8 F o u r D e ca d e s o f P o v e r t y R e d u c t i o n i n C h i n a
jobs in coastal areas were some of the key factors that contributed to family income growth and
helped lift millions out of poverty.
Over the years, the regional contributions to poverty reduction shifted from coastal areas to
the western and central regions. The establishment of special economic zones and the Coastal
Development Strategy in the mid-1980s followed the government’s strategy to develop the
country’s more prosperous coastal provinces by boosting their participation in international
trade and foreign direct investment flows. By 1999, the eastern region’s GDP per capita was
twice as high as in the rest of the country. Despite having a quarter of the country’s poor in
1995, the region accounted for 40 percent of the total rural poverty reduction between 1995
and 2002, with 79 million fewer poor people.8 In the 2000s, the government implemented the
Western Development Program to close regional gaps by directing considerable government
resources, including infrastructure investment, fiscal transfers, and subsidies, to lagging regions
(Fan, Kanbur, and Zhang 2011). Consequently, the western region accounted for 50 percent
of the total decline in rural poverty between 2002 and 2007 (while representing less than one-
quarter of the country’s population).
Since 2013, rural poverty had fallen below 10 percent based on the 2010 official poverty
threshold and became increasingly concentrated in remote areas in the western and central
regions. For the remaining pockets of poor households, further poverty reduction was no longer
driven by rising labor incomes but, instead, by the increasing role of private and public transfers
(figure 2.2). Reallocation of employment out of agriculture and the growth of earnings among
those in the bottom quintile slowed. As migration to urban areas accelerated, family transfers
(remittances) became increasingly important to the relatively worse-off rural households at the
end of the 2000s. Basic education fees were also waived for rural households beginning in the
mid-2000s. Moreover, a new rural collective medical scheme was piloted in 2002 and scaled
up in 2006.
Since 2009, the central government has strengthened social policy by extending the cover-
age of a basic noncontributory pension to rural areas and scaling up other social assistance
transfers, which were complemented after 2012 by additional cash and in-kind support under
the targeted poverty alleviation campaign. Consequently, public transfers became increasingly
important in 2013–18 to lifting the most deprived out of poverty. The share of public transfers
in total household income doubled (from 10 percent to 20 percent), driven by the increased cov-
erage of rural pensions, the introduction of universal health care with a basic reimbursement
package extended to rural areas, the expansion of social assistance, and social insurance and
social assistance benefits (albeit benefit levels remained low).
China’s demographic transition with falling dependency rates played a supporting role
in poverty reduction over the entire period. Starting from an already relatively low birth
rate, effective family planning interventions and the one-child policy introduced in 1982
(replaced in 2016 by a general two-child policy and in 2020 by a three-child policy), as
well as improved health care, together led to a further reduction in the dependency rate
(Naughton 2018). As birth rates declined, dependency rates fell sharply, increasing the
share of working-age adults that could potentially contribute with increased labor income
and thus drive poverty down. The share of the working-age population (ages 15–59) rose
from 58.6 percent in 1982 to 70.1 percent in 2010, while the dependency ratio fell from
62.6 percent to 34.2 percent, as the share of children under age 15 fell from 33.6 percent
to 16.6 percent and the total fertility rate remained well below two births per woman.
After 2010, the trend reverted as the share of the elderly grew more rapidly than the rest
of the population. According to the seventh national census data released in May 2021,
the working-age population accounted for 63.3 percent of the total population in 2020,
having dropped 6.7 percentage points, and the dependency ratio increased to 45.9 percent.
Decomposition of poverty changes by income components suggests that changes in the
F ORTY YE A RS O F RUR A L P OVERTY REDU C TION 9
share of the adult population (age 14 and above) contributed between 2 and 7 percentage
points to poverty reduction throughout the decades (figure 2.2, panel a).
Notes
1. This chapter is based on chapter 1 of CIKD (forthcoming) and Lugo, Niu, and Yemtsov (2021).
2. Based on National Bureau of Statistics Yearbooks.
3. Income-based Gini index 1981–2001: Ravallion and Chen (2007) based on data provided by the
National Bureau of Statistics of China (NBS), 2003–19: NBS Household Surveys Yearbook.
4. Whether high rates of economic growth could have been achieved without increases in inequality is
not clear. Indeed, the same forces that drove development may well lie behind the increasing inequali-
ties, creating incentives for some individuals and regions to invest more than others. Deng Xiaoping
thus famously said, “let some people get rich first.” Kuznets (1955) points to the likelihood that
inequality would increase during the process of development. This report does not aim to resolve this
point. Nonetheless, the decomposition in figure 2.1 is informative and shows that it was growth that
drove poverty reduction up until 2010, while rising inequality mitigated its effect.
5. Semi-elasticity is defined as the percentage point reduction in poverty for every percentage point of
economic growth. China’s position in the ranking is similar if one considers semi-elasticities of mean
income, or elasticities of per capita GDP or mean income.
6. World Bank (2009) studies economies that grew more than 7 percent per year for 25 years. China was
among the 13 economies that shared that characteristic. Brazil, Indonesia, and South Africa (included
in figure 2.1) were also in the group. But at least among those for which poverty data are available for
a long period, and considering a longer time horizon, China is, indeed, an outlier.
7. See also Ravallion and Chen (2007) and Montalvo and Ravallion (2010).
8. Ravallion and Chen (2007) show that that during the 1980s and 1990s, coastal provinces had signifi-
cantly higher rates of poverty reduction than inland provinces, even conditional on the initial level of
poverty and inequality.
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