IFAD: China needs to ensure its poverty eradication sustainable

Lixian County Chicken Industrial Park, Longnan, Gansu province [File photo by Ran Chuangchang]

On February 25, 2021, President Xi Jinping announced that China has succeeded in eradicating extreme poverty. This is an extraordinary achievement: In just 40 years, China managed to lift more than 800 million people above the poverty line – about 100 million in the last eight years – becoming the first developing country to achieve Sustainable Development Goal 1: eradicating extreme poverty. No other country can claim to have brought so many people out of poverty in such short period of time.

However, has China really eradicated poverty? One of the most commonly used arguments to challenge such an assertion is that the poverty line set by China (i.e. 2,300 yuan per year at 2010 constant prices, which today equates to about US$2.30 a day at 2011 purchasing price parity – somehow comparable to the international poverty line of US$1.90 a day) is too low for an upper-middle-income country, and thus not representative for China. This argument hints that if a higher poverty line were adopted, then a large share of China’s population would still be categorized as living in poverty.

While this argument is certainly valid, in my view it risks to narrowly limit the discussion – and the assessment of China’s achievements – to an overly theoretical debate on the ‘correct’ definition of poverty – which, no matter the definition of poverty adopted, can always be questioned. Moreover, restricting the discussion of China’s poverty reduction achievements to the numeric value of the poverty line used by China fails in my view to give sufficient credit to the enormous progress made by China in improving several other dimensions of human development beside income. Life expectancy, for instance, has increased by more than 10 years in the past 40 years, and the infant mortality rate has decreased more than five times in the same period. Today, about 95 percent of students in China complete the nine years of compulsory and free education. All key indicators on food security – prevalence of undernourishment, malnutrition, wasting, etc. – have drastically improved over the past 40 years, and, according to the Global Hunger Index (GHI), the level of China’s food insecurity today is low.

“Has China eradicated poverty?” is thus, in my opinion, not the appropriate question. The right question – and most relevant today – is:“Are China’s extraordinary achievements sustainable?”

Although China has succeeded in bringing all its population above the poverty line, there is still a significant share of the population that live above but dangerously close to the poverty line. According to the World Bank, almost one-fourth of the population live on less than US$5.50 a day, the typical poverty line in upper-middle-income countries. Premier Li Keqiang recently declared there are over 600 million people in China whose monthly income is barely 1,000 yuan. As the Covid-19 pandemic has showed in many countries, people barely above the poverty line are particularly vulnerable to shocks, and at risk of falling into poverty when facing a sudden, unexpected event: the loss of a job, a period of high expenditures, like children’s education, an increase of food prices or a bad harvest, or – as in the case of Covid-19 – a disease.

Second, the financial burden of poverty reduction efforts on public finance has been tremendous. According to the Ministry of Finance, it is estimated that the government spent over 1 trillion yuan (about US$150 billion) for poverty reduction programs over the past three years. While this effort was certainly justified by the pursuit of the highest social goal – ending poverty – it made poverty reduction extremely demanding (and dependent) on public resources, and it will certainly make poverty reduction efforts difficult to sustain financially over time.

Hence, while rightly celebrating the poverty reduction achievements today, China would need to ensure that such achievements are sustained over time. Properly identifying and targeting the vulnerable segment of the population, strengthening the capacity of the vulnerable to cope with shocks – thus preventing them from falling in poverty or remaining trapped in a status of “persistent vulnerability,” and making poverty reduction achievements financially sustainable, that is to say sustainable without heavily depending on the injection of public resources, represent the key priorities for the government in the years to come.

Achieving these goals would require – inter alia – investing to improve human capacity of the most vulnerable part of the population and to create new employment and investment opportunities specifically targeting them; revising and expanding the social protection system to properly cover this part of the population; and redefining the principles determining the use of public resources for poverty reduction – reducing the use of subsidies, and instead using public resources to increase investments in public goods to attract private investments for the benefit of the vulnerable.

This year, the International Fund for International Development (IFAD) and China celebrate the 40th anniversary of the first IFAD’s loan to China. This is a testimony of the strong and long-lasting ties between IFAD and China. IFAD stands ready to support China in pursuing this agenda and making poverty achievements sustainable – as it did support China, over the past 40 years, in eradicating rural poverty.

Matteo Marchisio is the Country Director and Representative for China and Head of the East Asia Regional Hub, International Fund for Agricultural Development (IFAD).

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn and Chinagate.cn.