Case Study:Poverty in China

Poverty in China refers to people whose income is less than a poverty line of $1.25 per day (PPP) set by the World Bank benchmark. Poverty has affected all aspects of China, including the environment, health, education, housing, nutrition, and agriculture. It has disrupted families and communities, and sent millions from the poorer regions to the cities in a desperate search for work.The People's Republic of China is the third largest country in the world and home to more than 1.3 billion people. It is an immense expanse that includes vast seacoasts, fertile plains and valleys, rugged mountains and windswept deserts.

In rural areas, as a result of rapid growth in agricultural production and income, absolute poverty declined dramatically from 1978 to 1984, from 262 million (around one-third of rural households) to 88 million people (around one-tenth). Poverty remained relatively constant during 1985-93, fluctuating between 11 percent and 16 percent according to World Bank estimates. (The author's calculations show a fluctuation of between 10 percent and 18 percent.) The failure to further reduce poverty was the result of stagnating grain production.
Urban income has grown rapidly since reforms started in 1984. Between 1984 and 1993 the average household member's real income almost doubled, increasing by 81 percent, with an average annual growth rate of 7.5 percent. Thus the average household was able to share the benefits of China's rapid economic growth. Absolute poverty is extremely low in urban areas, partly because the subsistence level is relatively low and partly because urban dwellers earn relatively high wages and receive food subsidies. Between 1978 and 1993 only a few years were registered in which the shares of urban households living below the absolute poverty line exceeded 1 percent. Between 1990 and 1993 the rate of absolute poverty in urban areas fell below 0.1 percent. The level of relative poverty is also very low, at less than 3 percent of urban households. (Relative poverty is defined as 50 percent of the urban national mean income.) But relative poverty is growing.

China's vastness and diversity encompass a broad range of the problems and challenges facing small farmers and pastoralists throughout the developing world. Population pressure strains the productive capacity of the 10 per cent of the land area that is suitable for sustained cultivation. An increasing number of livestock compete for fodder on fragile rangelands. Flood-prone areas and deteriorating irrigation systems result in water logging and salinization. Encroaching deserts threaten formerly productive land. Climate change has emerged as the main reason for poverty in China as over 95 percent of the poor live in ecologically fragile areas and are the most affected by the changing patterns. As there are many unexpected natural disaster in the area like earthquakes, crops are destroyed. This caused farmer in these areas to be unable to produce a sufficient amount of crops in order to feed their families.

Another factor is the unfavorable treatment by the central government for the rural residents as compared with the urban residents. The government has spent less on infrastructure investment in rural areas than in urban areas. It invested only a limited amount to improve agricultural productivity. It also provided less welfare benefits including healthcare and education subsidies to rural residents. Although much labor mobility was allowed for the farmers to move to urban areas to find work, those working in the urban areas are subject to the discrimination under the government policy of separating the residence status and thus entitled benefits of the urban and rural populations. The migrating workers do not have residence permits in the cities and cannot receive the services provided such as healthcare and schooling for their children. Procurement of farm products by government agencies has continued and the procurement prices were often set below market prices. Farmers were also not allowed to sell their products to private trades as private trading was prohibited. Therefore the farmers cannot earn enough money to support their families, which shows the causes of the poverty in China.

The efforts of China's government to stimulate economic growth have focused largely on boosting the productivity of the country’s enormous rural population by adopting a series of economic reforms that have guided China’s transition from a planned to a market-oriented economy. In the late 1970s, the government introduced the household responsibility system (HRS), which was a major shift away from a collective system towards one in which individual households had greater control and decision-making powers over the land and other resources they used. As a result, productivity surged.
At the same time, the government gradually relaxed its control over markets and prices, setting off a boom in township and village enterprises in rural areas. Meanwhile, the government sustained the opening up of the trade and investment sectors to the global economy to boost exports and foreign investment. As a result of these policy shifts, China has been undergoing continuous economic growth since 1978. By 2008 per capita income had increased sixfold, and the number of people living in absolute poverty, according to national poverty line criteria, had decreased from about 260 million to about 14 million.

Done by: Collin Cheong, Xin Qiong Xi, Chen Rong Hao, Tan Herh Kai, Tjai Leon 10S19

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