Countries and Regions

	Table of Contents
p. 4 of 21 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Policy and Development Issues C. Poverty Assessment D. Assessment of Socio-Environmental Performance E. Governance: Sound Development Management F. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Subregional Economic Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - People's Republic of China : I. Country Performance Assessment

---

C. Poverty Assessment

18. Poverty reduction is a key priority of the Government. Since the “8-7 Poverty Reduction Program” began in 1994, annual Government spending on poverty reduction has increased by 150 percent.³ In 2000, the budgeted funds for poverty reduction programs amount to Y24.8 billion, a 4 percent increase from 1999 (Y15 billion for subsidized loans; Y5 billion food for work; Y4.8 billion in budgetary grants). Additional funds contributed by local governments in the nationally-designated poverty counties amount to 30-50 percent of the Central Government's inputs.

19. There are several estimates of rural and urban poverty in the PRC using different methodologies. PRC’s official poverty line for rural areas is very low, Y635 per capita income per year, and reflects absolute poverty based on the minimum subsistence necessary to sustain life. Measures of absolute poverty based on official poverty line do not address quality of life issues. ADB takes a broader view of poverty and research is ongoing to develop better estimates of poverty in PRC.

1. Rural Poverty

20. Whatever estimate of poverty is used, rural poverty today is significantly lower than in 1994 when the 8-7 Poverty Reduction Program was started. The number of absolute poor in rural PRC has fallen from 70 million in 1994 to 34 million in 1999. Using the $1 per day income based figures, the reduction was from 237 million in 1994 to 106 million in 1998. The rural poor live largely in areas in the western and central regions. Minority nationalities, who often live in the more isolated areas, are proportionally over-represented among the rural poor. About half of the rural poor live in the 592 nationally-designated poverty counties. There are about 10 million poor disabled or handicapped people, including old people without spouses and people without sufficient income mainly in remote areas. A May 2000 International Poverty Reduction Conference in Beijing, was jointly sponsored by the Leading Group on Poverty Alleviation and Development (LGOPAD), ADB, the World Bank and United Nations Development Programme (UNDP). The conference concluded that the poverty county targeting system is an effective means of planning large investments, especially for infrastructure, in poor areas but that the targeting of the poor living outside of the poverty counties needed to be strengthened. The Conference also concluded that PRC should redefine its poverty line. Until more research is done, ADB is using a rural poverty line of Y1,000.

21. Allocating more fiscal resources to the central and western regions, both from the central and local governments, should form the key element of any affirmative policy agenda to promote regional development in PRC. Temptations to use the commercial banking system to lend at subsidized interest rates for investment in the western region should be resisted. The budget and fiscal policy, not the banking system, should be used to promote growth and development in the poor interior provinces.

2. Urban Poverty

21. Until the mid-1990s, poverty in PRC was mainly a rural problem. However, since the mid-1990s, unemployment and poverty have been increasing in most urban centers. Also, the number of migrants from rural areas to urban centers has steadily increased. While rural poverty is decreasing, urban poverty has been increasing since the mid-1990s.is rising. There are three groups of urban poor: (i) the hard-core urban poor comprising the disabled and elderly without family support, (ii) laid-off workers, and (iii) migrant workers. PRC has not officially adopted an urban poverty line. There are no consistent estimates of urban poverty in PRC. In 1997, the Development Research Center (DRC) estimated an urban poverty line of Y1,700 per person per year. Based on these figures and various domestic research studies, it is estimated that the urban poor range from 12 million to 15 million people (about 4 percent of the urban population). Many urban poor are workers whose family members have been laid off as a result of SOE reforms. The May 2000 Poverty Conference agreed that urban poverty lines should be two to three times those of rural poverty lines. Until more research is done, ADB will use an urban poverty line of Y2,000 in inland cities and Y3,000 in the coastal region.

22. The response of the Government to the increasing urban unemployment and poverty has been two fold: (i) introduce safety net programs in urban areas; and (ii) promote the development of small and medium enterprises (SMEs) and the tertiary sector to create new jobs. In 1997, the State Council issued a circular under which all cities and towns were required to establish social relief schemes for the urban poor by the middle of 1999. In September 1999 the State Council promulgated the Regulations on the Minimal Living Standard for Urban Residents. Under these programs, laid-off workers are being trained at re-employment centers and will receive some living allowances for a maximum of three years. If they fail to get a new job within the period, they will receive unemployment insurance for an additional two years. Those who fail to get new jobs after receiving the two years unemployment insurance and have income less than the Minimum Living Standard, will be entitled to a minimum subsistence allowance managed by the Ministry of Civil Affairs (MOCA). However these schemes, which are funded by central and local governments and managed by the municipal governments, are still in the , which are funded by central and local governments and managed by the municipal governments, formative phase. The operational and financial capacity to undertake urban poverty relief varies widely across cities. The operational and financial capacity to undertake urban poverty relief also varies widely across cities.

3. Future Strategy

23. The Government and ADB agree that poverty issues should be tackled from the following perspectives: (i) creating the conditions for pro-poor economic growth by providing the necessary physical infrastructure in the poorer interior provinces, particularly in poverty counties, and designing projects to include direct benefits to the poor as well as to stimulate pro-poor economic growth; (ii) encouraging natural resource management to sustain agricultural production in poor areas, protecting against disasters and bad living conditions, and targeting rural development projects towards the needs of the poor; (iii) supporting social security reform and the development of a social safety net to offset the social costs related to SOE reform and ameliorate the increasing urban poverty; (iv) ensuring affordability of project benefits by beneficiary income level (e.g. life line tariffs); and promoting equity in project finance (e.g. cost-sharing and partnership arrangements between central and local governments, private sector, and intraregional cooperation) and; (v) ensuring that resettlement components of projects do not worsen living standards by paying special attention to the effects of projects on women and minority groups; (vi) broadening ownership in designing and implementing poverty reduction projects to include also local governments, the private sector, and non-governmental organizations; and (vii) establishing close liaison with the LGOP in order to facilitate further poverty-related research, monitoring and participatory approaches on all aspects of ADB operations down to the village level.

____________________

Back B. Policy and Development Issues	Next D. Assessment of Socio-Environmental Performance