Targeted Poverty Relief: China’s New Anti-poverty Strategy
China cut the number of the poor by more than 700 million in the past 40 years. Its contribution rate to global poverty reduction exceeded 70 percent.
Since the late 1970s, China has made great progress in large-scale poverty reduction in the process of its reform and opening up, making considerable contribution to the realization of the UN Millennium Development Goals (MDGS). However, the nation is still facing problems such as income inequality, comparatively lower poverty line, huge poor population, and lack of targeted poverty alleviation measures. In this context, the strategy of “targeted poverty relief ” needs to be taken further for hastening large-scale poverty reduction.
Progress in Poverty Alleviation
Over nearly four decades since it began the reform and openingup policy, China has greatly reduced poverty while maintaining rapid economic growth. According to the World Bank’s poverty line of US$ 1 a day, the country cut the number of the poor by more than 700 million in the past 40 years. In 2000, the UN Millennium Summit passed the MDGS, setting a goal to halve the number of the poor from the 1990 figure. China was the first country to reach the goal. By 2002, it had
reduced the percentage of the poor in rural areas to 30 percent, which was 60 percent in 1990. During the period, China’s contribution rate to global poverty reduction exceeded 70 percent. China has made further efforts to reduce poverty since the 18th National Congress of the Communist Party of China in 2012. By the end of 2017, the population of the poor in the country’s rural areas had decreased to 30.26 million from 98.99 million at the end of 2012, and the poverty headcount ratio had dropped from 10.2 percent to 3.1 percent.
Rapid economic growth over decades has substantially increased incomes and consumption, being decisive in large-scale poverty reduction. This large-scale poverty reduction is attributed to a combination of many factors. Firstly, growth in agriculture is particularly important for poverty alleviation. According to a research report released by the World Bank, growth in China’s agricultural sector is four times as effective in reducing poverty as growth in the secondary and tertiary industries. Secondly, targeted poverty alleviation effort has helped narrow the gap between different regions and accelerate economic and social development of poverty-stricken areas. Thirdly, China began to establish a social security system for rural areas in 2007. Measures such as guaranteed minimum income, the new-type rural cooperative medical care system and the rural pension insurance system have ensured provision of basic living and public services. Fourthly, inclusive rural policies have benefited vast sections of the impoverished in rural areas. In 2003, the country launched the “grain for green” campaign in poverty-stricken areas, and farmers who returned their farmland to forests and grasslands were paid with allowances. In 2006, agricultural tax was abolished, and a policy to provide general subsidies for agricultural development was implemented. From 2008, nine-year free compulsory education began to be available nationwide for all children. And finally, the basic land system and land operation pattern ensure that the poor benefit from agricultural growth. The household contract responsibility system was adopted as the basic land system in rural areas, according to which rural lands are collectively owned, but farmers enjoy long-term use and management rights of the land contracted. In the early 1980s, farmlands were distributed to farmers in a basically equal manner, so that impoverished households could also benefit from their farmland and agricultural development.
Challenges in Poverty Reduction
Despite great progress in economic development and poverty reduction, it is undeniable that the income gap between the rich and the poor continues to expand. China’s Gini coefficient grew from 0.288 in 1981 to 0.4 in 2017. As relief measures accelerated economic growth of poverty-stricken regions, income inequality in those regions continued to increase. During the implementation of the Outline for Development-oriented poverty Reduction for china’ s rural areas (2001-2010) , the ratio of the average income of the poorest households to that of the richest households in key counties for poverty alleviation dropped from 21.59 percent in 2002 to 17.38 percent in 2010. The more income a rural household earns, the faster its net income grows. From 2002 to 2010, the per-head net income of farmers with the lowest incomes increased at an annual rate of 11.1 percent, while that of farmers with the highest incomes increased at an annual rate of 14.1 percent, resulting in a further expansion of the income gap. From 2002 to 2009, the annual income growth rates for
poor rural households and average rural households in key counties for poverty alleviation were 2.75 percent and 11.76 percent, respectively— the former is 9 percent lower than the latter, while the national average stayed at 11.04 percent. The ratio of the income of poor households to that of the average households nationwide continued to fall—from one third in 2002 to one fifth in 2009.
The increase in income inequality is attributed to various reasons. First, the mainstay of China’s economic structure has shifted from agriculture that is labor-intensive to manufacturing and service industries, resulting in further expansion of the income gap. Due to the fact that the country adopts a land system featuring equal distribution, the income distribution in its agricultural sector is comparatively equal. However, income inequality grows in the secondary and tertiary industries that are capital- and technology-intensive. Second, the population and labor migration between rural areas and urban areas also causes income inequality. Due to their comparatively lower educational level and comprehensive capacity and the shortage of capital and information, migrant workers from povertystricken rural areas are less likely to find jobs in cities than those from comparatively richer rural areas. This further widens the income gap. Third, although development-oriented relief effort has greatly improved infrastructure, production, and living conditions in poverty-stricken areas, it remains hard for poor households to substantially increase their incomes by utilizing improved infrastructure as rich households did. Finally, it is difficult for the poor to enjoy effective financial services, which impedes a rise in their incomes.
Against the backdrop of growing income inequality, it has become harder to reduce the number of the poor through economic development and regional poverty alleviation. Therefore, it is increasingly important to directly help the poor through more targeted relief policies.
Targeted Poverty Alleviation Strategy
In November 2013, Chinese President Xi Jinping first put forward the strategy of “targeted poverty alleviation” during his visit to Xiangxi Tujia and Miao Autonomous Prefecture in Hunan Province. So far, the strategy has remained a significant part of China’s fight against poverty.
The strategy aims to enhance the relevance and efficacy of relief effort, so as to offset the drop in the effect of economic growth on poverty reduction. The key content of targeted poverty alleviation is elimination of all the factors and obstacles that cause poverty through targeted assistance for the poor and enabling their selfdevelopment towards the goal of sustainable poverty reduction. Targeted poverty alleviation includes precise identification, assistance, management, and assessment.
According to a survey conducted by the National Bureau of Statistics of China, the country had 70.17 million below the poverty line at the end of 2014. (It was estimated that the figure would be reduced to 60 million in early 2016). The government has taken a series of measures to further innovate its poverty relief mechanism, so as to facilitate the implementation of its targeted poverty alleviation strategy and ensure eradication of
poverty by 2020. In terms of precise identification, China has identified 29.48 million poor households with a total population of 89.62 million since 2013. (Currently, the second round of poor identification is underway, and although the findings are yet to be revealed, it is believed that the identified poor would be less in numbers). Moreover, the country has registered all poor households and population and details about the families, as well as their available resources, income sources, and reasons of poverty, in the national poverty alleviation information system.
The government has taken a series of measures to push forward targeted poverty alleviation. First, supporting a batch of poor households through industrial development and employment and solving their difficulties in relation to technology, capital, and marketing. Second, relocating 10 million of the poor in remote areas with harsh natural conditions to comparatively more hospitable villages or small towns with a view to improving the environment and conditions for their development. Third, helping a batch of poor households reduce poverty through ecological compensation policies such as subsidies for those who returned their farmland to forests. Fourth, helping a batch of poor households reduce poverty through strengthening education. The measures include developing preschool education in povertystricken areas, providing free high school or occupational school education and living allowances for students from impoverished families. This will not only reduce the education expenditure of poor households, but also help end inter- generational poverty. Finally, helping a batch of poor households through social security measures such as expanding the coverage of minimum living allowances, launching rural cooperative medical care system, and providing severe-disease medical insurance and assistance, and pension insurance. By 2020, China’s minimum living security system will lift all its citizens above the poverty line.
To strengthen community-level poverty alleviation capacity, governments at various levels have dispatched officials to act as first secretaries and poverty relief team leaders in 128,000 poverty-stricken villages. Academic institutions, nongovernmental organizations (NGOS), and ordinary citizens are also encouraged to participate in poverty relief efforts by various means, such as establishing independent third-party poverty reduction appraisal mechanism.
Chinese Experience in Poverty Relief
China’s success in large-scale poverty reduction over the past four decades, as well as its ongoing effort in targeted poverty alleviation, is useful experience for developing countries. China’s successful experience can be summarized as follows:
First, sustained economic growth has been combined with development-centered relief effort. For any country, economic growth is a necessary prerequisite for largescale poverty reduction. Against a backdrop of increasing income inequality, targeted poverty relief is indispensable to end poverty.
Second, the country has realized an organic integration of poverty alleviation and social security. Essentially, in order to achieve sustainable poverty reduction, a country needs to enhance the selfdevelopment ability of povertystricken areas and population through development-oriented relief effort. Moreover, providing necessary social security policies will not only guarantee the poor’s basic livelihood, but also lay the foundation for development-oriented poverty alleviation. If the poor lack basic living guarantee, it is impossible to achieve sustainable poverty reduction.
Third, government-led relief effort should be made alongside social mobilization. With primary liability for poverty alleviation, governments at various levels are responsible for formulating relief strategies, providing and mobilizing relevant resources, and drafting and implementing relevant plans and policies. Poverty alleviation is a comprehensive, systemic project that involves various sectors and requires specialized knowledge and expertise. Therefore, broad participation of market entities, NGOS and citizens is vital to enhancing the effectiveness of poverty relief efforts.
Finally, rational institutional arrangements are helpful for poverty reduction. China’s fair land distribution system has considerably magnified agriculture’s role in poverty reduction. Moreover, the popularization of free compulsory education and cooperative medical care helps the poor increase their human capital and enhance their capacity for development.
The author is a professor at the School of Agricultural Economics and Rural Development under Renmin University of China, and director of the university’s Anti-poverty Research Center. He is dedicated to research on rural poverty.