Unprecedented Progress

In the past 40 years, China has made tremendous progress in poverty reduction. China’s historic rapid growth resulted in a poverty decline unprecedented in its speed and scale. Rapid growth was made possible by a wide range of reforms, which transformed a state-dominated, planned, rural, and closed economy to a more market-based, urbanized, and open economy. As a result, real per capita income increased by 16 times between 1978 and 2014, and real output per worker increased by a factor of 12. This enabled China’s extreme poverty rate, based on the international purchasing power parity (PPP) US $1.90 per day poverty line, to fall from 88.3 percent in 1981 to 1.9 percent in 2013. This implies that China’s success enabled more than 850 million people to escape poverty.

China is on its way to eliminating extreme poverty, but the population vulnerable to poverty will remain relatively large. China is expected to continue to make strong progress toward eliminating extreme poverty, despite the slowdown of economic growth. The World Bank projected extreme poverty in China, based on the international PPP US $1.90 per day poverty line, to decline to 0.5 percent by 2018. The population vulnerable to poverty, as defined by the higher international poverty line of PPP US $3.10 per day, will remain relatively large. The higher poverty line characterizes those in moderate poverty and vulnerable to falling below the poverty line. According to this higher poverty line, China was projected to have a poverty rate of 3.9 percent or 54.6 million people below this higher poverty line by 2018. Nevertheless, in all likelihood, China will have eliminated extreme poverty by 2020 or soon after.

Of course, China’s rapid growth, structural transformation, and poverty reduction measures have been strong drivers of this poverty reduction. But in addition, China’s government, together with partners such as the World Bank, has developed an array of specific programs to tackle poverty. China effectively used geographical targeting of its poverty reduction programs to maximize the impact on the poor. The programs included investment in agriculture to raise agricultural productivity, in infrastructure to link poor people with thriving urban markets, in education and health to equip the poor to find higher paying jobs or start a company, and many more. Increasingly, China also reinforced its social safety net by expanding dibao (basic living allowances), and the coverage of health insurance and pensions systems, for which the government covered for the poor.

The story of China’s successful battle against poverty is also important for policy makers in other countries: they can learn from China’s experience and adjust the lessons to their own specific conditions and own specific nature of their poverty challenge. With China’s growing success, learning from China has undoubtedly taken on more importance in recent years, and China’s government as well as the World Bank pay a lot of attention to this.