China’s New Rural Poverty Line: An Insight – Analysis

By Teshu Singh

Recently, China has revised its rural poverty line from 1,196 RMB to 2300 RMB (6.3 RMB per day). Consequently, it has brought three times more rural poor people under the poverty line. What has influenced China to revise its threshold limit? What are the implications of the new rural poverty line?

Poverty line of any country is the minimum level of income deemed essential to achieve an adequate standard of living, in a given country. In 2008, the World Bank revised the figure from US$ 1 a day to US$1.25 at 2005 purchasing power parity. China’s former rural poverty line was “one of the lowest lines in the developing world.” The former poverty line classified 2.8 per cent people under the poverty line while the new limit will bring 7.5 per cent (approximately) people out of the poverty line. It means that the number of people recognized as poor will expand from 26.9 million in 2010 to 128 million in 2011. Although at the moment it has increased rural poor population but in the long run it will set a new standard for improving the general living conditions of the people. It has initiated a new phase in the country’s effort to eradicate poverty.

The Chinese Government has come up with this poverty line because it was already aimed in the 11th Five Year Economic Program (2006-2010) to build a “harmonious society” through more balanced wealth and improved education, medical care and social security.

With the new threshold limit now more people will be eligible for government funded social support schemes. It is a substantive increase and will help spread the fruit of the robust economic development to a larger section of people. This program aims to eliminate absolute poverty and reduce the number of deprived people to a large extent by 2015. Thus the revised limit will bridge the widening wealth gap in the country.

By raising the threshold limit China has come closer to international standard of $1.25. In fact the new contour matches medium-ranked nations in the middle and low income countries category. China is now not much behind in comparison with the World Bank’s threshold limit. Hence it is an effective way of developing human resource and enhancing development capability of the country.

This is not the first time that Chinese government has adjusted their poverty line. In 1986, the absolute poverty standard was 206 Yuan after some adjustments it was raised to 1067 Yuan in 1988, 1196 Yuan in 2009 and 1274 Yuan in 2010 respectively.

As a result of constant revision of the rural poverty line the numbers of poor have fallen from about two hundred million in 1981 to 28 million in 2002. China began its anti-poverty program in 1980s. An anti poverty program called ‘Eight-Seven Program’ which mean that about 80 million people will be eliminated from the poverty line in seven years by the twentieth century, was launched in 1993. After the success of this plan Chinese government launched a “New Century Rural Poverty Alleviation Plan for 2001-2010”.

At a national poverty alleviation meeting, Hu Jintao has said that the poverty reduction is a “significant and urgent task.” He further called the members of Communist Party of China and the society to concretely carry out poverty alleviation work with a greater resolve, intensified efforts and more effective actions and measures “in order to achieve the country’s target of building a comprehensive well off society by 2020”.

This move has already achieved 3 out of the 8 key benchmarks outlined in the Millennium Development Goals, which are intended to help the world’s poorest by 2015. Since China is an agricultural country with a large rural population this rural poverty reduction is important for eliminating poverty in rural area. But on the other side, today urban poverty in China is also increasing. There are around fifty million people under urban poverty line. Still due to the low poverty line for urban areas many poor are out the poverty alleviation program.

Thus the present threshold limit shows that the government is sensitive to the difficulties of the rural poverty stricken people along with its economic growth process. With the slowdown in economy and rising inflation it would be difficult to implement this development program. However it indicates that the Chinese economy has become mature and is dealing with statistical inputs. This is the first proof we have that after decades of top down policy implementation, bottom up inputs are finally beginning to influence planning at the highest level which is indicative of a greater inclusiveness of the system.

Teshu Singh
Research Officer, CRP
email: [email protected]