Agricultural Development and Poverty Reduction in China Wang Sangui Renmin University of China
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Agricultural Development and Poverty Reduction in
ChinaWang Sangui
Renmin University of China
Poverty is largely a rural phenomenon in China
Rural and urban poverty in China
Poverty headcount rate at $1/day income
1990 1992 1996 1998 2000 2004
National 23.1 21.6 10.6 7.9 8.8 6.9
Rural 31 30 14.9 11.4 13.7 9.5
Urban 0.9 0 0.2 0 0.3 0.2
Poverty headcount rate at $1/day consumption
National 32.9 30.2 17.4 17.8 16.1 13.1
Rural 44.4 41.4 24.8 26.2 25 17.9
Urban 1 0.8 0.4 1 0.5 0.3
Source: World Bank estimates based on official household survey data available only until 2004.
Trend of rural poverty reduction in China According to NBS estimation
Rural poor population decreased from 250 million in 1978 to 14.78 million in 2007
A total reduction of 235 million poor people, with an annual decreasing rate of 9.3%
Poverty incidence decreased from 30.7% to 1.6%
Alternative estimations also show dramatic reduction in rural poverty over the past 30 year
WB $1/day or $1.25/day consumption poverty decreased by more than 500 million , and contributed greatly to the fulfillment of MDGs
But the reduction was more uneven over the period
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Rural poor pop Poverty incidence
mill
ion
％
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WB $1/day(income) WB $1/day(consumption)
Ravallion and Chen official line(income) Ravallion and Chen high line(income)
Yao official line(income) Yao $1/day(income)
％
Economic growth and poverty reduction
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070.00
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GDP growthChange of poverty incidence
％ ％
Elasticity of poverty reduction to growth is 0.52
Ravallion and Chen(2007) estimated a much large elasticity of poverty reduction to growth (around 3)
Agricultural growth has much higher impact on poverty reduction
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Agri. growthChange of poverty incidence
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Elasticity of poverty reduction to agricultural growth is 1.13
the elasticity of poverty reduction to agricultural growth Ravallion and Chen (2007) estimated is 8
The impact of agricultural growth on poverty reduction is at least twice as big as that of overall GDP growth
Why is China’s agricultural growth pro-poor? China has maintained long-term agricultural
growth (5-6% annual growth rate) Growth is based on a rather equal distribution
of assets and income when the reform started◦ Land was equally distributed to households on a per
capita basis◦ Gini index of per capita income was only 0.21 in
1978 (NBS, 2000)◦ Thus, the poor can equally benefit from growth
process when inequality was low
The poor depends more on agriculture for their livelihood◦ Net income (per capita) from agriculture in 2006
accounts for 54.5% for poor households 42.4% for all rural households 32.8% for the richest 20% rural households
At the household level, agricultural growth has strong positive externality, e.g. agricultural growth can lead to the development of non-agricultural activities
Maintain strong agricultural growth through institutional reform, investment in both physical and human capitals, as well as productivity increase◦ Adoption of HRS solved the incentive problem,◦ Market and price reforms provided new
opportunities for rural households and the base for effective resource allocation
◦ The improvement of agricultural terms of trade directly benefited all rural household in early reform period
◦ Institutional reform along accounted for 47% of agricultural growth during 1979-1985 (Lin, 1992)
◦ Human and physical capital investments occurred long before the reform Primary school enrollment rate
20% in 1949 96% in 1978 99.5% in 2007
Percentage of primary school graduates that went to middle school 32% in 1962 86% in 1978 99.9% in 2007
Percentage of middle school graduates that went to high school 40.6% in 1990 79.3% in 2007
Effectively irrigated land areas 20 million ha. In 1952 44.7 million ha. In 1978 56.5 million ha. In 2007
Time periods Agricultural Growth rate
Contribution of
technology change
Contribution of technology +efficiency
improvement
1985-1990 4.53 17.97 33.99
1991-1995 7.48 16.43 27.10
1995-2000 6.08 29.37 36.82
2000-2005 5.24 41.04 50.49
Contribution of technology change to agricultural growth （ % ）
source ： calculated from Zhao and Yuan (2008)
China has invested over RMB 300 billion for rural poverty reduction over the past 25 years◦ Central government contributed two third of the
investment and local governments contributed one third
◦ Majority of the investment went to agriculture and small scale infrastructure in poor areas
Targeted poverty intervention
Agriculture 47%
Infrastructure20%
Manufacturing14%
Transportation6%
Service5%
Others9%
Structure of poverty reduction investment (1998-2001)
Poverty reduction investment has contributed to both agricultural growth and poverty reduction in poor areas◦ Agricultural growth rate in poor counties was 7.5%
during 1994-2000, higher than the national average (7%)
◦ Annual growth rate of grain production in poor counties was 1.9%, much higher than the national average (0.6%)
◦ Net income per capita grow 12.8% annually in poor counties, two percent point higher than the national average
◦ Income growth was also higher in targeted poor villages in recent years
Net income Wage inceome Family business income
Asset income Transfer0
5
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20
25
Per capita income growth (%)
NationalPoor cpuntyPoor village
Empirical analysis shows that household income and consumption in the officially designated poor counties/villages grew significantly faster than in other counties/villages◦ 1.1% faster in per capita consumption (Ravallion and Jalan
1999 )◦ 2.2% faster （ 1986-1991 ） and 0.9% faster （ 1992-
1995 ） in per capita income, (Park, Wang and Wu 2002)◦ Income and consumption growths in poor villages receiving
poverty investment was 6-9 percent higher than poor villages without investment in 2001-2004 (Park and Wang 2010)
◦ The rate of return of poverty investments was estimated to be over 10%
Agricultural growth is the main driving force to China’s dramatic poverty reduction
Agriculture is pro-poor because of:◦ Equitable land distribution ◦ Low income inequality when the growth began ◦ The poor depend more on agriculture for their livelihood
China has sustained long-term agricultural growth through◦ Institutional and policy reforms to provide the right incentives◦ Investment in physical and human capital ◦ Investment in agricultural R&D to increase agricultural
productivity◦ Targeted investment in agriculture and infrastructure in poor
areas
Conclusion remarks
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