In order to eradicate poverty in China by 2020, the central authorities have just approved an investment plan equivalent to EUR 51bn. This is a strong political act but which, according to observers, must be combined with major social measures.

In China – undoubtedly more than elsewhere – the political discourse sets out the course to be followed. Consequently, in February 2018, when the President Xi Jinping decided to put an end to what he calls the “ghost” of poverty, the entire Chinese political system was mobilized. Less than a month later, following the annual session of the National People’s Congress,[1] the issue was turned into a national priority. The China Development Bank (CDB), set up in 1994 and under the supervision of the regime, immediately announced that it was making CNY 400bn (EUR 51m) available. This budget aims to eradicate poverty in China by 2020, according to Xinhua, and, in the meantime, finance “a number of infrastructure, rehousing, local industry development and education projects in regions in difficulty”, specifies China’s official news agency.

 

 

Less than USD 1.90 a day

In reality, this is not a new priority. As soon as he came to power in 2012, Xi Jinping had made – in a China plagued by corruption – the fight against poverty one of the “three crucial battles” to be waged, along with the prevention of financial risk and the fight against pollution. “But this new CNY 400bn plan is unprecedented”, points out Ding Yi Fan, a professor at the School of International Studies at Peking University and economic advisor to the Chinese Government. “Starting this year, this policy aims to lift over 10 million people out of extreme poverty”. These people live on less than USD 1.90 a day, according to the World Bank. “We estimate that 40 million people are still concerned in the country”, concludes the academic. This compares to 100 million people in 2012 (data: Crédit Suisse Global Wealth Report). “Across the country, which is home to 1.37 billion inhabitants, 40 million is not much, but it is still far too many, continues Ding Yi Fan. The vast majority of these poor populations live in remote rural regions.

The United Nations Food and Agriculture Organization (FAO) had already confirmed this observation fifteen years ago. Indeed, an article by Shen Maoying, a researcher at the Institute of Social Sciences of Chengdu and a contributor for the FAO, showed that there was a high concentration of poverty in what is known as western China. It is a huge area reaching from Guizhou to the gates of Central Asia, and including the Tibetan regions of Yunnan and Northern Sichuan. These provinces are far from the large urban centers on the east coast of the country and are still today the most affected by the “ghost” of poverty. “These isolated territories will first and foremost benefit from the plan recently decided on, adds Ding Yi Fan. Here, he promises, The State is going to take charge of the construction of roads to link the most remote villages up to the national road network.” The aim is to create, with this flow of investments, a “domino effect” falling down on the poorest populations, in the words of Liu He, Vice Premier of China in charge of the economy. The latter (graduate from Harvard) is very close to Xi Jinping and hopes to bring down the rate of extreme poverty at the end of 2019 to below 1% of the total population, then to completely eradicate poverty in China the following year.

 

 

Health: The key to success against poverty

Is this realistic? “The political impetus is such that this objective will be achieved. But will it be over the long term?, questions Ding Yi Fan for whom the difficulty above all lies in preventing the return of poverty after 2020. We need to find sustainable solutions for this, he cautions. The Chinese Government must undertake to assume responsibility for education for the poorest and allow them to have access to social security free of charge and to social housing.” This is an ambitious program for a country in which the Gini coefficient reached almost 0.5 last year, whereas the average in OECD countries is 0.31 and the alert threshold associated with risks of social uprisings is 0.4.

The hard part is consequently only just beginning. “China’s success so far has been based largely on economic growth, which has generated jobs, analyzes the British weekly The Economist. The final stage will be costly and complicated because (…) 46% of China’s poor were poor because of their health. The authorities in Beijing are fully aware of this. For nearly 15 years now, China has been significantly increasing its health coverage system and hundreds of millions of people now benefit from basic coverage. It does, however, remain ineffective in rural regions, where coverage often differs from one county to another. For instance, in the event of hospitalization, it generally only covers part of the medical expenses. For the 200 million migrant workers, these Chinese workers who come from rural regions, the situation continues to be a problem. Even though their average hourly wagehas been multiplied by 3 between 2005 and 2016 going from $1.2 up to $3.6, their health insurance is generally not sufficient to cover medical expenses, which are particularly high in the large cities.

 

Rapid development of the “New Silk Roads”

“The authorities appear to be fully aware of the situation”, considers Ding Yi Fan. Prime minister Li Keqiang has, moreover, recently assured that the projects launched to eradicate poverty in China are essential for building “a society that is moderately prosperous in all respects.” He has also promised everyone – without exception – that they will benefit from the fruits of Chinese growth.

To support this policy to eradicate poverty, the current government aims to take advantage of the rapid development of the New Silk Roads, which aim to create a land and rail route towards Europe via western China. These regions already benefit from a windfall of investments. This is the case for Gansu Province, which the Yellow River runs through, where tens of thousands of new housing units are being financed by this colossal project. Finally, the development of the rail system helps open up these poorest Chinese areas as the high-speed trainline connecting Beijing to Urumqi (Xinjiang) opened in 2014 demonstrates.

 

 

[1] An important moment in national political life, which gathers every year for a week in Beijing the 3,000 or so delegates (equivalent to MPs) of the Chinese Communist Party.

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