Long-Term Poverty Reduction Strategies in China Post-2020

HuangZhengxue(黄征学)etal........................................................................................................................

Abstract: Poverty reduction is an eternal theme in the modernization drive of countries. After 2020, China’s poverty reduction endeavors will face new challenges and shift towards: (i) elevating poverty standards, (ii) placing equal emphasis on rural and urban poverty, (iii) preventing people in the deeply poor regions from slipping back to poverty, (iv) combining external assistance with endogenous development, and (v) enhancing social protection and targeted fiscal support for aiding the poor. Following the new trends of poverty reduction, policymakers should update their strategic approach, adopt new poverty reduction standards, target at a broader group of poor groups, promote pro-poor development, and improve poverty governance. Lastly, this paper puts forward the following policy recommendations for reducing poverty in China post-2020: (i) maintaining policy continuity and stability during the transition period; (ii) creating regular poverty relief mechanisms for urban and rural residents; (iii) improving the targeted identification and dynamic adjustment of target groups for poverty reduction; and (iv) reducing poverty through social protection and development.

Keywords: post- 2020 poverty reduction, battle against absolute poverty, poverty reduction strategies, urban and rural integration

JEL Classification Codes: O15

DOI: 1 0.19602/j .chinaeconomist.2020.05.04

1. Introduction

As a worldwide challenge, poverty holds back social and economic development in many countries, topping the agenda of governments around the world. Tackling poverty is essential to building socialism with Chinese characteristics (Deng and Li, 2019). The Communist Party of China (CPC) and the Chinese government have always attached great importance to combating poverty. Since the 18th CPC National Congress in 2012, the CPC Central Committee has launched a swathe of initiatives to fight poverty with remarkable effects. The Report to the 19th CPC National Congress further calls for lifting all rural populations below China’s current poverty line out of poverty by 2020. Achieving this goal means that

1 all poor counties and contiguous poor regions will escape absolute poverty by then. Yet eradicating absolute poverty does not mean an end of all forms of poverty. China still has a long way to go before reaching higher standards and quality of poverty reduction. In the victory lap of the battle against

absolute poverty, it is relevant to take stock of China’s domestic anti-poverty policies implemented in various stages, evaluate current anti-poverty policies, set out future priorities, and plan for post2020 poverty reduction strategies and countermeasures. Research in this area is of vital importance for tackling poverty and making up for social and economic gaps as China strives to build a prosperous, democratic, civilized, harmonious, and beautiful socialist country.

In recent years, there has been an intense interest in poverty and antipoverty programs in the academic community. Numerous studies have been carried out to investigate the occurrence, measurement and social and economic ramifications of poverty, as well as the means, policies and effects of poverty reduction. Yet very few theoretical studies have focused on how China should effectively consolidate its poverty reduction results and achieve long-term targets beyond 2020, the final year for China to accomplish the ongoing battle against absolute poverty. Existing studies expect China’s post-2020 poverty agenda to shift from absolute poverty to relative poverty, from rural poverty to an equal emphasis on urban and rural poverty, from income poverty to multidimensional poverty, from homogeneous poverty to heterogeneous poverty, and from contiguous poverty to sporadic poverty (Gu, 2016; Zhang, 2016; Zuo and Jin, 2018; Huang, 2019). To cope with these changes, the academic community has called for a set of unified national poverty reduction criteria to precisely identify poor and fringe populations (Chen et al., 2019; Wei and Liu, 2019). Pro-poor initiatives should prioritize the prevention of poverty occurrence over poverty reduction (Lei, 2016; Li, 2019). Policymakers should devise integrated urban and rural anti-poverty policies and innovative pro-poor fiscal and financial systems, promote social protection in reducing poverty, and prioritize the equalization of healthcare education and other public services across urban and rural areas (Zuo, 2016; Li and Xu, 2018; Wei, 2018; Zu et al., 2018; Chen et al., 2019). In addition, some academics point to the importance of legal systems for poverty relief, the participation of various actors in assisting the poor, and international antipoverty cooperation (Bai et al. 2017; Wang and Liu, 2018; Wang and Yang, 2019).

These theoretical studies offer some insights on how China should continue to address poverty issues after accomplishing the current battle against absolute poverty in 2020. Yet more research is needed to identify the stages, strategies and long-term plan for poverty reduction beyond 2020. After reviewing China’s current anti-poverty policies, this paper will delineate a strategic approach and put forward policy recommendations for post-2020 poverty reduction in China.

2. Review of China’s Current Anti-Poverty Policies

In the planned economy era and the early stage of China’s reform and opening up, most of China’s poverty reduction programs were nationwide, there isn’t special anti-poverty policy. The Pro-Poor Agricultural Project for Hexi and Dingxi in Gansu and Xihaigu in Ningxia - the three regions known as “Three Xi’s” were the poorest regions in China - launched in 1982 marks the beginning of regionspecific anti-poverty policies. After the 18th CPC National Congress held in 2012, a combination of universal and specific anti-poverty policies has significantly reduced rural poverty in China. A proper review of China’s anti-poverty policies will help adjust policy orientation and consolidate poverty reduction achievements.

2.1 Pro-Poor Policies in Various Stages from 1949 to 2020

In tandem with its social and economic development, China’s anti-poverty policies have been implemented roughly in five stages.

Planned economy era (1949-1977): China’s anti-poverty policies in this stage include the “land to the tiller” policy for poor farmers, the “five guarantees” system for rural residents, i.e. proper food, clothing, medical care, housing and funeral expenses for residents, basic healthcare, and allowance to and priority placement of demobilized soldiers and their families.

Early stage of reform and opening up (1978-1985): Booming economy paved the way for poverty reduction programs to be launched on a massive scale. The Chinese government created jobs specifically for the poor, developed pro-poor agriculture in the “Three Xi’s” regions, and established pro-poor guidelines and preferential policies for poor regions.

Post-reform and rapid economic growth (1986-2000): Yawning development gaps between eastern, central and western regions and striking poverty in less developed regions prompted the Chinese government to set up a steering group for development-oriented poverty reduction, focus on poor counties, promote poverty cooperation between eastern and western regions, and designate Party and government agencies responsible for assisting poverty reduction in specific poor regions.

Decade of development-oriented poverty reduction (2001-2010): After securing access to food and clothing for the poor, the Chinese government identified ethnic minority regions in central and western regions, old revolutionary bases, border regions and deeply poor regions as priorities for developmentoriented poverty reduction. Poverty reduction started to focus on pro-poor industrial development, village-wide implementation, and training for migrant labor from poor regions.

Development-oriented poverty reduction in the new decade (2011-2020): Contiguous poor regions have become the main battlefield for fighting poverty, and targeted poverty reduction has taken the center stage.

2.2 Anti-Poverty Policies Became More Targeted and Diversified

First, the more focused and targeted use of poverty relief funds: After the turn of the millennium, the distribution of poor populations in China became more dispersed in mountainous areas and ethnic minority border regions. Hefty funds were devoted to contiguous poor regions, and poor populations in non-poor villages also benefited. Given the diminishing effects of previous untargeted poverty reduction schemes, the Chinese government started to promote targeted poverty reduction for specific poor groups. Second, the more diverse channels for poverty intervention measures: Since 2001, the main forms of poverty reduction in China have included village-wide implementation, resettlement, appropriate industrial development, educational support, and technical training. In the new era, China has followed a targeted approach to reduce poverty through development, resettlement, ecological compensation, education, and social protection.

2.3 Fiscal Funds Provide Solid Support to Poverty Reduction

First, improving fiscal support system for poverty reduction: Fiscal funds have played a critical role in development-oriented poverty reduction. The central government currently has 42 fiscal support funds for ecological compensation, education, healthcare, social protection, industrial development, and infrastructure construction in poor regions. For three straight years since 2016, the central government has cranked up special anti-poverty funds from 20 billion yuan to 106.1 billion yuan in 2018. From 2013 to 2017, the central government raised a special public-interest fund from lottery with 6.9 billion yuan to support industrial development and small-scale public-interest production infrastructure in povertystricken old revolutionary bases. Both poverty relief funds to households and village-level pro-poor investments have played a vital role in reducing rural poverty.

Second, there has been an increasing consolidation of agriculture-related poverty relief funds for poor counties. While ramping up fiscal resources to fight poverty, the central government also puts a premium on making the most of existing poverty relief funds. Launched in 2016, the pilot program to consolidate agriculture-related funds covered up to 832 poor counties by 2017, involving a total of 328.6 billion yuan. The consolidation of poverty relief funds has facilitated targeted poverty reduction in poor counties.

Third, the use of poverty relief funds has been brought under scrutiny: In conjunction with the State Council Leading Group Office of Poverty Alleviation and Development and five other departments,

the Ministry of Finance issued the Measures for the Administration of Special Central Fiscal Funds for Poverty Alleviation, which sets out complete rules on the allocation, use, management and supervision of special central fiscal funds for poverty alleviation. The Ministry of Finance also revised the Measures for Evaluating the Performance of Fiscal Special Funds for Poverty Alleviation, which identifies the precise use of funds as a basic principle for performance evaluation and gives more weight to such indicators as fund allocation progress and fund carryover balance rate. Local governments are held accountable for supervising poverty relief funds. Moreover, inspection teams have been dispatched to supervise poverty reduction in poor regions.

2.4 Development-Oriented Poverty Reduction Calls for More Precise Targeting

There is still room for pro-poor policies to target more precisely at poor populations in real need. First, the identification of poor populations is mainly based on income. Yet in practice, poverty relief programs may omitted poor populations in real need and mistakenly included those who did not meet the criteria. A person or household may become stricken by poverty due to expenses related to illnesses, marriage, education, incompetence or other factors. Second, the management approach for targeted poverty reduction is yet to improve. Higher levels of government determine the percentage of poor populations, and cascade the “poverty quotas” - the number of populations supposed to live below the poverty line - down to lower levels of jurisdictions. Since such quotas cannot be transferred across villages and counties, some impoverished households cannot be registered as poor households. Registered poor households, on the contrary, often refuse to deregister for fear of getting impoverished again. Third, the causes of poverty vary across regions, calling for targeted anti-poverty policies.

3. Five Shifts Expected in Post-2020 Poverty Reduction

After 2020, China is set to basically eradicate absolute poverty by current standards, scoring a victory in the nationwide battle against poverty., but this does not mean the end of poverty. Considering the long-term challenges to poverty reduction, it is vital to identify and adjust the targets, directions, priorities and driving forces of poverty reduction in China.

3.1 Towards Higher Poverty Reduction Standards

The Chinese government has devoted tremendous resources to reduce poverty in the countryside. But the rural poverty line of 2020 (annual income of 2,300 yuan per person at 2010 constant price), China’s rural poor populations have fallen from 770.39 million in 1978 to 16.6 million at the end of 2018 with poverty incidence down from 97.5% to 1.8%. Since the 18th CPC National Congress in 2012, China has lifted 82 million people out of poverty, and rural poverty incidence dropped by 8.4 percentage points on a cumulative basis (see Figure 1). The sharp decrease in poverty incidence owes to the effective poverty reduction work of the Party and government. For all the achievements, China’s official poverty line remains low by international standards. In 2018, the World Bank set the yardstick of extreme poverty to be less than 1.9 US dollars per day and the poverty line for lower-middle-income and upper-middle-income countries to be less than 3.2 and 5.5 US dollars per day, respectively (World Bank, 2018). China’s poverty line is roughly equivalent to the World Bank’s extreme poverty line. In other words, China is just able to lift the extremely poor out of poverty by 2020. The problem of multidimensional poverty in China remains intractable. According to the 2018 Human Development Indices and Indicators Statistical Report released by the UNDP, China ranks 86th among 189 countries in terms of human development index, which is on a par with relatively poor countries (UNDP, 2018).

3.2 Equal Priority to Rural and Urban Poverty

Urbanization has led to a massive migration of young workforce from countryside to cities, giving rise to the problem of poverty among “left-behind” elderly persons, women and children in the countryside, especially in central and western regions (Chen et al., 2019). As the rural poor rush to cities, migrant workers have become an emerging poor group, extending poverty from the countryside to cities. In India and some developing countries in Latin America, urban poverty often stems from the lack of sufficient jobs, proper housing and infrastructure in cities to cope with an influx of rural populations. Similar trends and risks also confront China.

For farmers who have migrated to cities, their rural household registration or “hukou” denies them equal access to urban social security and public services. Living in cities also makes it hard for migrant workers to receive social benefits such as healthcare and pension back in their home town. In addition to income poverty, migrant workers also face consumption poverty as exorbitant costs of healthcare and education leave them little cash to spare. If the relative urban poverty line is half the median per capita disposable income for urban households, the income poverty incidence for migrant workers is 26.33%, and the consumption poverty incidence is as high as 65.65% (Guo et al., 2018). Moreover, urban layoffs and unemployment also increase poverty in the process of urban transformation and upgrading,. The rise of urban poverty is particularly steep in rustbelt and regions reeling from resource depletion, industrial decline, and environmental degradation. After 2020, China should continue to lift more people out of poverty both in the countryside and cities.

3.3 Prevent a Possible Return to Poverty in the “Three Regions and Three Prefectures3”

The progress of rural poverty reduction is highly uneven across China. From 2010 to 2017, China lifted 81.6% of rural poor out of poverty nationwide, 88.4% in the eastern region and around 80% in central and western regions. As a result, more than 90% of rural poor populations live in central and western regions, where poverty incidence is much higher than in the eastern region (Wei, 2018). The 14 contiguous extremely poor regions have always been about 50% of total poor populations in China. Among them, the “Three Regions and Three Prefectures” are the poorest of the poor, where 3.08 million registered poor populations account for 10.1% of China’s rural poor, with a poverty incidence of 14.6%, or 4.7 times higher than national average. After 2020, the “Three Regions and Three Prefectures” are particularly at risk of slipping back to poverty. Gaps in housing, education, healthcare, infrastructure and other public services make it more likely for poverty to be passed between generations in regions like these, which warrant great attention from the central government.

3.4 External Support Should Be Matched with Endogenous Development

Over the years, China has devoted hefty funds to fighting poverty, and designated prosperous cities to support specific poor regions, put capable Party secretaries in charge of poor regions, dispatched poverty relief teams to assist the poor, and set up pro-poor factory works in poor townships and counties, among other extraordinary measures. From 2013 to 2018, China’s central government disbursed special poverty relief funds totaling 388.3 billion yuan, with an annual average increase of 16.9% (Wei, 2018). Yet after accomplishing the 2020 goal for eradicating absolute poverty, China’s poverty relief resources are expected to wane. Poor regions will face scant endogenous momentum stemming from a shortage of talent, technology, capital and other resources, as well as the weak industrial foundation, relatively lagging reform, low income level of urban and rural residents, and the lack of sustainability of exogenous income increase model

From 2014 to 2017, rural households’ per capita disposable income in China grew by an annual average of 7.5%, which is 1.1% higher than urban residents. Yet rapid rural income growth was made possible by farmers migrating to work in cities and receiving government allowances rather than profiting from agriculture and rural development. During this period, 46.1% of farmers’ per capita disposable income growth came from wage income, and 23.9% is attributable to government allowances, and the two jointly explain for 70% of farmers’ per capita disposable income growth. In the long run, the countryside should develop local industries and create jobs to deliver rural prosperity sustainably (Wei, 2018). Hence it is important to place an equal emphasis on external support and endogenous development in poor regions.

3.5 Pro-Poor Fiscal Funds Should Ensure Basic Protection for the Poor in Real Need

China’s experience underscores the importance of fiscal support to eradicating poverty. Beyond 2020, poverty reduction in China calls for further fiscal reforms to step up basic protection for the poor in real need. The first priority is to integrate the allocation of urban and rural poverty relief funds. Currently, most poverty relief funds in China have been devoted to the countryside, losing sight of urban poverty. The use of poverty relief funds is inefficient due to multiple departments participating and red tape. After 2020, China should develop an integrated fiscal allocation system for reducing rural and urban poverty. Another priority is to optimize fiscal spending structure. The lack of income is only one aspect of poverty. Under the multidimensional poverty approach, China should also meet the people’s educational, healthcare and cultural needs. In poor regions, there is a shortfall of fiscal spending on basic public services like scientific research, education, culture, pension and healthcare. Much remains to be done to address the fragmentation, quality and coverage of basic public services. After 2020, China’s

fiscal inputs should be skewed towards basic public services like rural elderly care, healthcare and education. The third priority is to redirect fiscal spending to benefit target groups in real need. Raising pension for the rural elderly who have little other income sources is vital. School-age children in remote areas should have access to transportation to attend school or receive a boarding allowance. Poverty reduction programs should also help those in poor health in the countryside by raising the medical reimbursement ratio and broadening reimbursement scope. Better public services will make a great difference in curbing rural poverty.

4. New Strategic Approach for Reducing Poverty beyond 2020

Beyond 2020, China’s poverty reduction agenda will shift from absolute poverty to relative poverty, from income poverty to multidimensional poverty, from contiguous poverty to sporadic poverty, and from cumulative poverty to transitional poverty. In line with this trend, China should keep a close eye on the goal of modernization and fully grasp the idea of people-centered development, identify new poverty standards and target groups, foster new driving forces, and promote new poverty governance.

4.1 Creating New Poverty Standards

There are two types of international poverty standards - the poverty line set by the World Bank based on income and spending and the Multidimensional Poverty Index (MPI) released by the UNDP. By the income and spending approach, the poverty line can be either a certain percentage of average personal income or Engel’s coefficient. Many countries have followed the income approach in setting their poverty lines. Yet income is only one aspect of poverty. The lack of housing, education, healthcare and other opportunities and competencies also matters. Many localities in China have already taken nonincome indicators into account in reducing poverty and identifying poor households. For instance, a household is considered to be poor in some regions if it has no housing, food or workforce, or if it can

5 ill-afford education, medical bills or daily necessities.

More than 50 countries have adopted or referenced the Multidimensional Poverty Index (MPI) as the basis of their poverty evaluation system to factor in non-economic poverty such as lack of education, healthcare, housing and durable consumer goods, which the income approach cannot reflect (Feng and Di, 2017). After achieving the “two no worries and three guarantees” (no worries about food and clothing and guaranteed access to compulsory education, basic healthcare and housing security) for its poor populations in 2020, China should steadily raise poverty standards for urban and rural poor groups at various localities. Referencing the MPI, China should also adopt multidimensional poverty criteria reflecting education, healthcare, housing and other dimensions. Provinces, municipalities and autonomous regions could raise poverty standards as appropriate based on local fiscal strength and adopt differentiated poverty standards.

4.2 Broadening the Scope of Poor Groups

With higher poverty standards comes a broader scope of poor groups. Since the launch of targeted poverty reduction in 2014, registered poor households have benefited more from propoor policies and funds. Yet the “fringe groups” narrowly above the current poverty line have experienced a crowding-out effect, making them even poorer than registered poor populations. In 2018,

6 the city of Harbin, for instance, registered 10,531 poor households with 20,977 persons in total. Yet

the city had over 48,000 persons living on Dibao, or minimum subsistence allowance, from lowincome families, or from low-income families and with disabilities, as well as close to 100,000 people with invisible disabilities struggling to make ends meet ( Chen, 2018). After eradicating absolute poverty in 2020, policymakers should race to create a dynamic mechanism for identifying poor populations, adopt differentiated poverty reduction standards, and include “fringe groups” just above the income poverty line (such as by less than 5%, 5%-10%, etc.) into the scope of target poor groups. The multi- tiered poverty reduction system should prevent “fringe groups” from slipping into poverty.

Among the rural poor, left- behind children, elderly persons and other special groups warrant great attention. In 2015, poverty incidence for rural children and elderly persons was 7.9% and 10.4%, respectively, higher than the overall rural poverty incidence by 1.6% and 4% in the same year, respectively (Chen et al., 2018). In 2018, more than 10 million people from over 6.05 million

7 households in China lived on Dibao. Migration of rural populations to cities will make poverty among rural migrants a more prominent issue, necessitating their inclusion into the scope of poverty reduction (Chen et al., 2019). The 19th CPC National Congress called for “creating integrated urban and rural development systems and policies.” In line with this new requirement, the government should promote unified standards for basic public services such as education, healthcare and social security across cities and the countryside, bring the poor among the more than 200 million rural migrant workers and the urban poor into the poverty reduction system gradually.

4.3 Fostering New Driving Forces behind Poverty Reduction

Recent years have seen growing special fiscal transfer payments for poverty reduction. Pro-poor tourism, e-commerce, photovoltaic and income-generating assets have sharply increased poor people’s income. From 2013 to 2017, farmers in poor regions saw their per capita disposable income rise by 10.4% on an annual average basis, which is 2.5 percentage points higher than the nationwide per capita disposable income growth of farmers. Yet farmers continued to see their operating income and property income decrease in terms of proportion and growth contribution relative to their wage income and income from transfer payments. After 2020, farmers’ wage income and income from transfer payments are likely to grow at a slower pace as urbanization decelerates and targeted antipoverty campaigns give way to long-term and universal programs. It is necessary, therefore, to retain a transition period for development-oriented poverty reduction to consolidate the achievements of poverty reduction. Based on policy orientation and local experience, efforts to foster new driving forces behind poverty reduction should focus on: (i) market-based operations to steadily increase return on pro- poor projects, ramp up spillover effects, and refresh traditional poverty reduction models such as designating rich cities and provinces to support poor regions and creating incomegenerating assets; (ii) integrating pro-agriculture fiscal funds to form long-term momentum for reducing poverty; (iii) enlisting private capital to take part in poverty reduction, bringing in new technologies and business models.

After eradicating absolute poverty, the focus of poverty reduction in China should shift from raising income to mitigating non-income poverty by improving social protection and basic public services like education and healthcare and equalizing basic public services in cities and the countryside. In view of the characteristics of high poverty incidence among children, the elderly and people with poor health conditions, the government should increase the coverage of social protection, improve pension, healthcare and education for urban and rural poor groups through a combination of transfer payment tools with different poverty reduction effects.

4.4 Ramping Up Poverty Governance

Poverty reduction in China has focused on the countryside and agriculture since the State Council’s implementation of the “Three Xi’s” pro-poor agricultural project in December 1982. After the turn of the new millennium, departments responsible for minimum subsistence allowance, education, healthcare and other social services joined the fight against rural poverty. To score a victory, the central government brought together various departments and poverty relief resources with remarkable effects. Yet some administrative mandates are contradictory with existing laws and regulations and short-term in nature. Once the first Party secretaries and poverty relief work teams are withdrawn from poor villages, the continuity of poverty reduction work comes into question. With the increasingly multi-dimensional characteristics of poverty, the involvement of more departments in tackling multidimensional poverty after 2020 will highlight the fragmentation of poverty reduction resources, making it harder and costlier to coordinate poverty reduction programs on various fronts. Hence, there is an urgent need to strengthen innovation and reform to develop institutional mechanisms with the joint participation of multiple departments.

To improve anti-poverty governance, we should: (i) create a national-level agency in charge of urban rural poverty reduction, and clarify the responsibilities of provincial, municipal and county governments, as well as market actors and social organizations; (ii) involve multiple departments in poverty reduction to share resources through strategic guidance, planning and policy coordination, under the leadership of the central government in administration and nationwide mobilization; (iii) develop a sound working mechanism with clear responsibilities among the central, provincial and municipal or county governments to work in synergy; (iv) enhance independent third-party evaluations as the basis for awards and penalties; (v) offer tax breaks to private capital involved in poverty reduction, and incentivize firms, households and social organizations to contribute to fighting poverty.

5. Policy Recommendations for Long-Term Poverty Reduction

Going forward, China’s poverty reduction endeavors should consolidate existing achievements, “guarantee basic protection, build a dense social safety net, and enhance institutional development for poverty reduction8” as called for at the 19th CPC National Congress, prioritize social protection for poverty reduction, use poverty relief funds more wisely, and improve the quality of poverty reduction.

5.1 Securing Policy Continuity and Stability

After winning the campaign against absolute poverty in 2020, the central and provincial-level governments are advised to fund a three-year transition program for poor counties lifted out of poverty through a combination of special poverty aid and industrial development. Additional central fiscal funds for poverty reduction should focus on deeply poor regions and people with special difficulties to lift them out of poverty once and for all. Counties lifted out of poverty should promote their feature industries and products. Assistance should be offered to resettled populations for them to lead a stable and prosperous life. Private actors should be mobilized to support designated poor regions. More preferential financial, land and other policies should be offered to poor regions, focusing on education, healthcare and employment, using education to stop the transmission of poverty between generations, improving the level and ability of medical services in poor areas, and providing employment information to poor rural workers in a timely manner.

5.2 Establishing an Integrated Urban and Rural Poverty Reduction Mechanism

After the three-year transition period, China’s poverty reduction work should shift from shortterm campaigns to regular mechanisms, from tackling absolute poverty to addressing a combination of absolute and relative poverty, and from fighting rural poverty to promoting integrated urban and rural poverty reduction. Urban and rural poverty reduction mechanisms and policies should be in place. A combination of social protection and basic public services should be offered to both poor groups and other low-income people to avoid the “cliff effect” and “welfare trap.” The following four priorities warrant consideration: (i) fostering feature industries, improving small-scale public-interest production facilities and amenities, and helping the poor develop skills and risk resilience; (ii) expanding the coverage of urban Dibao for all permanent urban residents; ( iii) including the remainder of poor populations after the transition period into the scope of social protection and relief, and steadily raising the level of social protection; (iv) improving social relief policies for urban and rural poverty-stricken handicapped persons, elderly persons, seriously ill patients and poor children.

5.3 Improve the Targeted Identification and Dynamic Adjustment of Aid Recipients

Based on the registration of poor populations, China should create an income statistical system and information management platform for rural households, and improve evaluation indicators for rural poor households and those living on Dibao. Departments responsible for poverty reduction, civil affairs, education, transportation, public security, market supervision and information services, as well as banks, should share information about poverty reduction, remove data barriers, and address the problems of “information islands” and the imprecise identification of poverty reduction. It is also necessary to improve an information system for urban and rural residents living on Dibao and struggling with special difficulties. Dynamic poverty monitoring is the basis for adjusting the scope of aid recipients. Moreover, urban and rural Dibao standards should be linked with price hike and adjusted on a dynamic basis.

5.4 Reducing Poverty through Social Protection and Development

Pro-poor social protection policies should offer incentives and recognition to families that worked their way to escape poverty as role models for other poor families, so as to form a positive incentive mechanism and improve their subjective initiative to participate in poverty alleviation. Innovative social protection and effective services should be offered to people struggling with special difficulties. Professional agencies and social workers should be invited to offer better and more efficient social relief services. When it comes to development- oriented poverty reduction, China should explore its own path of poverty governance in the new era by integrating agriculture-related funds for poor counties, combining special pro-poor projects with a negative list to facilitate funding, and exploring the mechanism of "rewards instead of subsidies" for poverty reduction development projects.