UA fails to stop World Bank loan to impoverished Chinese province

"Our village, which lay on a little plateau, was almost encircled by fertile fields of wheat and barley and the plateau in turn…

"Our village, which lay on a little plateau, was almost encircled by fertile fields of wheat and barley and the plateau in turn was surrounded by ranges of hills which were covered by grass - thick and vividly green."

On the nearby Mountain Which Pierces the Sky "there were junipers and poplars, peaches, plums and walnuts, and many kinds of berries and scented flowers . . ."

This is how Tibet's spiritual leader, the Dalai Lama, describes in his autobiography, My Land and My People, his birth place of Taktser in the west of what is now China's Qinghai province.

Once an ancient Tibetan land, Qinghai was incorporated into the Chinese empire in the early 18th century and has remained a sparsely-populated wilderness of semi-nomadic Tibetan herders living alongside Kazak, Mongol and Hui minorities.

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This elevated terrain of great beauty and temperature extremes is in places as barren as the moon, and other inhabitants of western Qinghai have less lyrical memories of its qualities.

It is the location of the Chinese laogai prison camp system. Many camp inmates died of starvation here in miserable conditions, especially during the great Chinese famine of the 1950s.

Today there are still an estimated 20,000 prisoners living in camps though conditions are said to have improved.

Qinghai has today become the unlikely source of new tension in the troubled relations between the US and China. Beijing plans to resettle 55,750 impoverished Chinese peasants from eastern Qinghai in the western steppes and plateaus where the Tibetans live.

It will do this with the help of a World Bank loan of $160 million (£125 million) for poverty alleviation in Qinghai and two other Chinese provinces, Inner Mongolia and Gansu.

The US, the bank's major shareholder, publicly and strenuously objected to the World Bank aiding the project which it said would dilute the native Tibetan population.

Among those who joined in a chorus of opposition in the US were Treasury Secretary-designate Mr Lawrence Summers, 60 members of the US Congress and the New York Times, which called the project a "destructive scheme".

Tibetan rights groups throughout the world and almost half of the bank's 24-member board were also opposed, arguing that the project violated the bank's policy on indigenous peoples.

Tibetan support groups said they feared that the project would endanger Tibetan culture. There are some 1.7 million Tibetans across Qinghai, Sichuan, Gansu and Yunnan provinces of China, in addition to 2.3 million in Tibet. They pointed out that since Tibet was incorporated into the People's Republic of China as the Tibetan Autonomous Region in 1959, the capital, Lhasa, has become a Chinese metropolis through an influx of Han Chinese traders and officials.

However, on Thursday the World Bank approved the loan, for the first time ever overruling the US.

It argued that the project "would give households in the three areas the opportunity to increase their incomes and, in some of the most desperate cases, to move from dependence on food subsidies and government handouts to a level where food supplies are predictable and secure".

The bank said the money would help to provide seeds, fertilisers, forests, irrigation, land improvement, basic roads, health and education services, credit and drinking water for people living below subsistence level, some of whom have to walk four hours for water.

Its vice-president for East Asia and the Pacific, Mr Jean-Michel Severino, said the project would enable malnourished people with nowhere else to go "to start afresh in what is now a barren, desert area".

China reacted furiously to Washington's objections, seeing them as part of a malevolent policy to build up a case for Cold War containment. The US attitude was an attempt to "sabotage ethnic unity" within China, said Ms Zhang Qiyue, the Chinese foreign ministry spokeswoman, who demanded that Washington stop "using the Tibetan issue to interfere in China's internal affairs".

Germany, the third-largest bank shareholder, also voted against the project, the 32nd World Bank contribution to alleviate poverty in China, totalling 1.3 billion dollars and benefiting 6.3 million people.

Canada, representing a group of small countries including Ireland, voted in favour, though an Irish Embassy official in Beijing said Dublin expressed concerns about the effect on the Tibetan people in Qinghai.

To encourage a majority of the bank's 182 members to approve the loan, the World Bank made concessions. It said the $40 million Qinghai component of the scheme would be delayed until a panel reviewed whether the bank violated its own rules in processing the loan application.

China also volunteered that diplomats, government officials, members of parliament and the media would be allowed access to the project at any time without government supervision.

"The visitors are welcome to have extensive contacts with the local people, unattended by Chinese officials," the Chinese government said, adding: "We are in favour of transparency. Transparency brings to light facts and scotches rumours."

The outlook for relations between the US and China, which suffered a serious setback when NATO bombed the Chinese embassy in Belgrade in May, killing three Chinese journalists, remain bleak.

China stopped US warships making routine courtesy calls to Hong Kong last month, and this week extended the ban to cover US military aircraft which have continued to refuel in Hong Kong since it was reunited with the Chinese mainland in 1997.

China rejected an explanation of the bombing conveyed to Beijing by the US Under-Secretary of State, Mr Thomas Pickering.

Officials on both sides had hoped that stalled negotiations on China's entry to the World Trade Organisation, a key to restoring Sino-US relations, could resume soon. The US vote at the World Bank has made this more difficult. However, if Washington had managed to deny the loan to China, relations would have gone into deep freeze for a long time.