WB: China's national poverty line is higher than its new standard

Bert Hofman,Country Director, China, Mongolia and Korea of the World Bank

China’s latest national poverty line of 2,300 yuan is higher than the $1.90 a day line that the World Bank uses for global poverty monitoring，said Bert Hofman,Country Director, China, Mongolia and Korea of the World Bank, during an exclusive interview with chinagate.cn.

Q: China has helped 439 million people get out of poverty from 1990 to 2011. How would you evaluate this progress?

A: China’s tremendous success in reducing extreme poverty is widely recognized. The new global poverty estimates recently released by the World Bank using an updated international poverty line of $1.90 a day in 2011 purchasing-power parity (PPP) shows that the percentage of the population in China living below this international poverty line fell from 88 percent in 1981 to 6.5 percent in 2012, and the number of poor fell from 878 million to 87 million during this period. Thus, china’s success is even larger than previously thought. In the past 30 years, the 790 million drop in the number of poor in China accounts for over 70 percent of the total reduction in the developing world as a whole, indeed a truly remarkable achievement.

Q: According to a new report released by the World Bank, the international poverty line has been lifted to 1.9 dollar per day; while China’s latest poverty line is 2,300 yuan (US$360) per year. How to understand the differences between these two standards?

A: If adopting this new standard, there would be 250 million poor populations in China. What do you think is the biggest obstacle for China to help them get out of poverty?

As differences in the cost of living across the world evolve, the global poverty line is periodically updated using new data to reflect these changes. Earlier this month, the World Bank updated its international poverty line to $1.90 a day in 2011 PPP, incorporating new information on differences in the cost of living across countries. This updated line preserves the real purchasing power of the previous line (of $1.25 a day in 2005 prices) in the world’s poorest countries. Using this updated poverty line in conjunction with new country-level data on living standards, the World Bank projects that global poverty will have fallen from 902 million people in 2012, or 12.8 per cent of the global population, to 702 million people in 2015 (9.6 per cent of the world’s population), giving fresh evidence that a quarter-century long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.

It is important to note that the global poverty line is used primarily to track global extreme poverty, and to measure progress on global goals set by the World Bank, the United Nations, and other development partners. A country’s national poverty line is far more appropriate for country-specific analysis, underpinning policy dialogue or targeting programs to reach the poorest. In PPP-adjusted terms, China’s latest national poverty line of 2,300 yuan is higher than the $1.90 a day line that the World Bank uses for global poverty monitoring. This is not surprising, given that China is now an upper-middle income country while the World Bank’s international poverty line is anchored to the poverty lines of the world’s poorest countries.

Despite its tremendous success in reducing poverty noted earlier, China faces significant challenges in reducing remaining poverty. Based on its more frugal $1.90 a day poverty line, the World Bank estimates that the number of poor people in China is still the third largest in the world, with projections indicating that about 7 percent of world’s poor live in China in 2015. As poverty has decreased across the country, the remaining poor are harder to reach as they are less concentrated in a specific location and are more dispersed in remote and inaccessible areas. Most of China’s remaining absolute poor are rural inhabitants, and about 80 percent of these poor reside in the western and central provinces. The scale of rural to urban migration is large and migration has helped to reduce poverty, particularly in rural areas. But many of the remaining poor are less able to migrate and hence poverty alleviation in rural areas remains important. We also know of the widening rural-urban income gap and the increasing income inequality within both rural and urban areas.

In coming years, key challenges for China will likely include (i) living conditions of migrants in cities, due to their difficulties in accessing labor market opportunities and welfare services as a result of the hukou system; (ii) as a by-product of migration, the large number of left behind elderly and children whose living conditions may also deteriorate despite remittances; (iii) access to affordable health and education, to prevent the spread of cases of families becoming poor or returning to poverty as a result of the burden of healthcare and education costs; and (iv) land-related issues regarding landlessness or ecologically fragile zones and its link to the population in poverty. In addition, the abundant academic literature on inequality in China identifies three main areas meriting attention: (i) regional development and the urban-rural divide; (ii) the functioning of labor markets; and (iii) new sources of inequality due to growing wellbeing and wealth inequality.