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Lifting 800 Million People Out of Poverty: Lessons from China’s Experience

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Over the past 40 years, the number of people in China with incomes below $1.90 per day – the International Poverty Line as defined by the World Bank to track global extreme poverty– has fallen by close to 800 million. With this, China has contributed close to three-quarters of the global reduction in the number of people living in extreme poverty. At China’s current national poverty line, the number of poor fell by 770 million over the same period.

To take stock of this achievement, a joint study – “Four Decades of Poverty Reduction in China: Drivers, Insights for the World, and the Way Ahead” – was undertaken by China’s Ministry of Finance, the Development Research Center (DRC) of the State Council, and the World Bank, with the China Center for International Knowledge on Development (CIKD) acting as the implementing agency. The report looks at the key drivers of China’s poverty alleviation achievements over the past 40 years, considers the insights of China’s experience for other developing countries and puts forward suggestions for China’s own future policies.

“China’s battle against poverty has benefited the largest number of people in human history,” said Minister Ma Jiantang, Secretary of the Party Leadership Group of the DRC. “To sustain poverty reduction gains, China will focus more on achieving endogenous development in areas that have been lifted out of poverty and introduce vigorous measures to support rural revitalization. Our goal is to achieve common prosperity and high-quality development including through the rural revitalization strategy with a focus in five key areas: industry development, human capital, culture, ecological environment and local governance.”

“China achieved its goal of poverty reduction in the new era as scheduled at the end of 2020”, said Yu Weiping, Vice Minister of Finance. “We have accomplished the arduous task of eliminating extreme poverty, and  made significant contributions to global poverty reduction. Going forward, China will continue to sustain and expand the gains in poverty alleviation and comprehensively realize rural revitalization. The Ministry of Finance will ensure that sound fiscal policy measures will be made and implemented to support the transition. We stand ready to continue strengthening cooperation with the World Bank in relevant areas.”

“China’s poverty reduction story is a story of persistent growth through economic transformation,” said Manuela V. Ferro, World Bank Vice President for East Asia and Pacific. “As China’s economy adjusts to a new low carbon growth model, its social policies will need to be adapted to support greater labor mobility, upgrade skill levels in line with shifts in labor demand, and offer improved social protection to ensure a just transition.”

China’s approach to poverty reduction has been based on two pillars, according to the report. The first was broad-based economic transformation to open new economic opportunities and raise average incomes. The second was the recognition that targeted support was needed to alleviate persistent poverty; support was initially provided to areas disadvantaged by geography and the lack of opportunities and later to individual households. The report points to a number of lessons for other countries from China’s experience, including the importance of a focus on education, an outward orientation, sustained public investments in infrastructure, and structural policies supportive of competition.

The report also highlights how the success of China’s economic development and the associated reduction of poverty benefited from effective governance, which helped coordinate multiple government agencies and elicit cooperation from non-government stakeholders. To illustrate the role of broad-based economic transformation in poverty alleviation, separate sections of the report analyze growing agricultural productivity, incremental industrialization, managed urbanization and rural-to-urban migration, and the role of infrastructure. The evolution of China’s approach to poverty alleviation, from place-based to country-wide social protection policies, and the targeted poverty alleviation strategy since 2012 are also reviewed.

The report considers the likely future structural shifts in China’s growth model, including rebalancing towards consumption and high value services and embarking on the transition towards carbon neutrality, and their implications for China’s future policy agenda. It highlights the need to close remaining gaps in quality education between rural and urban areas and to provide better social protection to migrant workers, and the scope for improved integration of the various existing social security policies.

Over the past two years, the joint research team conducted field studies in the regions of Ningxia and Zhejiang, held a series of workshops with domestic and international experts, and worked closely with academic institutions on data analysis. Several working papers have been published containing details of the case studies and data analysis. The report presents a synthesis of this work.

The study was released on March 31 at a joint event in Beijing attended by Secretary of the Party Leadership Group of the DRC Ma Jiantang, Vice Minister of Finance Yu Weiping, and World Bank Vice President for East Asia and Pacific Manuela V. Ferro.