Whether it’s the currency devaluation or the stock market rout, the economic news coming out of China seems unremittingly negative – and that’s not to mention the horrific explosions in Tianjin.
But here’s some good news. Yet-to-be-released data shows that China has all but eradicated urban poverty. For a country with huge numbers of poor people streaming into its cities, many of whom living initially in conditions of abject misery, this is an extraordinary success. It has been achieved, in large part, because of a government subsidy paid to urban dwellers to bring incomes up to a minimum level of 4,476 yuan ($700 or £446).
The data comes from the latest survey in the China Household Income Project (Chip) series and will not be formally published until next year. It shows that in 2013 the share of people living in cities below this minimum income line was just 1.6%, adjusted for purchasing power parity. According to Prof Li Shi, director of Beijing Normal University’s institute of income distribution who works on Chip, that’s mostly accounted for errors in targeting by the government.
And it seems that the data is unusually robust: it is based on a behemoth household survey for which more than 100,000 families recorded their income and consumption every day for a whole year.
China has lifted more people out of poverty than anywhere else in the world: its per capita income in increased fivefold between 1990 and 2000, from $200 to $1,000. Between 2000 and 2010, per capita income also rose by the same rate, from $1,000 to $5,000, moving China into the ranks of middle-income countries. Between 1990 and 2005, China’s progress accounted for more than three-quarters of global poverty reduction and is the reason why the world reached the UN millennium development goal of halving extreme poverty. This incredible success was delivered by a combination of a rapidly expanding labour market, driven by a protracted period of economic growth, and a series of government transfers such as the above urban subsidy, and the introduction of a rural pension.
The question now is whether the government can repeat this success and eradicate extreme poverty entirely: after all upto one person in 10 in the country remains poor. The current economic and social five year plan (the country’s 12th) aims to eliminate all poverty by 2020 (10 years ahead of the newly agreed UN Sustainable Development Goal poverty eradication target, and it seems likely that this target will be reiterated in the new five year plan to be agreed by the Chinese Communist party’s central committee next year. If that’s to be achieved, the government will need to keep up its expensive transfer programmes, even at a time of economic downturn.
In addition, inequality remains a big issue and will need to be tackled. Although China’s Gini Coefficient for income inequality is improving from its 2008 peak of 0.491, it remained at a relatively high level of 0.473 in 2013. This is despite the government’s record of progressive taxation, which has had a distributional effect, as well as raising money to fund transfer programmes. There are also significant gender and regional inequalities, meaning the government will need to do more to target women and people living in rural areas (as well as other groups such as disabled people) to ensure that no one is left behind.
And finally, equitable growth will of course also need to be the sustainable kind that cuts rather than increases carbon emissions – no small order for a country where air pollution kills an estimated 4,000 people a day.
- Elizabeth Stuart is a research fellow at the Overseas Development Institute