LOANS CREATE TERRACED FIELDS, EASING RURAL POVERTY IN CHINA

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No one can fault the farmers of the remote yellow mountains of northern China for failing to think big.

For generations, it was all they could do just to coax crops of millet and buckwheat from the steep, barren hills ribbed with gullies - the same ''yellow earth'' country where the Communists set up a base and grew to power in the 1930s and '40s.

Two years ago, the World Bank and the Chinese government offered a $250 million loan to create terraced fields.

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Farmers swinging pickaxes and shovels leveled the slopes and built retaining walls of straw and earth that look as smooth as cement. Bulldozers notched the toughest hills.

Now the fields are flat, and water, soil, and fertilizer no longer run off in the rain. With bigger crops, thousands of families in this part of Shaanxi province have escaped the severe poverty that bound them for generations.

The government is promoting this kind of change in remote inland areas, where most of China's poorest people live. People here have missed most of the benefits of rapid growth in the booming coastal areas.

At least 70 million of China's 1.2 billion people are so poor they do not have enough food and clothing. In the past year, the country's leaders and its state-run press have set a new goal: ending severe poverty by the year 2000.

An important part of the strategy has been the World Bank's low-interest loan program. The funds are meant to bring development to the world's poorest people. China has been one of the biggest borrowers, receiving more than $1.5 billion since 1986.

World Bank officials say the funds generally have been well used. In the northwestern province of Gansu, west of Shaanxi, the loans provided irrigation on arid plains. In the southwest, the money brought health care, roads, and training in better farming methods.

In Shaanxi and neighboring provinces, the answer is terraces. The plateau of loess - a fine-grained, yellow-brown loam - covers an area the size of France and is one of China's poorest regions.

Before the terraces, the typical farmer in the valley earned about 300 yuan ($36) a year, well below the poverty level of 440 yuan, says Gao Shuhua, a World Bank official. The higher crop yields have increased income to about 600 yuan and the goal of 1,000 yuan is well within reach, he says.

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