1. The Role of Government in Poverty Reduction Practice in Rural China
Zhang Lei
Managing Director, IPRCC
Beijing

2. Catalogue Preface Ⅰ.Relations between Government and Poverty Reduction
Ⅱ. Government Practice in Rural Poverty Reduction
（1）Transformation of Economic Structure
（2）Economic Growth and Structure Upgrade
（3）Changes of agricultural and rural policies
（4）Poverty Reduction Programs
Ⅲ. What can be learnt from the role of Chinese Government
in Poverty Reduction

3. Preface
Over the past two decades, Chinese achievements with poverty reduction in China were remarkable: substantial decline of poor population; improvement of infrastructure, public utilities, basic production and living conditions of the poor.
Fig 1：Absolute Poor Population and Poverty Incidence in Rural China during
Source：China Yearbook on Rural Household Surveys（2003）and China Poverty Monitoring Data of Rural China

4. Preface Growth and anti-poverty, the two mandates with the same
purpose, have been attained in the transition from a
centrally-planned to a market-based structure and forward to
modernization.
The Chinese Government was acting as the provider of
imposing regulations, the major manager and user of public
resources and the direct manipulator of social and economic
development.

5. 1 Relation between Government and Poverty Reduction
1.1 Determinants of Poverty
★Under-capacity：
Poor skill
Inadequate capital and resources for production
Imbalance between economic and bio systems
Constraints in social capital
★Opportunity deprivation：
Market discrimination
Unbalanced distribution of development rights
The determinants are the outdated approaches of production and
immature market at the fledging stage but the market failures when it
comes to mature.

6. 1 Relation between Government and Poverty Reduction
1.2 Government Role in Poverty Reduction
It is difficult for the poor and poor areas to do away with poverty
by solely counting on the market which is geared to growth rather
Than equality. Government is positioned to reshape their life with a
power that directs economic and social development.
Government functions：
（1）Address market failures：Establish a mode of economic
operation, growth and social development that benefits all, so as to
avail the poor of development opportunities.
（2）Provide public service and adjust income distribution: improve
physical and human resources, enhance the development capacity of
The poor.

7. 1 Relation between Government and Poverty Reduction
1.3 Means of government poverty reduction
（1）Optimize regulations to provide basic stimulus for economic
Growth.
（2）Promote economic growth, optimize economic structure, adjust
income distribution and create development conditions.
（3）Devise and enforce the poverty reduction program targeting the
poor living in impoverished areas.

8. 2 Poverty Reduction Practice in Rural China
2.1.Transform economic structure, build up and perfect economic operational system that features resources allocation regulated mainly by the market and set a basis for rural poverty reduction
Change land operation mode: rationalize ownership to
encourage investment on production
● Endow the farm households with the right of land use, land
disposal and claim to the rest of land；
● Extend land contract；
● Regulate land transfer

9. 2 Poverty Reduction Practice in Rural China
Percentage of rural household expenditure on production in total expenditure and percentage of agro-expenditure on the total household expenditure on production (%)

10. 2 Poverty Reduction Practice in Rural China
Reform on market circulation of farm products: return to real
price signals, increase the efficiency of agricultural resources
distribution
● Lift government direct control on price；
● Expand the variety of traded products；
● Lift the constraint on grain market buyer and seller.

11. 2 Poverty Reduction Practice in Rural China
Farm products purchasing prices in China（1978=100）
Source: China Statistical Yearbook 2001

12. 2 Poverty Reduction Practice in Rural China
Economic restructuring: enhance rural elements and trade
environment
Reform State-owned enterprises, lift restrictions on non-state-owned sector, absorb foreign investment, reform financial regulations, financing, tax, and regulate market competition, etc. An economic system features market regulating resource allocation has been set up in China.

13. 2 Poverty Reduction Practice in Rural china
2.2 Maintain the momentum of sustained economic growth, promote
industrialization and urbanization to set an economic basis for rural
poverty reduction.
The above moves have helped a lot to sustaining poverty reduction
when the effect of structural reforms in rural was over and poverty
reduction slowed down.
● Economic growth: increase demands for farm products and farm
labor.
● Industrialization and urbanization: Expand the scope of non-farm
production and employment.
The operational mode, employment structure and farmer’s income
structure in rural have changed remarkably.

14. Changes on the percentage of agro-labor and non-agri-labor in the total employees for the whole society and for the rural areas
Source: China Report on Agricultural Development (2005)

15. Percentage of net per capita income （1978=100） for rural residents, income from salary/income apart from family run planting in the total family net income (%)
Source: China Yearbook on National Rural Household Survey (2003)

16. 2 Poverty Reduction Practice in Rural China
Chinese Government moves to sustain economic growth：
★Maintain the investment rates on fixed social assets and sustain the growth of aggregate demands by means of public expenditure and investment from state-owned sectors.
★Strengthen macro control, curb deflation and inflation, avoid major economic fluctuation
★Perfect market system, incent innovation of market player for a higher efficiency of production

17. 2 Poverty Reduction Practice in Rural China
2.3. Promulgate a range of pro-farmer policies, enhance
agricultural productivity and delivery of rural service so as to set a
policy basis for rural poverty reduction
Over the past two decades, China shifted from agriculture supporting industry to industry repaying agriculture, thus brought about the integrated development of the two sectors and balance between rural and urban areas.
Since the mid of the 1990s, as the marginal effects of structural reform declined, the redundancy of farm products replaced demands, farmers' income was increasing, growth of agriculture and rural development relied more on the enhancement of productivity, industrial structure is readjusted, transfer of product elements across the two sectors and between urban and rural, support from government, it requires transformation of policies for rural areas and agriculture.

18. 2 Poverty Reduction Practice in Rural China
Effects of poverty reduction
Pro-farmer policies
★Production and bio conditions in rural areas
★Agricultural support and farmer’s burden
★Market system of farm products
★Industrial structure of agriculture
★Social service for rural areas
★Non-farm employment in rural areas
Improve the production and employment conditions and environment for the farmers,
split the development cost of rural, increase capital stock of farmers,
reduce the transaction cost of production elements and products for both urban and rural areas.

19. 2 Poverty Reduction Practice in Rural China
2.4 Implement poverty reduction programs to address the
low qualifications, poor living and production conditions,
limited channels to increasing income, so as to upgrade the
capacity of the poor
Due to market constraints, structural transmission, economic
growth and pro-farmer policies failed to tackle the above problems.
In another word, economic growth and policies alone can not sweep
away the poverty at all aspects.

20. 2 Poverty Reduction Practice in Rural China
2.4.1 Content, measure and model of poverty reduction program in
China
（1）Types of measures
A. Favorable policies
B. Development projects at macro and micro levels
C. Subsidy and relief for production and livelihoods
（2）Measures at different phases
Phase 1：
★Set up：Special fund for agricultural development in three Xi areas
Subsidy for bordering area development
Development fund for underdeveloped regions
★Enforce reduction and exemption of tax, liberate purchase and sale of
farm products and carry out sale on account for cloth, cotton and
clothes
★Welfare-to-Work

21. 2 Poverty Reduction Practice in Rural China
Phase 2：
★Identify guidance of development based poverty reduction,
establish agencies specialized in poverty reduction
★Set up：Subsidized loans for poor areas
Budgetary poverty reduction fund
Subsistence fund for ethnic minorities
Newly-added development fund
★Enforce favorable policies to stimulate social and economic
development in poor areas
Phase 3：
The Seven-Year Priority Plan on Poverty Reduction was for the
first time issued and enforced. It raised that the human, physical
and financial resources and all walks of the society should be
mobilized to address the 80 million poor in rural Chin within
seven years.

22. 2 Poverty Reduction Practice in Rural China
Measures specified by the Seven-Year Priority Plan on
Poverty Reduction ：
★Integrate the finance from various channels into two
categories, fiscal funds and credit funds, and direct them to
the key poor counties. Governments at local levels shall
support other poor areas.
★Organize targeted support and cooperation of poverty
reduction between east and west regions
★Devise favorable policies of finance, credit and economic
development for poor areas
Additionally, international organizations, bilateral organizations
and NGOs started their engagement in Chinese poverty reduction.

23. 2 Poverty Reduction Practice in Rural China
Phase 4: 2001-now
Poverty Reduction Program for Rural China ( ) was enforced to bring about balances between poverty reduction and sustainable subsistence, between income increase and improvement of both life quality and human qualification, between economic social growth and bio preservation, between the development of poor areas, poor communities and poor households.

24. 2 Poverty Reduction Practice in Rural China
（3）Modes of poverty reduction
A. Modes that were shaped in the poverty reduction history：
Welfare for work, reliance on technology, targeted areas
supported by government agencies, matches between east and
west, public charity and service, micro finance, labor export,
migration and international collaboration.
B. The mode that was newly developed to include all the above:
One body two wings

25. 2 Poverty Reduction Practice in Rural China
One body：Village-based development
County as the unit, poor village as the foundation, the residents
of poor areas were mobilized to participate in development.
Development plans are designed at village levels to address
economic social development and bio preservation, which are the
components of plans at county and provincial levels. The county
and provincial governments shall coordinate resources for the
orderly implementation of these plans at county level.

26. 2 Poverty Reduction Practice in Rural China
45.1 thousand out of the 148 thousand key poor counties for support
identified by the government have performed the development
planning.
Monitoring of plan implementation on 716 poor counties showed
that: each village that had performed the planning received an
average 600 thousand RMB; each village had its roads increased or
expanded by an average 7 km; a total of 8.3 hectare artificial pasture
was built or upgraded; a total of 127 coverage of buildings was
constructed for education and sanitation use; 243 people and 244
livestock were relieved of water shortage; 4.7 hectare of mulberry,
Vegetable and fruit plantations were added and 81 people were
trained to be qualified laborers.

27. 2 Poverty Reduction Practice in Rural China
Two wings：
Industrialization：Support industries that help increase farmer’s
income, including agro-projects, processing or transaction of
farm product, enterprises and construction projects that absorb
poor laborers.
Training for labor transfer：Training on agro and non-agro skills
for poor farmers.

28. 2 Poverty Reduction Practice in Rural China
Execution architecture and resource mobilization
●Execution architecture
The poverty reduction leading groups were set up at central and
locals of governments to take charge of the organization,
guidance, coordination, monitoring and inspection of poverty
reduction.
Offices reporting to the leading groups were set up to perform
specific steps like policy formulation, planning and
implementation and international collaboration.

29. 2 Poverty Reduction Practice in Rural China
State Council Leading Group of Poverty Alleviation and Development
State Council Leading Group Office of Poverty Alleviation and Development
Leading Groups at provincial level
Poverty Reduction Office at
provincial level
Leading Groups at prefecture level
Poverty Reduction Office at
prefecture level
Leading Groups at county level
Poverty Reduction Office at
county level
Supervise
Poverty Reduction Office at
township level
Guide and coordinate
Chinese Government Poverty Reduction System

30. 2 Poverty Reduction Practice in Rural China
●Implementation mode
Split of accountability at various levels was adopted to
stimulate the governments into active functioning. The funds,
power, tasks and responsibility reach provincial level. Poverty
reduction planning, accountability split and project execution
was achieved by the rule of provincial supervise, county
responsible, village implement and household engage.

31. 2 Poverty Reduction Practice in Rural China
●Effect
►Mobilize government resources to the largest extent, including:
budget poverty reduction funds, administration funds from relevant
government agencies, each agencies supporting specific areas and the match between east and west regions.
►Mobilize social resource, including: international organizations,
NGOs, private sectors and individuals.
►Coordinate poverty reduction efforts at various aspects,
including: integrated policy formulation and planning, task split,
coordination, concentration of funds.

32. 2 Poverty Reduction Practice in Rural China
Targeting and methodology
（1）Poverty standard
Poverty line：Drawn in 1986 to target the absolute poor without
adequate subsistence
Low income line: Drawn in 2000 to target the poor who is just
out of poverty without secure subsistence
The two lines are flexible to price changes
（2）Beneficiaries of poverty reduction
Ex- 1986: poverty reduction and support to living and
production of the poor with specific areas as targets
Post-1986：Target poor counties. Adjust and readjust the
selection of national key poor counties respectively
in 1986, 1994 and 2001
Up to now, a total of 592 key counties was identified to cover 61.9% national poor and 63.3% low incomers.

33. 2 Poverty Reduction Practice in Rural China
Starting from 2001: The targets or beneficiaries of poverty
reduction extend to villages and households to
accommodate the Shifted distribution of the poor
from large concentration and Intensive groupings
to small concentrations and extensive groupings.
The key poor villages were started to be fixed
and the village became The essential unit of
project implementation.
A total of 148 thousand key poor villages were identified
nationwide to cover 76% of the poor. 130 thousand such villages or
88.4% of the total come from the western region. 82 thousand or
55.6% of them are covered by the national key poor counties.

34. 3 What can be learnt from the role of Chinese Government in Poverty Reduction
3.1 Strong political will and government commitment are the fundamental guarantee of poverty reduction achievements. Poverty reduction is an important components of national modernization strategy which focuses on human benefits and ensure the economic growth be shared throughout the society.
3.2 Development and poverty reduction should be correlated to each other. At macro level, China pushes for a social development by economic transition and sustained growth; at micro level, China goes along with guidelines of development-based poverty reduction and participatory poverty reduction with a final purpose to enhance the self-development and self-accumulation capacity of the poor areas and poor people.

35. 3 What can be learnt from the role of Chinese Government in Poverty Reduction
3.3 Poverty reduction requires political and polity security provided by the
government. At political system aspect, the key is to foster balances of
resources allocation and endowment of development right, and continued
improvement of economic efficiency; at policy aspect, the key is to improve
the production and living conditions for the poor and to enhance their
capacity.
3.4 Poverty reduction requires the extensive engagement of all walks of life.
Government interference, social engagement should be integrated with the
demands and participation of poor population.
3.5 Poverty Reduction requires learning and drawing upon the successful
experience from home and abroad.