Asset-based measures sustain development of Qingdao's new area

Located in east China’s Shandong Province, the Qingdao West Coast New Area, established in June 2014 as part of a national-level strategy, is home to a number of major industrial chains. In 2016, with its functional districts flourishing, the area reached a “Shenzhen speed” with its anti-poverty work: All its residents were out of poverty, including 4,278 rural households (7,250 people), 769 urban households (1,271 people), 41 villages, and 5 towns.

In 2016, Qingdao West Coast New Area allocated 99.08 million yuan (U.S. $15 million) as poverty alleviation funds, invested 37.69 million yuan (U.S. $5.6 million) in poverty alleviation industries, and leveraged 630 million (U.S. $94 million) of social capital. But the matter of how best to use these funds needed careful consideration.

One of the most significant experiments by the new area was that of asset-based poverty alleviation, which turned inactive poverty alleviation funds into high-value assets, ensuring sustainability for poverty alleviation.

From 2016, the new area began to assist 30 provincial-level impoverished villages and 35 municipal-level ones with annual poverty alleviation subsidies of 600,000 yuan (U.S. $90,000) and 500,000 yuan (U.S. $75,000) respectively.

“Some villages do not have adequate resources for industrial development and high-yield projects, or are unable to invest autonomously with significant risk. This leads to unused poverty alleviation funds or even to an investment deficit,” said Zhang Hui, vice director of the Qingdao West Coast New Area Poverty Relief Office.

In order to make optimal use of these funds, the new area came out with Suggestions on the Purchase of Commercial Assets with Poverty Alleviation Funds based on a democratic decision-making process across 65 impoverished villages. Over three years, the new area plans to purchase Qingdao Huangdao Development Group—a state-owned enterprise (SOE)—with high-quality assets totaling more than 100 million yuan (U.S. $15 million): 35.5 million yuan (U.S. $5.3 million) each year, split among the villages. These assets will be leased to Fumin Company, another SOE that guarantees a minimum annual dividend of 8% for 20 years. Village collectives can choose whether to renew their contracts or cash out their assets upon expiry.

Lijiadianzi Village is one of the beneficiaries. “During the most difficult times, we even needed to ‘beg for alms’ to afford the salaries of veteran cadres,” said Li Kailiang, secretary of the village party branch, “with poverty alleviation and self-raised funds, we built 10 mushroom greenhouses in 2015 and leased them to companies, which brought in a total of 120,000 yuan (U.S. $18,000) over three years. Last year, we bought high-quality real estate from Qingdao Huangdao Development Group with 1.4 million yuan (U.S. $210,000) of poverty alleviation funds for 2016–2018, and received a dividend of 120,000 yuan (U.S. $18,000). We will invest all this revenue into the second phase of greenhouse construction and will build 10 more this year. With the help of the Qingdao Science and Technology Council, we will establish a 16.5-acre mushroom production base in the future. We already have a say in the mushroom prices on the (Qingdao) west coast.”

“In the past, village collectives did not have money to solve villagers’ problems, and party branches did not have any prestige. Since poverty alleviation work has driven villagers out of poverty, party branches have now been inciting widespread response,” added Li.

“This model can insure a collective income of 150,000 yuan (U.S. $25,000) across 65 key poverty alleviation villages,” said Li Chunrong, director of the Qingdao West Coast New Area Poverty Relief Office. “If the ‘v1.0’ model of poverty alleviation is fund allocation or (to use a metaphor) ‘blood transfusion’, then the ‘v2.0’ model is fund-to-asset conversion or ‘blood production’. Then, the parlaying of the returns from these assets is the ‘v3.0’ model, which denotes the autonomous generation and allocation of one’s own blood. Such is the virtuous cycle of poverty alleviation funding.”