the Chinese rural poverty line

3 Mar

Since the economic growth of China of the past few decades and it’s climb towards a middle income status, Chinese experts from the World Bank and Chinese ‘think tanks’ have urged the government to raise the threshold to get a better reflection of the poor in China in the rural areas.

At the end of 2011 China lifted their rural poverty line to 1 dollar a day. After the raise 128 million Chinese were qualified as poor, a 100 million increase compared to 27 million considered poor under the old rural Chinese poverty standard, which was 0.55 dollar a day. The Chinese rural poverty line is now closer to international norms of The World Bank of 1.25 dollar a day.  The new limit better reflects the overall higher standards of living of China.

In countries not using the U.S. dollar as currency the living costs of a day are often determined by the purchasing power parity (PPP). This PPP compares the local currency with the dollar by looking how much local currency you need to buy the same things in the U.S. with one dollar. Based on the PPP the Chinese new set standard of 1 dollar a day equals around 1.80 dollar a day in rural China.

In the last decade the percentage of rural population officially considered poor went from 10.2% to 2.8% in 2010. Which is incredibly low compared with other (developed) countries. After the poverty line adjustment to 1 dollar a day in 2011 around 13.4% of the registered rural population was considered as poor. This increase made more people qualified for receiving government assistance. In addition the Chinese government also increased the amount of funding for poverty relief by more than 20%.

The Chinese government is doing a good job here, and yet there is still a way to go to at least reach the rural poverty line 1.25 dollar a day of The World Bank. In saying that, I also think the Chinese government realised that 2.8 percent is pretty low and therefore hard to (visually) improve. By increasing the poverty standard this poverty percentage also increased, which might make it easier for the government to set a goal lowering the poverty rate. And, maybe most importantly, this whole idea of increasing the rural poverty standard sends a good message to the surrounding world and to the Chinese population itself. This might have been a deciding factor for the increase. Or am I now being too suspicious…?


3 Responses to “the Chinese rural poverty line”

  1. gw2g11 March 4, 2013 at 2:06 pm #

    I think this is definitely going in the right direction, after all, a country’s poverty line should in International Relations practise be raised as the economy and society develops. Under this new poverty line China’s poverty-stricken population will officially increase by millions of people. Although at the same time, it seems to me that China’s government is now strongly beginning to realise that it needs to work harder to alleviate rural poverty in order to secure a more equal and harmonious future development for its people. How to tackle this issue is obviously a very tricky one, considering how vast and diverse China is. I believe Chinas rural poor must be given equal opportunities to be a part of China’s development, rather than be provided for by government aid. However, with this already difficult question of poverty alleviation also naturally follows the issues of protecting the environment and sustainable development as the spendable income of the population, and thus the ecologic footprint, will continue to grow. Not only do the Chinese decision-makers need to develop strategies for “integrating” millions of poor people into the economy, but they also need to so whilst protecting the environment and working with local conditions. I do not envy them this task!

  2. timhaythorne March 4, 2013 at 7:56 pm #

    Despite the Poverty line adjustment, there is merit to be found in the figures given. As the report posted below shows, China is actually the first developing (which it was considered at the time) country to achieve its poverty alleviation targets set by the UN under the Millennium Development Goals (MDGs).

    Pages 10-19 give a great insight in to China’s progress in this area. With regards to the relative poverty in rural areas, table 1.1 gives a good overview of the distribution of income over time. The ratio of rural to urban income per capita is now about 2/3 of what it was in 1990, but when you consider the ratio of growth between the two sectors this is actually a notable achievement for the Chinese Government.

    The Engel Coefficient moves in a pretty similar pattern for both the rural and urban populations, which gives us an even better insight in to the relative progress of wages across the regions. Engel’s law states that as incomes rise, the percentage of income spent on food decreases, ie. the percentage spent on food should reflect relative food prices throughout regions and therefore be a good indication of relative wages. Seeing as the changes in the Engel’s Coefficients remain in approximate proportion over time, we can infer that the growing differences in wages between the urban and rural areas (a primary indicator for inequality) really is not as drastic as first portrayed.

  3. pw9g10 March 6, 2013 at 9:15 am #

    China appears to be taking this issue seriously considering its increase in poverty relief funding and the near doubling of the amount by which it defines as living in poverty. Furthermore, as poverty had fallen by almost eight percentage points in the last decade it is clear that something at least was being done to reduce poverty whether it be through high levels of employment or other factors.

    Increasing the amount by which poverty is defined can be viewed as China committing to further improvements by setting new targets or as a lack of a need to hide behind false definitions considering the improvements it has made. I would suspect that both are prevalent but the idea that China is setting new targets seems to fall in line with a country that has undergone rapid economic development.

    While living below US$1.25 a day may be defined as living in absolute poverty a case can be made in favour of China’s lowered definitions. By setting the level at US$0.55 per day the focus was very much on those that are the ‘poorest of the poor’ and so will have required the most attention. Following on from the near eight percentage point drop in those living in poverty by that definition China was able to amend the amount and then target the new ‘poorest of the poor’. Reducing poverty is something that doesn’t happen immediately and considering an argument suggesting China has adopted a staggered approach in dealing with it seems very appropriate.

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