Document of
        The World Bank


                                 Report No: 60598-CN




     RESTRUCTURING PAPER

             ON A

PROPOSED PROJECT RESTRUCTURING
               OF
     RURAL HEALTH PROJECT
             LOAN
          June 24, 2008


            TO THE

  PEOPLE'S REPUBLIC OF CHINA


          March 9, 2011
                  ABBREVIATIONS AND ACRONYMS

NCMS   New Cooperative Medical Scheme




          Regional Vice President:        James W. Adams
                 Country Director:        Klaus Rohland
         Sector Manager / Director:       Juan Pablo Uribe
                Task Team Leader:         John C. Langenbrunner




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                      CHINA -- RURAL HEALTH PROJECT
                                  P084437
                                LOAN 7551-CN
                                Restructuring Paper

1.      Proceeds for China, Rural Health Project , Loan 7551-CN, P084437 will be
reallocated as follow:

      Category of Expenditure             Allocation (US$)          % of Financing
        Current            Revised       Current     Revised       Current   Revised

(2) For Chongqing                        396,332      696,332    30% till
Municipality:                                                    DFID End
(b) Goods, Consultant's                                          Date and
services, training and                                           100%
Program Support under                                            thereafter
Part B of the project
(5) For Henan Province:                  607,328      807,328    30% till
(b) Goods, Consultant's                                          DFID End
services, training and                                           Date and
Program Support under                                            100%
Part B of the project                                            thereafter
(6) For Jiangsu province:                616,015      716,015    30% till
(b) Goods, Consultant's                                          DFID End
services, training and                                           Date and
Program Support under                                            100%
Part B of the project                                            thereafter
(7) For Qinghai Province:                163,242      263,242    30% till
(b) Goods, Consultant's                                          DFID End
services, training and                                           Date and
Program Support under                                            100%
Part B of the project:                                           thereafter
(8) For Shaanxi Province:                450,518      750,518    30% till
(b) Goods, Consultant's                                          DFID End
services, training and                                           Date and
Program Support under                                            100%
Part B of the project                                            thereafter
(10) Unallocated                        2,900,000    1,900,000


2.     Briefly summarize project implementation progress.

Overall progress on implementation continues to be encouraging, with innovations being
piloted in each of the technical component areas as follows:


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Health Financing. Activities include (a) integration of Medical Assistance Fund and the
New Cooperative Medical Scheme (NCMS); (b) initiation of outpatient pooling; and (c)
new payment methods.

Service Delivery. Counties and Provinces continue to make progress in this component,
starting with quality assessments including performance evaluation. Evidence-based
clinical protocols have been developed, and contract-based employment is being piloted.

Public Health. Most of project counties are now implementing public health service
benefit package in various degrees, and there has been an expansion of services relating
to non-communicable diseases, as well as reproductive health.


The proposed reallocation is necessary to move funds from the unallocated category for
distribution among performers who have been deemed to have made strong progress with
piloting activities. This is in line with the design which had indicated that exceptional
performers could apply for up to 30% of their total pilot budget for new innovations
originally not included in their proposals. The additional funds could be used to support
innovative activities already undertaken, or to have more innovations. It could be used
for capacity strengthening as well. This reallocation, given by Province/Municipality and
County/District, reflects the intention to provide approximately one-third of the amount
ear-marked for this purpose to those meriting this.

    Province/
   Municipality        County/District      Amount                    Reason
Chongqing             Jiulongpo District    $200,000     Overall innovation
Municipality
Chongqing             Qianjiang District    $100,000     Extension of NCMS to village level
Municipality
Shaanxi Province      Zhen'an County        $100,000     Performance based activities
Shaanxi Province      Xunyi County          $100,000     Extension of NCMS
Shaanxi Province      Hanbing County        $100,000     Launch of compensation reform
Jiangsu Province      Gaochun County        $100,000     Expansion of public health service
                                                         coverage
Henan Province        Wuzhi County          $100,000     Expansion of public health service
                                                         coverage
Henan Province        Yiyang County         $100,000     Expansion of public health service
                                                         coverage
Quinghai              Huzhu County          $100,000     Promoting participation rate of
Province                                                 NCMS



It is anticipated that additional reallocations will need to be effected relating to this aspect
during the remainder of the Project.




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