettlement. All the resettlement sites were funded by the ZXRC (Table A12.3). The remaining 3,007 households opted for scattered resettlement.

Table A12.3: Collective Resettlement Sites in the Project Area

Province

City/ District/ County Name of Village

Total Resettled Households

Year of Completion

Henan Zhongyuan District Xushui 24 2008 Miaowan 36 2009 Wangyue Village 25 2009 Shenjiazhuang

21 2009

Yangshi County Duandong 36 2009 Duanxi 42 2009 Liwang 40 2009 Luzhai 46 2009 Wuchagou 11 2009 Nanzhai 42 2008 Nanshenming 13 2008 Xingyang County Gaozhai 31 2008 Wugou 58 2009 Taoli 14 2009 Caizhai 20 2009 Leilong 15 2008

3 Water supply, electricity supply, road supply and land leveling.

Appendix 12 59

Province

City/ District/ County Name of Village

Total Resettled Households

Year of Completion

Zhuyehe

17 2008

Gongyi City Guanzhang 136 2009 Caidan

19 2008

Yiyang County Xiaozuo 450 2008 Geda 325 2009 Zaohe Group 2 21 2008 Zaohe Group 3

40 2008

Luolong District Balitang 85 2011 Xinzhuang 10 2009 Longmen

600 2011

Mianchi County Lusi 50 2008 Baonan 32 2008 Mengjiagou 16 2009 Yutong

22 2009

Hubin District Houqiao 1 10 2010 Houqiao 2

41 2009

Shanxian County Qiaoguan 10 2009 Tuqiao 22 2009 Chencun 68 2009 Ganmaio 20 2009 Shimengou 9 2008 Xiaochao

10 2008

Lingbao City Leijiaving 25 2009 Wendong

45 2009

Huayin City Baipo, Fushui, Shadao, Taitou, Nanying, Shangwa, Guojia

299

2008 Lucheng, Yougang 134 2008 Gongjia

36 2008

Huaxian County Dongluo 20 2008 Zhuangtou 37 2008 Fuzhong 19 2009 Fengliang 78 2009 Nanguang 107 2009 Shaanxi Jiangjia 40 2008 Xiangtian 25 2008 Tuanjie 17 2009 Linwei District Dongfeng 16 2009 Madu 49 2009 Dongsi 49 2008 Zhandong 54 2011 Zhangxi 23 2009 Xuncun 90 2012 Zhuwnag 20 2011

Source: Completion Report of Resettlement in Land Requisition and Demolition 2014. 18. To compare income before and after land acquisition, a survey was conducted by the external monitor among 1,047 households. The survey indicates that the incomes of affected households had recovered and increased following project completion. The average per capita

60 Appendix 12

annual income rose by 73% during 2006‒2014 (Table A12.4). Much of this income is generated through employment and locally based non-agricultural activities.

Table A12.4: Income Restoration of Affected Households

CNY = Chinese yuan. E. Resettlement Costs 19. LAR costs totaled CNY2,410,383,871, an increase of 21.25% compared with the CNY1,990,060,000 estimated at appraisal. Of the total LAR budget, 22.7% was compensation for land—14.99% for the expropriation of farming land, and 7.71% for the expropriation of other lands; 31.39% for compensation of ground attachments; 22.09% for compensation for house demolition; 4.97% for temporary land occupation; 7.16% for land reclamation; 2.91% for management; and 8.05% for other expenses. The final resettlement cost is higher than estimated originally because the compensation rates were increased for house demolition and reconstruction, resulting from inflation and increased costs for construction materials. All additional costs were funded by the ZXRC. 20. By end of April 2012, all LAR compensation had been paid fully. F. Institutional Arrangements 21. The LAR institutional setup followed the resettlement plan outline: (i) the foreign capital and technical import center of MOR (now the China Railway Company) led the planning, consultation and participation, including LAR implementation, along with the local land resource bureau; (ii) Zhengzhou and Xi’an headquarters of ZXRC set up LAR offices responsible for coordinating with local governments in Henan and Shanxi provinces, respectively to implement LAR; (iii) the county and district governments involved in ZXR established relevant steering groups and coordinating offices for the LAR work, that included other relevant government agencies such as the finance bureaus, land resource bureaus, poverty reduction office, All-China Women’s Federation; and health, civil affairs, and ethnic affairs bureaus; and (iv) ZXRC engaged an external monitor—the Research Institute of Foreign Capital Introduction and Unitization of Southwest Jiaotong University—to carry out independent monitoring and evaluation of LAR implementation. 22. The external monitor prepared and submitted the phase I resettlement monitoring report to ADB in August 2007, a report on phase II in December 2008, and on phase III December 2009, which were disclosed on the ADB website. In May 2014, the institute submitted a resettlement completion report. 23. In general, the requirements for resettlement monitoring and evaluation were complied with through the resettlement plan, and a professional evaluation system established. The suggestions provided by the monitor promoted smooth LAR implementation. G. Participation and Consultation, Complaints and Grievance Redress 24. For LAR, the planned information disclosure, participation and consultation activities followed the relevant national regulations, which were timely and effectively. Such activities

2006 (CNY)

2014 (CNY)

Growth (%)

Average annual net income per capita

6,541 11,322 73%

Appendix 12 61

included: (i) distributing a resettlement information booklet among all affected persons; (ii) organizing at least two villager’s meetings in each natural village each year to mobilize and organize various LAR actions; (iii) publicizing actual resettlement impacts and compensation for each affected household in each natural village; (iv) arranging training; and (v) carrying out monitoring and evaluation in some targeted villages. 25. During project implementation, consultations and surveys were conducted with about 10,000 people to understand people’s perceptions about the project. These activities were supported by local government agencies, including the poverty reduction offices; the All-China Women’s Federation; and the health, civil and ethnic affairs bureaus. 26. A grievance redress mechanism was set up in accordance with the resettlement plan to deal with project-related grievances of affected persons. The grievance redress mechanism was publicized among affected persons along the rail alignments through distribution of resettlement information booklets and through village meetings. The project’s resettlement policy was people-centered, with higher compensation rates than required by the resettlement plan, and routine consultation and participation activities among ZXRC, local governments, villages and affected persons. No complaints were received regarding LAR during resettlement plan implementation. H. Lessons Learned 27. In general, resettlement work under the project strictly followed the requirements of the project resettlement plan. However, this project had a long construction period, and estimates made during preparation differed from actual outcomes. The assessment for this project made at the outset did not consider the influence of newly issued policies on social security, and the rising price of building materials needed for the construction of new houses in the project area, which resulted in many difficulties relating to resettlement, housing demolition, and housing reconstruction. Accordingly, the project did not limit compensation to the already published standards, but immediately readjusted the resettlement policies, improved the compensation standards for demolished housing, and reduced the potential risks to affected persons.

62 Appendix 13

ENVIRONMENTAL IMPACT ANALYSIS

A. Introduction 1. The project is classified as category A for environment. A summary environmental impact assessment (SEIA), containing an environmental management plan (EMP) and an environmental monitoring plan (EMOP) were prepared and assessed in April 2005 for the construction of (i) 458.9 kilometers (km) of an electrified, double-track passenger-dedicated railway line (PDL); (ii) a total of 61 km of tunnels and 151 km of bridges; and (iii) nine new train stations. 2. The domestic environmental impact assessment (EIA) was prepared by the Fourth Survey Design Institute and submitted to the State Environmental Protection Agency (SEPA), which identified sensitive environmental receptors, including several areas of cultural, historic and archaeological sites; the Yellow River Wetlands National Class Natural Protection Area; and numerous villages, townships, and schools that were sensitive to noise and air pollution. A set of comprehensive mitigation measures included in the domestic EIA went through a series of government consultation processes. The Ministry of Water Resources approved the soil and water conservation measures indicated in the domestic EIA approved in December 2004. The final domestic EIA was approved by SEPA in early 2007. 3. Project construction was completed in December 2009 and the initial test operation carried out during February 2010 to February 2011. The 2011 environmental monitoring report (EMR) indicated that the environmental completion report was prepared by China Academy of Railway Science in October 2010 and relevant inspection was carried out in 2011. The project was completed with 459.53 km of double-track highspeed PDL, 134 bridges with a total length of 252 km, 38 tunnels with a total length of 77 km, and 10 passenger train stations. The bridges and tunnels account for 72% of total alignment, and sought to help lessen noise and vibration impacts to affected communities. 4. The project completion review (PCR) mission was conducted by the Asian Development Bank (ADB) during 24 to 28 April 2017. During the mission, inspections were made of sites and facilities along the Zhengzhou‒Xi’an railway alignment. The mission had extensive discussions with representatives from the ZXRC and the Zhengzhou railway bureaus under the China Railway Corporation (CRC). By the time of the ADB PCR mission, insufficient data and information were available to enable a thorough evaluation to be conducted. The ADB PCR mission was conducted 8 years after completion of construction, during which time the executing and implementing agencies had been restructured, and staff reassigned. This report was prepared based on information obtained from the mission and the records of EMRs prepared during 2006 to 2011. The quality of the EMRs was good and the information on EMP implementation judged sufficient. Table A13.1 shows reports reviewed for project completion assessment relevant to environment impacts.

Table A13.1: Reports Reviewed for Project Completion

No. Report Title1 Third Survey and Design Institute of China Railways Co. 2006. Environmental monitoring report (covering

September 2005–October 2006). Prepared for the Ministry of Railway for submission to ADB.

2 Third Survey and Design Institute of China Railways Co. 2007. Environmental monitoring report (covering November 2006–October 2007). Prepared for the Ministry of Railway for submission to ADB.

3 Third Survey and Design Institute of China Railways Co. 2009. Environmental monitoring report (covering January 2008–December 2008). Prepared for the Ministry of Railway for submission to ADB.

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No. Report Title4 Third Survey and Design Institute of China Railways Co. 2009. Environmental monitoring report (covering

January 2009–December 2009). Prepared for the Ministry of Railway for submission to ADB.

5 Third Survey and Design Institute of China Railways Co. 2011. Environmental monitoring report (covering January 2010–January 2011). Prepared for the Ministry of Railway for submission to ADB.

6 Zhengzhou–Xi'an PDL Co. 2011. Engineering Summary of the Zhengzhou-Xi'an High Speed Railway. Beijing: China Railway Publishing House.

ADB = Asian Development Bank, PDL = passenger-dedicated line. Source: ADB and ZXRC. B. Institutional Arrangement and Capacity Training for Environment Management 5. MOR (now restructured and renamed CRC) was the project executing agency, with overall responsibility for the environmental management of the project, including fulfilling EMP implementation and environmental monitoring and reporting requirements. The Zhengzhou‒Xi’an Passenger Dedicated Railway Line Company (ZXRC), established in January 2006 as the implementing agency, was responsible for daily operations and project environmental management, as agreed at appraisal. The institutional arrangements for the project’s environmental management as agreed at appraisal, and as implemented, are in Table A13.2.

Table A13.2: Environmental Management Plan Responsibilities and Summary of Implementation Status

Duties and Responsibilities Agreed at Project Appraisal Implementation status

Project Executing Agency: Ministry of Railways (later restructured as CRC) Overall responsibility of the project’ environmental management, including EMPand EMOP

Complied. Established ZXRC and ensured proper implementation of project environmental management.

Project Implementing Agency: ZXRC 1. Establishment of environmental social

monitoring unit

Complied. Safety and quality control department was established with adequate staff. During project construction, the safety and quality control department closely coordinated with the engineering department in EMP implementation, including supervision of contractors’ EMP performance and compliance. An environmental protection steering team, led by a deputy general manager of ZXRC, was organized and provided close supervision for EMP implementation.

2. Environmental clauses and EMP provisions in all bidding documents

Complied.All the bidding documents and contracts had environmental clauses and EMP provisions.

3. Preparation of EMP execution schedule for contractors

Complied.Detailed site-specific soil and water conservation measures were prepared and approved by relevant local EPBs.

4. Supervision of contractors to comply with the EMP provisions

Complied.Regular site visits, inspections, and supervision were carried out.

5. Implementation of operational phase EMP Complied. Since commercial operation began in 2011, the Zhengzhou and Xi’an railway bureaus under CRC have been

64 Appendix 13

Duties and Responsibilities Agreed at Project Appraisal Implementation status

implementing environmental safeguards measures (engineering management units of these bureaus are responsible).

6. Direct communication and cooperation with national and local government agencies for environmental protection and EMP and EMOP

Complied.There was close communication and cooperation in implementing mitigation measures with relevant local EPBs and other concerned bureaus.

7. Engagement of independent environmental monitors.

Complied on the engagement of independent environmental monitor; partially complied with the submission on environmental monitoring reports. The Third Survey and Design Institute of China Railways was engaged as an independent environmental monitor beginning in 2006, and provided annual environmental monitoring reports.

Supervision engineering companies Fifteen domestic and international construction supervision companies were involved in and closely supervised and managed railway construction. Supervision to ensure proper environmental management planning and execution was a priority concern and working area of those construction supervision companies.

Contractors Environmental management was taken seriously by contractors. Some contractors obtained ISO 14001 environmental management system certifications, implemented good environmental management system practices, actively contacted relevant local authorities, and followed the agreed environmental management in their contracts.

CRC = China Railway Corporation, EMP = environmental management plan, EMOP = environmental monitoring plan, EPB = environmental protection bureau, ISO = International Organization for Standardization, ZXRC = Zhengzhou‒Xi’an Passenger Dedicated Railway Line Company. Source: Zhengzhou-Xi’an Environmental Management Plan. C. Environmental Impacts and Mitigations 6. Air quality. The project SEIA provided baseline air quality data along the alignment, which shows that local air quality was poor prior to the project. Without mitigation, the SEIA assessed that a moderate and temporary deterioration of air quality would be caused by construction activities, construction machinery and equipment. During construction, a range of dust control measures were implemented, and these were assessed as effective. Attention was paid in particular to house and building demolition: dust separation was used to mitigate dust impacts to nearby residents and communities. Water spraying was frequently applied to control construction dust and dust from construction vehicles. Vehicles loaded with construction materials were covered during transportation. A hardening treatment was applied to temporary construction roads, and staff employed for regular cleaning. Cement, sand and other materials were stored indoors at mixing plants. Construction vehicles and equipment met applicable vehicle emissions standards, and construction dust control performed as required. Waste burning was also strictly prohibited. Construction supervision companies provided frequent monitoring and supervision to ensure there were no serious unresolved issues relating to construction dust. No persistent complaints were recorded regarding construction dust over a long period. 7. Noise and vibration. The project SEIA indicated there were considerable noise and vibration issues along the alignment caused by the existing railway, national highways and other roads, and a range of industrial, commercial and agricultural activities. Noise and vibration impacts from the project were assessed at project appraisal, which identified major noise and vibration sources during construction (blasting in tunnels and quarries; and heavy earthmoving

Appendix 13 65

equipment such as excavators, pile drivers, jackhammers, and vibrating rollers). During operations, the high-speed train was identified as having noise and vibration impacts. 8. To reduce impacts from noise and vibration, all contractors (i) worked closely with local authorities to coordinate and schedule agreeable operating hours for blasting and other earthworks associated with high noise and vibration; (ii) strictly followed the work schedule; (iii) properly maintained heavy equipment to reduce noise and vibration; and (iv) provided and ensured the use of noise protection equipment by workers working in high noise areas, and with high noise machinery and equipment. They strictly followed and complied with noise standards for the boundaries of construction sites, particularly at large construction works in populated areas, and this was confirmed by local environmental protection bureaus. Throughout the construction period, public notice was properly provided to inform residents of construction times with high noise levels, methods used for noise mitigation, and contact information to report any issues. Special attention was given (and close communication ensured with relevant authorities) to affected communities identified as high noise and vibration sensitive receptors. 9. Noise barriers were installed for the 160 noise-sensitive areas to mitigate noise and vibration. Along the alignment, a total of 65 km of noise barriers (height of 2.15 meter to 3.95 meter) were installed. For some areas that were scattered and not suitable for noise barriers, soundproof windows were installed if noise monitoring results exceeded the limits. A total of 14,860 square meters (m2) of soundproof windows were installed. To reduce noise and vibration from train operations, low-vibration slab tracks were installed. Regular maintenance of rolling stock is being carried out to mitigate operational noise and vibration. Noise monitoring was conducted at noise-sensitive receptors, including the alignment crossing the experimental zone of the Yellow River Wetland Nature Reserve, and results show that noise impacts are insignificant at sensitive receptors along the alignment. 10. Water and wastewater. The project SEIA identified two critical water bodies along the alignment—the Yellow River Wetlands and Xiliu Lake—with the latter a Class I water source, providing drinking water for Zhengzhou City. At project appraisal, the alignment was adjusted to avoid the buffer zone of the Yellow River Wetland Nature Reserve. It is confirmed that the alignment as constructed passes only the experimental zone, as planned. The Shanxian Extra Large Bridge (length of over 9 km) was constructed to protect the experimental zone of the Yellow River Wetland Nature Reserve. The entire alignment passing the experimental zone was elevated, and culverts, piers, and other structures built to reduce local hydrologic impacts. Also, a 193.7 m bridge was constructed to cross Xiliu Lake as planned. To mitigate any adverse impacts on Xiliu Lake, construction camps, storage sites for construction materials, and other temporary works were set up far from the lake and its impact area. Special attention was given to prevent construction debris from entering the lake. To assess the effectiveness of mitigation measures to protect Xiliu Lake, water quality monitoring was carried out, and results confirmed that railway construction and operation had no adverse impacts on Xiliu Lake water quality. 11. To mitigate the project’s construction wastewater impacts, special attention was paid to tunnel construction in mountain areas. The EMRs confirmed that contractors built settling ponds, treated oily wastewater using oil separators, and provided sanitary latrines at workers’ camps to mitigate impacts on local watercourses. After construction, all the temporary wastewater treatment methods were properly uninstalled and the sites restored. During operation, all the wastewater generated from passenger train stations along the line is pre-treated in septic tanks prior to being discharged to local sewage pipelines, and then treated in local wastewater treatment plants.

66 Appendix 13

12. Soil erosion. At project appraisal, attention was paid to soil erosion impacts, as the project involved constructing several tunnels, and the alignment passed some areas where severe erosion had already occurred. A soil conservation framework was developed and approved by the Ministry of Water Resources and SEPA. In addition, site-specific soil conservation plans were also developed and implemented, including a wide range of good engineering practices to minimize terrain disfigurement and control erosion. The EMRs and the 2011 engineering summary report confirmed that the soil conservation and protection measures were strictly followed and effectively implemented. 13. Detailed land reclamation and restoration plans were also developed and a range of measures implemented, with consideration of site conditions. A total of 42 hectares (ha) in 16 different locations were reclaimed after construction, and a total of 848 ha of land was filled with excavated soil and transformed into farm and forest land in 73 different locations. Along the railway line, slopes were stabilized and landscaped. In the experimental zone of the Yellow River Nature Reserve, land was re-vegetated and restored, with special attention given to mitigating the impacts caused by railway line construction, and to restore vegetation functions. A total of 88,000 trees and 176,000 shrubs were planted, with 828,000 m2 of subgrade slope planted with grass, and 600 million m2 of borrow areas vegetated. The total investment in greening exceeded CNY1.6 billion. At the time of the PCR mission, all construction camps had been dismantled and the sites restored. Temporary access roads were reclaimed. There was no remaining construction land, construction wastes or abandoned mobile homes. 14. Ecology. The total area affected by the project was 1,808.4 square kilometers, which mainly included agriculture land. At project appraisal, potential ecological impacts were identified, including the impact on a 300-year-old tree that is located at the vicinity of the railway. The PCR mission visited the site where the 300-year-old tree is located and confirmed that it is well protected and strictly controlled by the temple management. To offset flora impacts on the project areas, the EMRs recorded that extensive greening works and afforestation were carried out. To mitigate impacts and protect ecological values in the project-affected areas, over 384 bridges of various lengths and culverts were designed and constructed for the railway, particularly in ecologically sensitive areas such as the experimental zone of the Yellow River Wetland Nature Reserve. 15. Cultural, historic, archeological sites and resources. At project appraisal, a total of 59 cultural and/or historical sites were identified along and in the vicinity of the railway alignment. The cultural relics protection scheme was developed and implemented. Prior to construction, all the contractors thoroughly assessed and developed protection measures for any cultural, historic, and archeological resources. The detailed plans to protect these resources were implemented in close coordination with local authorities. 16. Emissions reduction benefits. The project SEIA estimated that by 2020, a total of 171 pairs of trains would be in operation, consuming 2,359,410 megawatt hours of electricity. Energy consumption of electrified trains and diesel buses was compared when transporting the same number of passengers, which led to an estimated reduction of 6,200 tons per year (t/y) of carbon monoxide, 2,500 t/y of hydrocarbons, and 8,000 t/y of nitrogen oxides. In April 2017, a total of 56 pairs of trains were operating, consuming 758,874 megawatt hours of electricity, and requiring an installed capacity of 126 megawatts. This results in emissions reduction of 1,984 t/y of carbon monoxide, 800 t/y of hydrocarbons, and 2,560 t/y of nitrogen oxides using the same calculation methodology as used at project appraisal.

Appendix 13 67

D. Environmental Monitoring and Reporting 17. As planned, an independent environmental monitor—the Third Survey and Design Institute of China Railways—was engaged throughout project construction and conducted regular site visits, conducted monitoring of performance of environmental mitigation measures, and prepared annual EMRs during 2006–2011. The EMRs recorded that the project implementing authority also conducted regular site visits and site inspections throughout construction, and closely cooperated with local environment protection bureaus and other relevant authorities (such as water resource bureaus) for environmental monitoring, including water quality and soil erosion impact monitoring. 18. A total of five annual EMRs were prepared and submitted to ADB during 2006–2011, which contained data on engineering progress; environmental management status, including a range of mitigation measures, with a focus on water and soil conservation; and supervision and inspection records. Because EMRs were submitted annually despite the environmental classification of category A, it is considered as partial compliance of the project loan reporting requirements. E. Public Consultation and Grievance Addressed 19. During project preparation, extensive public consultations were carried out to discuss project impacts, including environmental impacts. This included public consultation meetings, targeted consultation meetings, surveys, interviews, and information disclosure and feedback. Over 1,700 individuals, 2,500 households, 1,600 passengers, 1,000 drivers, 163 business enterprises, and 350 government officials were consulted or surveyed. During project construction, the EMRs indicated that close dialogue and communication were carried out with local authorities and affected communities. As of May 2017, there was no record showing any pending grievance issue. F. Conclusion 20. The environmental assessment was carried out based on available information and data. Overall implementation of the project environmental management is judged to be satisfactory: the institutional setting and arrangements were appropriate. The EMRs were of good quality and provided sufficient information on EMP implementation. A range of good engineering practices incorporating environmental protection measures were implemented. At the time of the project completion review, there were no pending issues in terms of environmental safeguards-related grievances and non-compliance issues.