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The World Bank's Board of Executive Directors approved a US$100 million loan to improve the living standards of dairy farmers in parts of China's Heilongjiang Province and to experiment with solutions to reduce greenhouse gas emissions from dairy farms.

Although Heilongjiang Province in China's inland rural northeast accounted for about 20 percent of the country's milk production in 2002, dairy farms there suffer from low productivity and high risks of price fluctuations due to inconsistent milk quality. Seventy to 80 percent of milk in Heilongjiang is produced by smallholder households with an average herd size of 2 to 5 cows.

These smallholders – and other potential dairy households -- have little or no access to formal financing for investment in dairy production. The six-year Heilongjiang Dairy Project would address that problem by helping increase the scale, efficiency and quality o f milk production in Heilongjiang through household and dairy park-based production programs. This effort would also help improve the quality of the dairy herd by improving its genetic base.

"This project aims to help rural farmers increase their incomes and gain more income security," said Mohamed Noureddine Ben Ali, Lead Operations Officer for the World Bank. "This is particularly important for poor households who have no cows and will now have the chance to dramatically improve their families' standards of living."

The project would also encourage further development of farmer associations to help protect farmer interests in the sector which has been dominated by milk processors. It would also help improve agricultural extension services to help farmers improve production and quality. This effort supports the Heilongjiang government's plan for improving the dairy industry and the province's rural economy.

Finally, a US$5.5 million grant from the Italian Trust Fund for Environment in China would help test innovative technologies to reduce greenhouse gas emissions and increase carbon sequestration from dairy farms. 

The US$100 million loan from the International Bank for Reconstruction and Development is repayable in 20 years with a five-year grace period.

(China.org.cn January 25, 2006)