Rural Poverty Reduction in China: Policy Changes and Future Challenges
By Jiwei Qian

Rural Poverty Reduction in China: Policy Changes and Future Challenges

Apr. 15, 2016  |     |  0 comments


In March 2016, the “13th Five-year Outline Plan” was approved by the National People’s Congress. This plan highlights the importance of rural poverty reduction policies that aim to lift 55.75 million rural people out of absolute poverty by 2020. In 2016, it is expected to lift over 10 million rural residents out of poverty. There will also be an over 40 percent increase in government budget in poverty reduction this year.


In this plan, two important sets of policies are underlined for future poverty reduction in rural areas: The first set of policies aims to improve the targeting accuracy of poverty reduction programs. The second set of policies plans to have poverty reduction programs to focus on adjacent regions with disadvantaged natural and economic conditions.


Rural poverty used to be very serious in China before the 1980s. The World Bank estimates that in 1980 over 848.2 million Chinese, mostly rural residents, lived below the international poverty level of less than USD 1.25 per day (at 2005 prices) (World Bank, 2009). China has achieved poverty reduction in a dramatic way. Between 1990 and 2005, the number of people in China whose income was less than USD 1.25 a day (at 2005 prices) fell from 683 million to 212 million. Internationally, this represented 76 percent of the world’s total number of people who were lifted out of the poverty. The United Nations Development Program’s Millennium Development Goal of poverty reduction was thus achieved 10 years in advance (World Bank, 2009).


By the end of 2015, China still has about 56 million people in rural areas living below the poverty line, which is set at an annual income of RMB 2,300 (at 2010 prices; or RMB 2,800 at current prices) (Xinhua News Agency, 2016).


According to Qian (2014), there are four major causes of rural poverty in China. First, most rural poor reside in regions characterized by inferior geographical conditions, including challenging terrain, infertile soil, and lack of water supply. Second, in many places, inferior infrastructure or the lack of basic infrastructure hinders development and is likely to have a negative impact over local residents’ income levels. Third, similar to the case in many other developing countries, credit constraints and human capital constraints result in lack of opportunities for the poor. The fourth factor is that the poor face larger financial risks due to the undersupply of basic public services in some rural areas.


China began initiating rural poverty reduction programs in 1986. For a long time, these programs were implemented based on regions. National-level poverty-stricken counties were the key players to implement these programs. In the 1980s and 1990s, 592 national-level poverty-stricken counties were identified based on the level of per capita income. Since 2001, the benchmarks used to define national-level poverty-stricken counties have been based on the proportion of the poor, income, and fiscal revenue per capita.


The achievements of these programs are significant. The proportion of the poor in national-level poverty-stricken counties was reduced from 24.3 percent in 2002 to 8.3 percent in 2010. Nationwide, the number of poor was reduced by half between 1990 and 2005 (Qian, 2014).


While the poverty reduction programs were very effective in increasing income levels in the 1990s, returns for these programs have been diminishing. There were three major shortcomings in the first two decades of poverty reduction practices. First, inaccurate targeting was a serious concern. Poor households were not directly covered by these programs because these programs were targeted at impoverished regions rather than families. Second, many programs produced results that were heterogeneous and context-dependent. That is to say, a given policy may be effective only in certain regions. Third, without a social safety net, the programs may not have enduring effects on the poor. Some rural poor who had been lifted out of poverty were soon found to have fallen back into poverty again.


As stated in the “13th Five-year Outline Plan,” there are two major policy responses to these concerns. First, the accuracy of targeting is underlined. Recently, villages are gradually replacing counties as the basic unit for poverty reduction programs. Since 2001, 148,000 poverty-stricken villages have been singled out and development programs like “Whole Village Advancement” have been introduced. Over 80 percent of the poor population is covered by the “Whole Village Advancement” program (Qian, 2014). In addition, the Organization Department of the Communist Party of China has deployed over 128,000 urban cadres to be Party secretaries of poverty-stricken villages, and with their working experiences in urban areas, they are expected to help promote local economies (Xinhua News Agency, 2015). To further improve the accuracy of targeting, since 2013 the Chinese government has set up profile databases for over 89 million rural poor. Officials managing the poverty reduction programs can thus make use of this data to target the rural poor more accurately (State Council, 2015).



The proportion of the poor in national-level poverty-stricken counties was reduced from 24.3 percent in 2002 to 8.3 percent in 2010.



Second, improvements in infrastructure and the provision of public services in adjacent regions with disadvantaged natural and economic conditions are also highlighted. In 2011, a new 10-year plan for rural poverty reduction was released by the State Council. This plan complemented social protection with area-based development-oriented poverty reduction programs. The plan targeted 14 extremely poor regions which are adjacent to each other in western and central China, with emphasis on improving regional coordination in infrastructure upgrading and public service provision. In addition, developing infrastructure for tourism has been identified as the new direction in poverty reduction.


China faces several challenges in implementing the two above-mentioned sets of poverty alleviation policies. First, policies to improve the accuracy of targeting populations living below the poverty line would not suffice for poverty reduction because there is a large number of low-income households that live above the poverty line which are at risk of falling into poverty. Recent research has shown that some of the rural poor (over 62 percent of 35 million in 2009) who got out of poverty, were soon found to have fallen back into poverty (Ye et al., 2013). In this case, future action plans are imperative to address the issue of low-income households that live marginally above the poverty line being driven to poverty.


Second, the information in the rural poverty databases may be insufficient to achieve accurate targeting and identify the reasons for poverty, which is most significant in evaluating poverty reduction policies and designing appropriate policies. Currently, the databases simply record the reasons for poverty of rural poor individuals or households. The common reasons for poverty that the rural poor often cite when filling up the forms include poor health, low level of education and skills, poor living conditions, and shortage of credit options. However, in reality, the reasons can be far more complex and interrelated. Even with big data, it is a serious challenge to correctly identify the reasons for poverty.


Third, the effectiveness of coordination between different government departments and different regional development schemes will pose a challenge to infrastructure upgrading and the provision of public services in adjacent regions. Coordination between local governments will be challenging, particularly in the area of tourism development as it requires the protection of the environment and the maintenance of a sustainable local ecosystem. Furthermore, coordination has been lacking in the implementation of poverty eradication programs in the designated 14 adjacent regions and in several national-level regional economic development plans such as the Yangtze River Economic Zone and the Coordinated Development of the Beijing-Tianjin-Hebei area.


References


Qian, J. (2014). Interaction between public policies and institutions: The case of poverty reduction in China. Working paper.


State Council. (2015). “Ruhequanbao qiqianwanren ruqituoping”. Retrieved from http://www.scio.gov.cn/ztk/dtzt/2015/33598/33604/Document/1451471/1451471.htm


Xinhua News Agency. (2015). “Zhongyang yaoqiu xiangpinkuncun xuansong diyishuji”. Retrieved from http://news.xinhuanet.com/local/2015-05/10/c_127783032.htm.


Xinhua News Agency. (2016). “Shisanwu, Zhongguo Haixu Tuopin 5575 wan ren”. Retrieved from http://news.xinhuanet.com/politics/2016-03/06/c_1118246885.htm.


Ye, C., Zhao, R. and Sun, D. (2013). The frontier of poverty dynamics. Economics Perspectives, 4, 120-128


World Bank. (2009). From poor areas to poor people: China’s evolving poverty alleviation agenda, an assessment of poverty and inequality in China. The World Bank, Washington DC.

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