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Liaoning province, in the southern part of northeast People’s Republic of China (PRC), functions as a major hub between the country’s northeastern economic region and fastest-growing economic region of Pan-Bohai that includes the cities of Beijing and Tianjin. Since the 1980s, the province’s economic growth has lagged those of other provinces because of resource depletion and a painful transition from reliance on state-dominated heavy industries to a more diversified industrialization track.


Problems have heaped up as rapid urbanization has accompanied the province’s race to industrialization. Amidst an unabated urban population growth, many cities and towns have had to contend with the increasing inadequacy and poor quality of urban infrastructure and associated services, more pollution and congestion, and greater poverty and unemployment. The province’s urban population reached 67.4% of its total 43.8 million people in 2016 as against 59% of the total 42.98 million in 2007.


To prevent the situation from getting worse, Liaoning’s Eleventh Five-Year Plan (11th FYP) called for the promotion of sustainable economic development, particularly in the province’s small cities and towns, through the construction and upgrading of road infrastructure and water supply, and environmental improvement. The plan accorded with PRC’s policy to develop small cities and towns’ potential in increasing national productivity and narrowing the urban income gap by transforming them into dynamic economic hubs that provide farmers from nearby rural areas with better employment opportunities and a higher standard of living.


Responding to the call, the Asian Development Bank (ADB) financed the Liaoning Small Cities and Towns Development Demonstration Sector Project through a loan of $100 million and a grant of $0.25 million from the ADB-administered Water Financing Partnership Facility. The project was processed as a sector loan to enable the government to flexibly respond to the small towns and cities’ rapidly changing needs. It supported 7 subprojects, 3 of which consisted of core subprojects that served as models for subsequent subprojects during loan implementation.

All the core subprojects were along major transport corridors, had employment generation potential, and had achieved a certain level of development, at appraisal. Subsequent subprojects were chosen based on their economic growth potential and capacity to provide jobs for rural migrants. Institutional development was also undertaken to ensure effective implementation of each subproject and sustainable operation and maintenance of the facilities.

With outputs consisting mainly of improved roads, water supply networks, wastewater treatment, river management, and district heating, all the subprojects were completed in 6 years, without cost overrun and, in several cases, exceeding targets. Successful completion of these subprojects has improved the quality of life in 7 small cities and towns, directly benefiting over 1 million people, 8.2% of them poor. During implementation, the project also created 3,862 jobs, including 374 for women and 1,235 for the poor.

The Liaoning Provincial Government, through the Provincial Project Coordination Group and the Liaoning Provincial Project Management Office (LPPMO), served as executing agency. The LPPMO, together with the project management office in each subproject, managed day-to-day project implementation.

Project Information
Project Name: 
Liaoning Small Cities and Towns Development Demonstration Sector Project
Report Date: 
June, 2018
Main Sector: 
Project Number: 
Sector Loan
Loan Number: 
Source of Funding: 
OCR, Water Financing Partnership Facility
Date Approved: 
18 September 2009
Report Rating: 

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