The number of rural poor in China has just gone up by around 100 million.
This is not because China has been hit by an unexpected economic catastrophe. It is just that the rural poverty line in the country has been revised upward.
The poverty line threshold in China?s rural areas was an annual net income of 1,196 yuan. It has been revised upward to 2,300 yuan. The near doubling of the threshold, converted to the dollar, translates to a daily benchmark of almost one dollar. It is, however, still less than what the World Bank has put down as its benchmark poverty ceiling?$1.25 per day.
The implication of the higher poverty threshold is an immediate increase in the number of rural poor. Although estimates are divided over the exact number of rural poor this will produce, the calculations vary from 128 million to 130 million plus. At present, official statistics show 26.9 million rural people in China. The number of ?official? poor, after the new poverty line, is therefore expected to go up by at least 100 million.
For a country of 1.34 billion people, 100 million is probably not a big deal. An increase of a hundred million means adding another 7.5% of the population to the poor club. From a larger sense though, the increase is substantive. It is more than the population of Mexico (94 million) and double that of South Africa?s (50.6 million). Mexico and South Africa are as much emerging markets as China is. They are part of the G20 club where China also figures. And, indeed, they are the latest extension of the BRIC club, which is now being referred to by many as BRICSAM, including South Africa and Mexico. Adding one Mexico, or two South Africas in the poor club, therefore, is certainly an ?achievement?. And this is what is provoking most to ask: Why did China decide to increase the number of its poor by revising its rural poverty line?
The decision has probably been influenced by more than one factor. One of these is to inch closer to international standards. By revising the poverty line upward, rural poverty threshold in China is now not much behind the World Bank threshold. While China?s economic prowess is recognised by all and sundry, reservations have often been expressed over its success in removing poverty. The earlier poverty line of 1,196 yuan classifies only 2.8% of China?s population as poor. Since this was a much lower threshold than the World Bank?s, and far less than those of the OECD countries, China?s success in raising incomes of its poor has always been disputed. By re-defining the rural poverty line, China challenges the doubting Thomases and sends out the signal that it is prepared to judge its achievements by global standards.
The average per capita income of the 20% lowest income rural households in China was 1,869 yuan in 2010. The new poverty line will make this entire cohort ?poor?. It would make this entire group, and many more, eligible for assistance under the government?s 27 billion yuan poverty reduction programme. China has obviously taken note of the fact that the economic distance between several low-income and poor households in rural areas is shrinking fast. High inflation is a major factor behind the reducing gap as it is chipping into rural purchasing powers. Many of these households are dependent on remittances from their members who have migrated to urban areas. With export demand dwindling, several enterprises are retrenching workers, adversely affecting the volume of inward remittances. The only way of helping these households experiencing sharp decline in earnings is through targeted fiscal intervention. This was resonated in President Hu Jintao?s speech at the State Council meeting that took the decision to revise the poverty line; the overarching target is to provide adequate food, clothing and shelter to the poor while ensuring their access to compulsory education, basic medical services and housing by 2020.
In a sense, the new poverty line, and official recognition of more people as ?poor?, reflects the sentiments behind China?s 12th Five Year Plan. The Plan makes a conscious effort to move away from emphasising on the rate of economic growth and focus more on its quality. China?s astounding economic progress over the last three decades has not eradicated the gap between growth and development in the country to the extent it should have. Chinese authorities realise the importance of reducing this gap through effective redistribution of income. The new poverty line marks an important beginning in this respect.
Finally, the move also shows the confidence China has in not only identifying its additional economically marginal population, but also improving their condition. Aiming to give an enormous body of poor people?numbering almost as much as the whole population of Mexico?a decent life, is anything but a modest goal. But that?s typical of China. Its economic progress has been characterised by setting, and achieving, of ambitious and larger-than-life targets. The revised poverty line underpins another such aspiration.
The author is a visiting senior research fellow at the Institute of South Asian Studies in the National University of Singapore. These are his personal views