Poverty in China

Poverty In China

Poverty in People's Republic of China refers to the state of relative or absolute material deprivation that affects hundreds of millions of Chinese citizens, particularly those living in rural areas.

Since the start of far-reaching economic reforms in the late 1970s, growth has fueled a remarkable increase in per capita income and a decline in the poverty rate from 85% in 1981 to 13.1% in 2008 (poverty being defined as the number of people living on < $1.25/day). At the same time, however, income disparities have increased. The growing income inequality is illustrated most clearly by the differences in living standards between the urban, coastal areas and the rural, inland regions. There have also been increases in the inequality of health and education outcomes. Exact statistics are disputed, as there have been reports of China's underestimating the poverty rate.

Some rise in inequality was expected as China introduced a market system, but inequality may have been exacerbated by a number of policies, including the dismantling of the state health care system and the "Iron rice bowl" system of guaranteed employment and benefits; the imposition of restrictions on rural-urban migration that have limited opportunities for the poorer rural population; the inability to sell or mortgage rural land has further reduced opportunities; and development and investment policies that in the 1990s focused overwhelmingly on coastal regions. China has a decentralized fiscal system that relies on local government to fund health and education. The result has been that poor villages cannot afford good services and poor households cannot afford the high costs of basic services.

The large trade surplus that China has built up in recent years is a further problem, because it stimulates an urban industrial sector that no longer creates many new jobs, while restricting the government's ability to increase spending to improve services and address disparities. The government has recently shifted its policy to encourage migration, fund education and health for poor areas and poor households, and rebalance the economy away from investment and exports toward domestic consumption and public services, to help reduce social disparities.