China’s poverty alleviation experience
Bert Hofman
Today, this conference on Academic China is more important than ever. It’s not just because China has become a very important country in the world, but also because of the international tensions and the importance of understanding China both from the inside, as well as from the outside looking in. Because of COVID it has not been easy to look in from the outside, but we are trying our best to continue to develop our understanding in China and this conference today is contributing to that goal. So, thank you very much to the organizers for having this event.
What China achieved
I would like to offer some lessons from China’s poverty reduction experience for other developing countries. I worked with the World Bank for almost 30 years and started working on China in 1992. I lived in China in the 2000s and lately from 2014 to 2019, as the director of the World Bank program in China. So, I think I have some perspective on what China has achieved in poverty reduction. After all, the World Bank’s goal was reducing poverty around the world, and China has been very successful in that.
Since the late 1970s, the number of people in poverty in China declined by some 850 million people. In 2021, China celebrated the complete eradication of extreme poverty. This extreme poverty is measured at a line comparable to the World Bank’s International Poverty Line. This is a truly global significance of China’s poverty reduction. Without it, the Millennium Development Goals would not have been achieved, and, of course, going forward, China will continue to contribute domestically as well as internationally in not just reducing extreme poverty, but also reducing relative poverty compared to where they are now.
China’s experience is, of course, specific to China. China’s unique history, its initial conditions, and its political system all play a role in shaping the poverty reduction experience in China. And it is hard, but not impossible, to draw lessons for other countries.
Overall, China’s poverty reduction is due to two primary factors. One, economic growth triggered by economic reforms; and two, targeted development-oriented poverty reduction programs that enable people to help themselves escape poverty.
Lessons from China
I would like to propose seven lessons of China’s poverty alleviation for other countries.
First, economic growth is the primary driver of poverty reduction. China’s economic reforms, initiated in 1978, started in rural areas where poverty was undoubtedly the highest at that time, and gradually opened China’s economy to make it more market-driven, industrial, and urban. This was the key to poverty reduction. It’s created huge amounts of jobs. People could improve their lives by moving first industries to rural industries, but also to urban areas, and it simply made everybody’s life better.
Second, demographic trends in China were explicitly taken into account in designing China’s poverty reduction strategy, and more broadly, China’s development strategy. China started changing its population policies already in the mid-1970s, moving from a pro-population growth policy to a moderation of population growth. The demographic dividend was there to be had between, say, 1980 and 2010, and China took that opportunity. It took that opportunity to first focus on labor-intensive growth in rural areas, but also in industry, in special economic zones, and later in urban areas. And later it started to enhance that labor by better education and to protect labor better by introducing pensions, introducing health insurance, and introducing a social safety net that benefits all.
Third, China targeted its scarce resources for poverty reduction well. From the very start, China had reforms in 1980, China had a focused program of poverty reduction. But in the beginning, it was targeted very, very narrowly to just a few regions that were extremely poor. So, targeting of resources was an important aspect of China’s poverty reduction.
Fourth, within China’s political context, the leadership created a tolerance for income inequality across regions and among people. And that was not easy at the time because of China’s political tradition. But Deng Xiaoping famously said “some may get rich first.” And then he said, and that should not be forgotten, “so that they can help others to get rich, too.” And I think by today, in 2021, where common prosperity is one of the big policy initiatives of the government, I think we’re at that phase. But at the beginning, it was in an environment where socialism was the official ideology, and where equality among people was an important aspect of that. To create the political space to say, no, actually, some may get rich first: it was very important for the success of reforms. It’s created the leaders in industry that in the end created millions of jobs for ordinary Chinese.
Fifth, China managed to mobilize all levels of government and all sectors in the economy for the goal of poverty eradication. As I said, in the beginning that was on a modest scale, but in areas that were officially designated as poverty-stricken areas, government and industry worked together to help people help themselves out of poverty. And it’s a phenomenon that I haven’t seen in other countries. Yes, there is charity. Yes, there are donations. But to really engage companies, to really engage local governments in poverty alleviation is quite unique to China.
Sixth, I believe China’s approach to policy development and poverty reduction has been very important for keeping its goals. China had basically taken an approach which can best be described as “trial and error” and experimental approach to economic reforms restricted to particular locations to see whether things worked or not, and if they worked, to gradually expand them nationwide. “Feeling the stones to cross the river” is the saying that goes with that. And the second part of that was feeling your way into poverty targets. At the very start of reforms, the long-term goal for China was modernization of the economy and society. A very big goal, and China is still working on it, in fact. But the short-term poverty reduction goal was very simple—eradicate hunger. At the end of the 1970s, and the early 1980s, China still suffered from the aftermath of the Great Leap Forward and the Cultural Revolution. Some provinces still experienced hunger. Eradicating hunger was therefore a short-term, achievable goal. And it was achieved by agricultural reforms that also alleviated poverty. Later on, from the year 2000, the goal became broader. It was to end hunger, but also provide clothing and heating. “Wenbao” is a term that you find back in Chinese history. The wenbao problem. To solve the wenbao problem, solve the hunger, clothing, and heating problem, which was basically done by the year 2000.
Then for 2021, it’s part of the goal to have a moderately prosperous society, xiaokang society. China chose as its goal to eradicate extreme poverty and the plans for that became known in the early 2010s, and of course the implementation and the success of that we all know. The conditions that China faced when it started its reforms, when it embarked upon its poverty reduction program, were very different from countries around the world today.
And the final lesson is really that there is no China model. China would itself say there was no China model. As a matter of fact, I’ve always admired how China, Chinese authorities, and Chinese intellectuals try to learn as much as possible from the outside world. So they studied dozens of countries on how they approach particular problems that China was facing at that particular point in time. But they’re not taking those lessons as if they were some higher truth, no more than truly thinking about how does a lesson like this, how does the German system of intergovernmental fiscal relations, how does the US system of the Federal Reserve Board and economic management, how would that apply to China? What is the lesson that China can draw from this international experience?
So, copying a China model doesn’t make any sense, but learning from China, learning how they approach it, learning what they have done, in particular, is a very important task that we face today. I think it’s a very important task that academicians like me working on China and academicians like you studying China should set themselves.
Bert Hofman is director of the East Asian Institute at the National University of Singapore. This is an excerpt from his video speech at the forum.
Edited by YANG XUE