National University of Singapore From the SelectedWorks of Jiwei QIAN Fall 2016 Rural Poverty Alleviation in China: Recent Reforms and Challenges Jiwei QIAN Available at: https://works.bepress.com/jiwei-qian/24/
East Asian Policy, 2016 Rural Poverty Alleviation in China: Recent reforms and challenges Abstract Qian Jiwei The "13th Five-Year Outline Plan" (2016-2020) has poverty alleviation as one of the major tasks for the Chinese government. Two sets of policies have been underlined: poverty alleviation (jinzhun fupin) plan to improve the targeting accuracy of these programmes and policies to focus on adjacent regions with disadvantaged natural and economic conditions. However, the efficacy of these programmes has been saddled with issues including low government capacity and the difficulties to mobilise the private sector. Poverty Alleviation as a Critical Task during the 13th Five-Year Plan The 13th Five-Year Outline Plan approved by the National People s Congress in March 2016 has poverty alleviation as one of the major tasks for the Chinese government, 2006-2020. According to this plan, China will have zero national-level poverty-stricken counties and no rural poor by 2020. In 2016, the target is to lift over 10 million rural residents out of poverty. The target is backed by a substantial increase in government expenditure of over 43% of the central government s earmarked fund for poverty alleviation in 2016 compared to that in 2015. Despite double-digit annual growth rates in the last three decades, there were still a large number of people under absolute poverty. By the end of 2015, the number of rural people living below the poverty line was a whopping 55.75 million, or about 9.2% of rural population. Qian Jiwei is Research Fellow at the East Asian Institute, National University of Singapore. 1
Since the 1980 s, China has initiated rural development programmes to reduce poverty. The earlier programmes were largely regional-based and focused on local economic growth rather than providing relief. Social protection complementing area-based development-oriented poverty reduction programmes has been emphasised since the 2000 s. Programmes to improve labour skills, facilitate microcredit and enhance rural social assistance were launched. However, poverty alleviation policies met with several difficulties, the first of which is the definition of the rural poor. In poverty-stricken counties and designated poor villages, many beneficiaries were not poor while many poor did not benefit from the programmes. Second is the multiple dimensions of poverty such as health, education and standard of living. Poverty may prevail if policies ignore some dimensions of poverty other than the income level. Third is the heterogeneous impacts of the programmes for the rural poor. Different poverty alleviation programmes may have different effects across social groups and regions. Fourth is the inaccuracy of targeting affected groups in some regions where the poverty head count ratio is low. In the 13th Five-Year Plan, two important set of policies have been underlined for future poverty reduction in rural areas: poverty alleviation (jinzhun fupin) plan to improve the targeting accuracy of these programmes, and policies to focus on adjacent regions with disadvantaged natural and economic conditions. In particular, 14 extremely poor regions which are adjacent to each other in western and central China are highlighted. The poverty alleviation programmes for the coming five years include the promotion of Great Poverty Alleviation ( 大扶贫 ), and the expansion of microfinance and other financial assistance programmes. International donors, social organisations and enterprises have been roped in. 2
1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The efficacy of these programmes has been saddled with low government capacity, inadequacies of rural poor s profile databases, poor coordination among different government departments and the inability to mobilise the private sector to finance poverty alleviation projects. Poverty Alleviation Policies in China Before the 1980 s, rural poverty was an extremely serious problem in China. The economic backwardness of China was the major reason for rural poverty before the 1980 s. World Bank estimated that over 848.2 million people of mostly rural residents whose income was below US$1.25 a day (in 2005 price) lived in poverty. China has set an official line for absolute poverty since the 1980 s, with adjustments made constantly along the line of purchasing power. The official poverty line in 2015 was about RMB3,000 per capita income, a big jump compared to RMB130 in 1980. Based on the official poverty line, rural poor was 220 million in 1980 and about 56 million in 2015 (Figure 1). Figure 1: Changes of poverty line in China (RMB) and the number of rural poor 3500 3000 2500 220 250 200 2000 1500 1000 500 125 85 65 32 29 28 29 26 24 21 15 40 36 27 128 99 150 100 82 70 5650 0 0 poverty line (RMB) number of rural population whose income is below poverty line (million) 3
Source: Chen, Zongsheng, et. al (2013), Absolute and relative changes of rural poor in China, Management World, 1, 67-77 and a recent news conference by the director of the Leading Group Office of Poverty Alleviation and Development under The State Council in December 2015. Many rural poverty reduction initiatives have been released since the 1980 s. Between the 1980 s and 2000 s, poverty reduction policies were largely regional and development oriented. In the 1980 s, 331 key national poverty counties were nominated and resources for poverty reduction shifted towards economic development and revenue generating activities in these counties. By end 1993, the number of rural poor living below the official poverty line was reduced to 75 million. In 1993, the 8-7 plan, a national plan for poverty reduction between 1994 and 2001, was released by the Chinese government. The programme was thus named to reflect its objective of lifting 80 million rural poor out of poverty within seven years. Under the 8-7 plan, programmes such as subsidised loans, food-for-work and budgetary development fund covered 592 national-level poverty-stricken counties. The number of rural poor below the national poverty line was reduced to 26 million in 2000. Poverty reduction programmes such as education and microfinance programmes were initiated to address such constraints. Since 2001, 148,000 poverty-stricken villages have been singled out and development programmes such as Whole Village Advancement (zhengcun tuijin) have been introduced. Over 80% of the poor was covered by these poverty reduction programmes. Social safety nets were also improved in the rural areas to protect the poor. In 2007 and 2009, rural social assistance and rural social security programmes were implemented respectively. In 2014, rural social assistance programmes covered over 50 million and in 2011, over 85 million rural residents claimed pension from the rural social security scheme. 4
Between 1990 and 2005, the number of people with income of less than US$1.25 a day (in 2005 price) in China dipped from 683 million to 212 million. Internationally, this represented 76% of the world s total. The Millennium Development Goals to reduce poverty were thus achieved 10 years in advance. The gap between nation and key national-level poverty-stricken counties in terms of poverty headcount ratio (i.e. the share of the poor in total population) had narrowed from 15% in 2002 (i.e. nation 24.3% and key counties 9.2%) to 5.5% in 2010 (i.e. nation 8.3% and key counties 2.8%). The trend suggests that area-based poverty deduction programmes, which target poor counties, have been effective to some degree. Targeting the Rural Poor under Poverty Alleviation Policies Rural absolute poverty in China is found in areas with poor natural conditions, such as poor geographic location, landscape, soil, water supply and other conditions. Poor infrastructure in these areas is also known to bring down economic conditions. The poverty trap in the form of credit constraint and human capital constraints for the poor is more likely to affect the poor when there is external economic shock in particular adverse health shocks. The poor are also handicapped by the lack of marketable skills, social exclusion and geographic isolation; debilitating disease, or environmental degradation is also said to play a part. The under-provision of basic public services due to poor local fiscal capacity 1 has further burdened the poor with the need to pay for health-care and educational services. 1 See Qian, Jiwei. (2013), Equalization Of Basic Public Services In China, EAI Background Brief, No. 819. 5
Table 1: Reasons for poverty for 89 million rural poor in 2013 2 Reasons for poverty Share of households Illness 42.4% Short of credit 35.4% Short of technology 22.3% Short of labour force 16.8% Financial burden of tuition fee and 9% schooling Disabled 5.8% Source: Xinhua News Agency, 13 June 2016. Table 1 shows the major reasons for poverty reported by 89 million rural poor identified in 2013. Given there are multiple choices in the form, the summation of all of these shares of households are larger than one. Table 1 suggests that reasons such as illnesses, tuition fees, disability and restrictions to credit access, technology and labour are the constraints related to both the poverty trap and underdevelopment of the regions. Poverty alleviation policies thus have to take into consideration the factors of poverty and accuracy in targeting the rural poor. Many beneficiaries of the poverty reduction programmes are not the rural poor. Like poverty reduction programmes in other countries, an elite capture phenomenon is evident in China s poverty reduction programmes. Elite capture refers to the phenomenon that political or economic elites rather than the poor are more likely to benefit from the development programmes. 3 Some studies have shown that richer residents in national-level poverty-stricken counties in China benefit more from poverty reduction programmes. For example, there was not only the existence of elite capture but also the widening of income inequality in Inner Mongolia, between 2000 and 2010. 4 2 http://news.xinhuanet.com/politics/2016-06/13/c_129055964.htm, accessed 28 June 2016. 3 Platteau, J. P. (2004). Monitoring elite capture in Community Driven development. Development and Change, 35(2), 223-246. 4 Zhang, Qian (2014) Poverty Trap and Elite Capture (Pinkunxianjin yu jinyinbuhuo), Xuehai, 5, 132-42. 6
While income level has been the major criterion for targeting the poor, according to many research in other developing countries, poverty is multi-dimensional and could include income, education, health and others. United Nations Development Programme has constructed a Multidimensional Poverty Index including health, education, standard of living, among others. Poverty may also persist when the policies ignore some dimensions of poverty other than the income level. For instance, over 62% of 35 million in 2009 who had been lifted out of poverty were soon found to have fallen back into poverty. Constraints to health-care and education access are among the major reasons for the persistence of poverty. As the effects of many poverty reduction programmes are heterogeneous and context dependent, these programmes may have varying impacts on the rural poor, depending on the reasons for their poverty. Regional economic conditions are important factors. The accuracy of targeting and regional conditions are highly correlated. In the western region, the number of absolute poor is not as high as that of the central region but the share of the rural poor in the total population is higher. This makes targeting difficult and inaccurate. Recent Government Initiatives in Poverty Alleviation To address the targeting issues in implementing poverty alleviation policies, the government has introduced a number of strategies, measures and programmes. First is a national guideline for poverty alleviation in 2011. Poverty reduction strategies for economic development and social development are largely area-based. Basic public service provision including health care, education and social security is expected to complement these programmes. Second is the aim to lift all national-level poverty-stricken counties by 2020 based on the 13th Five-year Outline Plan approved by the National People s Congress in March 2016. 7
All 70 million rural poor (based on 2014 data) will be lifted out of poverty by 2020. Thirty million people will be lifted out of poverty under programmes promoting local economic development. Another 20 million will be relocated to find jobs in other places (urban areas) or out of areas with harsh natural conditions. The remaining 20 million rural poor will be assisted and covered by the social safety net. To achieve these goals, two important sets of policies have been underlined: targeted poverty alleviation (jinzhun fupin) plan to improve the targeting accuracy of poverty reduction programmes, and policies to focus on adjacent regions with disadvantaged natural and economic conditions. To improve targeting, the Leading Group Office of Poverty Alleviation and Development under the State Council has set up profile databases for over 89 million rural poor since 2013. Information in these databases includes individual income, family members, age, size of arable land, housing conditions and major reasons for poverty. With the databases, officials could thus target the rural poor more accurately given the information on household income, reasons for poverty for individual rural poor and details concerning the multidimensional aspects of poverty. Plans under targeted poverty alleviation could, as a result, be individualised based on different reasons for poverty and the economic conditions of the individual rural poor and of the poverty-stricken village. 8
Policies that focus on adjacent regions with disadvantaged natural and economic conditions would cover regions such as Tibet, Tibetan-inhabited areas in four western provinces, three counties in southern Xinjiang and 11 extremely poor regions. Over 28% of poor people had been targeted for poverty alleviation programmes in these regions in 2011. With a high poverty headcount ratio, poverty alleviation programmes in these areas are expected to be more effective given the better targeting. Since 2013, 14 central ministries have registered as coordinators of supportive units to provide assistance to adjacent regions. As the coordinator, the central ministry has to collaborate with other ministries in different poverty reduction projects. Third is the deployment of 128,000 urban cadres by the Organisation Department of the Communist Party of China to be Party secretaries of poverty-stricken villages in 2015; with their working experiences in urban areas, they are expected to help promote the local economies. Fourth is the setting of poverty alleviation as the major criterion for evaluating officials in national poverty-stricken counties. For example, a recent report shows that in Guizhou province, two most important performance evaluation criteria are the proportion of the poor who have been lifted out of poverty and the growth of disposable income for the rural poor. Fifth is the rapid increase in government budget for poverty alleviation since 2010 (Figure 2). The total government s earmarked fund for poverty alleviation reached over RMB 122 Billion in 2015. It has increased by about 23 % annually since 2010, much faster than the growth of fiscal revenue. The growth rate of central government earmarked fund for poverty alleviation has also increased to about 16% annually. Figure 2: Government expenditure for poverty alleviation (RMB Billion) 9
100 90 80 70 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 Central government earmarked fund for Poverty allievation Total government earmarked fund for Poverty allievation (central and local government) Source: Ministry of Finance, budget report, various years. Private investment and social organisations have also been encouraged to actively participate in poverty alleviation works such as those under Great Poverty Alleviation, which are inter-linked with programmes that are industry-based or society-based. Industry-based poverty reduction programme highlights the role of various industries including agriculture, water conservancy, education, health and ethnic affairs. Society-based poverty reduction programme refers to the participation of enterprises and social organisations. Challenges for Recent Government Poverty Alleviation Initiatives While these initiatives had positively reduced the number of rural poor from 128 million in 2011 to 56 million in 2015, a number of challenges remain. The lack of capacity of government agencies for implementing poverty alleviation initiatives is a critical issue. At the local level, poverty alleviation bureau/office is usually short of resource as other departments such as bureau of civil affairs and education bureau are given higher priority in the policy agenda. 10
For example, in a national-level poverty-stricken county in Shanxi province, there are reportedly only five staff who are in charge of all poverty reduction programmes in 2016. With low capacities, household information may not be collected as precisely as expected and corruption has been reported. For example, the National Audit Office in 2015 reported that there were over 3,000 beneficiaries with faked records in Mashan county of Guangxi province. Thereafter, it had taken over 250,000 cadres in Guangxi province three full months to verify all the records of the rural poor in Guanxi province since October 2015. There is also the question of an insufficiency of information in the rural poor s profile databases to achieve accurate targeting and identifying the reason for poverty, which is most significant in evaluating poverty reduction policies and designing appropriate policies. Currently, the databases simply record the reasons of poverty of rural poor individuals or households. The common reasons for poverty that the rural poor often cite when filling up forms include poor health, low level of education and skills, poor living conditions and shortage of credit options, among others. However, in reality, the reasons can be far more complex and interrelated. How to correctly identify the reason for poverty even with the big data is a serious challenge. The coordination among different government departments is another concern. For example, for policies under targeted poverty alleviation, the National Bureau of Statistics, Ministry of Civil Affairs and the Leading Group Office of Poverty Alleviation under the State Council each manages one set of statistics on the rural poor. 11
According to National Bureau of Statistics, the total number of rural poor in 2014 was about 70 million. However, the figure churned out by the Leading Group Office of Poverty Alleviation under the State Council was about 80 million in 2014. Also, there were about 49 million rural residents claiming benefit from the Dibao programmes managed by the Ministry of Civil Affairs. The discrepancy in statistics has made policy implementation difficult. A unified database for the rural poor is thus necessary. Coordination issue for infrastructure upgrading and public services provision in adjacent regions between different regional development schemes is also another serious concern. Particularly in the area of tourism development that requires environment protection and maintenance of a sustainable local ecosystem, effective correlation is much needed. Coordination is also lacking in the implementation of poverty alleviation programmes in the designated 14 adjacent regions and several national plans for regional economic development such as Yangtze River Economic Zone and Coordinated Development of the Beijing-Tianjin-Hebei area. While private investment and social organisations are encouraged to actively participate in poverty alleviation works (i.e. society-based poverty reduction), mobilising and coordinating the private sector to finance poverty alleviation projects will not be an easy task. 12