China has reported a dramatic decrease in rural poverty over the last decade.
The number of rural citizens living below the national rural poverty line fell from 94.2 million people (10.2% of the rural population) in 2000, to 26.88 million (2.8%) last year, according to figures released Wednesday by China’s State Council.
The sharp drop occurred despite the fact the national rural poverty benchmark was raised from 865 yuan (US$136) in 2000 to 1,274 yuan (US$201) in 2010.
The Council’s white paper evaluates the government’s “Development-Oriented Poverty Reduction Programs,” a wide range of rural policies, such as agricultural subsidies, social security measures, and improved infrastructure for access to water, electricity, and transportation.
“Wage growth is the key to understanding this whole development in China,” said Duncan Innes-Ker, Beijing-based senior editor and economist at the Economist Intelligence Unit.
Ker said the dramatic decrease “doesn’t shock him at all” citing the “phenomenal scale of income growth,” whereby average annual incomes are growing at rates of 15-20%.
“Even the poor have been experiencing very strong growth in incomes…in the last five years, the supply of unskilled or semi-skilled labor is starting to fall short of demand, so wages for those labor classes have been growing very fast,” he added.
Previously, the supply of rural labor in cities greatly outstripped demand, keeping wages low.
“Urbanization and migration to Tier 1 and 2 cities are major reasons behind the reduced rate of rural poverty, as they result in increased annual incomes for rural citizens,” echoed Wang Sangui, professor at School of Agricultural Economics and Rural Development at Renmin University in Beijing.
Whilst wage growth certainly supports the reduction of poverty, it should be pointed that rural migration to the cities is not a government poverty reduction program, at least not directly.
Innes-Ker warned that “even if incomes are rising rapidly, the cost of living is also rising rapidly. I’m not sure if the government has adjusted its policies to take that into account.”
He said there is a suspicion amongst many in China that the Consumer Price Index is rising more slowly than the cost of living and that the rate of inflation is under-accounted in official figures.
Wang said the challenge of reducing China’s poverty rate will grow in the future, given the widening income disparity in China.
“Even though the economy is still growing, the efficiency of poverty alleviation is slowing down, and in the next 20-30 years, the government will not be able to make as significant progress in reducing poverty. Over the long-term, the most efficient way for China to eradicate poverty is to increase its social welfare policies and investment in human capital, for example, through education and medical care.”
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