Economic development and poverty reduction in China over 20 years of reforms

Economic Development and Cultural Change

Volumn 48, Issue 3, 2000, Pages 447-474

  Yao, Shujie ^a  

^a UNIVERSITY OF PORTSMOUTH   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC DEVELOPMENT; ECONOMIC GROWTH; INCOME; POVERTY ALLEVIATION; RURAL ECONOMY;

CHINA;

EID: 0034122030     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452606     Document Type: Article

References (55)

1. The incidence of urban poverty was negligible compared to that of rural poverty because urban residents were highly protected by the government. However, because urban residents accounted for less than 20% of the total population, it can be said that the majority of the Chinese people lived in poverty in 1978.
2. State Statistical Bureau, Chinese Statistical Yearbook, Chinese ed. (Beijing: Statistical Press, 1978-97, various issues).
3. World Bank, "Sharing Rising Incomes: Disparities in China" (World Bank, Washington, D.C., 1997).
4. Cyril Z. Lin, "The Assessment: Chinese Economic Reform in Retrospect and Prospect," Oxford Review of Economic Policy 11, no. 4 (1995): 1-23.
5. Gary H. Jefferson and Thomas G. Rawski, "Enterprise Reform in Chi-nese Industry," Journal of Economic Perspectives 8, no. 2 (1994): 47-70; John McMillan and Barry Naughton, "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy 18, no. 1 (1992): 130-43; Dwight Perkins, "Completing China's Move to the Market," Journal of Economic Perspectives 8, no. 2 (1994): 23-46.
6. Gary H. Jefferson and Thomas G. Rawski, "Enterprise Reform in Chi-nese Industry," Journal of Economic Perspectives 8, no. 2 (1994): 47-70; John McMillan and Barry Naughton, "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy 18, no. 1 (1992): 130-43; Dwight Perkins, "Completing China's Move to the Market," Journal of Economic Perspectives 8, no. 2 (1994): 23-46.
7. Gary H. Jefferson and Thomas G. Rawski, "Enterprise Reform in Chi-nese Industry," Journal of Economic Perspectives 8, no. 2 (1994): 47-70; John McMillan and Barry Naughton, "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy 18, no. 1 (1992): 130-43; Dwight Perkins, "Completing China's Move to the Market," Journal of Economic Perspectives 8, no. 2 (1994): 23-46.
8. N. Lardy, Agriculture in China's Modern Economic Development (Cambridge: Cambridge University Press, 1993).
9. D. Gale Johnson, "Economic Reforms in the People's Republic of China," Economic Development and Cultural Change 36, no. 3 (1988): S225-S245; Justin Yifu Lin, "The Household Responsibility System in China's Agricultural Reform: A Theoretical and Empirical Study," Economic Development and Cultural Change 36, no. 3 (1988): S199-S224.
10. D. Gale Johnson, "Economic Reforms in the People's Republic of China," Economic Development and Cultural Change 36, no. 3 (1988): S225-S245; Justin Yifu Lin, "The Household Responsibility System in China's Agricultural Reform: A Theoretical and Empirical Study," Economic Development and Cultural Change 36, no. 3 (1988): S199-S224.
11. Shujie Yao, Agricultural Reforms and Grain Production in China (Lon-don: Macmillan, 1994).
12. Theodore Groves, Yongmiao Hong, John McMillan, and Barry Naughton, "Autonomy and Incentives in Chinese State Enterprises," Quarterly Journal of Economics 109, no. 1 (1994): 183-209; Shujie Yao, "Profit Sharing, Bonus Payment, and Productivity: A Case Study of Chinese State-Owned Enterprises," Journal of Comparative Economics 24 (1997): 281-96.
13. Theodore Groves, Yongmiao Hong, John McMillan, and Barry Naughton, "Autonomy and Incentives in Chinese State Enterprises," Quarterly Journal of Economics 109, no. 1 (1994): 183-209; Shujie Yao, "Profit Sharing, Bonus Payment, and Productivity: A Case Study of Chinese State-Owned Enterprises," Journal of Comparative Economics 24 (1997): 281-96.
14. Donald Hay, Derek Morris, Guy Liu, and Shujie Yao, Economic Reform and State-Owned Enterprises in China, 1979-1989 (Oxford: Clarendon, 1994).
15. Shujie Yao, "Industrialization and Spatial Income Inequality in Rural China, 1986-1992," Economics of Transition 5, no. 1 (1997): 97-112.
16. State Statistical Bureau, The Chinese Regional Economies in 17 Years of Economic Reforms and Opening (Beijing: Statistical Press, 1996).
17. The average annual growth rate of total Gross Domestic Product (GDP) in South Korea was 9.6% in the period 1970-91. It was 9.2% in Hong Kong and 8.3% in Singapore in the period 1970-80. See World Bank, World Development Report 1993 (Oxford: Oxford University Press, 1993).
18. The poverty line defined by the World Bank is US$1 in its 1985 value per day per capita. However, the purchasing power of US$1 in different countries varies considerably. In order to have the same purchasing power, when the dollar is converted into local currencies, the purchasing power parity exchange rates should be used.
19. L. Zhu and Z. Jiang, "Yigong-Daizhen in China: A New Experience with Labor-Intensive Public Works in Poor Areas," in Employment for Poverty Reduction and Food Security, ed. Joachim von Braun (Washington, D.C.: International Food Policy Research Institute, 1995), pp. 75-107.
20. Among the many indicators of well-being, food consumption is proba-bly the most important one reflecting the degree of poverty. To provide a rough idea of how the poor people might live, the average rural household budget in 1990 is used as an example. At the national average, 85% of household income was used for consumption; 58% of that consumption was food. If we assume that the poor spent 90% of their income for consumption and 70% of such consumption was of food, then, if we use the official poverty line, the poor could only consume 58% of the national average food consumption, equivalent to 148 kilograms of unprocessed rice. If we use the World Bank poverty line, the poor could consume 84% of the national average food consumption, equivalent to 214.2 kilograms of unprocessed rice (State Statistical Bureau, China Rural Statistical Yearbook, Bureau of Rural Social and Economic Statistics [Beijing: Statistical Press, 1993], pp. 208-13). To meet the international minimum nutritional standards, each person requires at least 200 kilograms of unprocessed rice. Hence, the official poverty line would imply that the poor were 28% short of the international minimum nutritional requirement. The World Bank poverty line would imply that the poor would have a slightly higher nutritional level than the minimum requirement.
21. Because China's official poverty line may be too low (see Zhu and Jiang, pp. 80-85), we should pay more attention to the World Bank poverty line.
22. Carl Riskin, "Chinese Rural Poverty: Marginalized or Dispersed?" American Economic Review 84, no. 2 (1994): 281-84.
23. J. Knight and Lina Song, "The Spatial Contribution to Income Inequality in Rural China," Cambridge Journal of Economics 17 (1993): 195-213.
24. Shujie Yao, "Industrialization and Spatial Income Inequality in Rural China," pp. 109-111.
25. The World Bank's estimates of the Gini coefficients may not be precise and should be used with caution (see World Bank, "Sharing Rising Incomes" [n. 3 above], p. 2, table 1). However, various calculations, including those based on household survey data in this article and those made by the Ministry of Agri-culture show that the trend of widening income inequality during economic re-forms is unmistakably clear. See Ministry of Agriculture, China's Agricultural Development Report (Beijing: Agriculture Press, 1995).
26. The World Bank's estimates of the Gini coefficients may not be precise and should be used with caution (see World Bank, "Sharing Rising Incomes" [n. 3 above], p. 2, table 1). However, various calculations, including those based on household survey data in this article and those made by the Ministry of Agri-culture show that the trend of widening income inequality during economic re-forms is unmistakably clear. See Ministry of Agriculture, China's Agricultural Development Report (Beijing: Agriculture Press, 1995).
27. World Bank, "Sharing Rising Incomes," pp. 2-3.
28. Dennis Tao Yang and Hao Zhou, "Rural-Urban Disparity and Sectoral Labor Allocation in China" (paper presented at the annual meeting of the Association for Asian Studies, Honolulu, Hawaii, April 1996).
29. See Lardy (n. 6 above).
30. See Yao, "Industrialization and Spatial Income Inequality in China" (n. 11 above), pp. 97-112; A. Hussain, P. Lanjouw, and N. Stern, "Income Inequalities in China: Evidence from Household Survey Data," World Development 22, no. 12 (1994): 1947-57.
31. See Yao, "Industrialization and Spatial Income Inequality in China" (n. 11 above), pp. 97-112; A. Hussain, P. Lanjouw, and N. Stern, "Income Inequalities in China: Evidence from Household Survey Data," World Development 22, no. 12 (1994): 1947-57.
32. See World Bank, "Sharing Rising Incomes," pp. 15-25.
33. Provinces and cities are classified into three economic zones: east, central, and west. For detailed classification, see Shujie Yao and Jirui Liu, "Economic Reforms and Spatial Income Inequality in China," Regional Studies 32, no. 8 (1998): 735-46.
34. Ibid., p. 742, table 3.
35. Ministry of Agriculture, Chinese TVE Yearbook, and Chinese Agricultural Statistical Data (Beijing: Agriculture Press, various issues, 1978-87, 1988, 1989, 1990, 1991, 1992, and 1993).
36. Following the 1995 industrial census, total TVE outputs and their growth rates were adjusted downward. So the growth rate of 25.6% may be higher than the actual growth rate. Despite such potential statistical errors, the growth of TVE output was impressive by any standards.
37. Ministry of Agriculture, Chinese TVE Yearbook, and Chinese Agricultural Statistical Data (Beijing: Agriculture Press, various issues, 1978-87, 1988, 1989, 1990, 1991, 1992, and 1993).
38. See Yao and Liu, p. 745, table A3.
39. See Yao, "Industrialization and Spatial Income Inequality," for more detail.
40. See Yao and Liu, p. 742, table 3.
41. See World Bank, "Sharing Rising Incomes" (n. 3 above), p. 17.
42. Household survey data by province and by year exist but they are held by the State Statistical Bureau (SSB). It is almost impossible to get hold of such data because they are not officially published. Independent researchers have to negotiate with the SSB. Through an international collaborative research project with the SSB, I was able to obtain the data presented in this article.
43. See World Bank, "Sharing Rising Incomes," pp. 15-25.
44. The most recent data show that about 10 million SOE employees have been laid off, which is equivalent to about 9% of total SOE employment and about 5% of total urban employment (see G. Parkins, "China Struggles with Job Crisis," Times Higher Education Supplement [London], August 14, 1998, p. 9).
45. See World Bank, "Sharing Rising Incomes," p. 45.
46. "My Country Sets a Target to Support the Poor This Year: Solving the Wen Bao Problem for 10 Million People," People's Daily, June 13, 1998, p. 1.
47. The data in table 5 are derived directly from the household survey data available to me. All of the household incomes are deflated using the provincial rural retail price indexes obtained from official statistics. The price indexes are different for different provinces. In addition, the mean incomes obtained in this table are slightly higher (by about 3%-7%) than those published by the SSB-see State Statistical Bureau, China Regional Economies (n. 12 above) for both Liaoning and Jiangsu. This may be due to the difference of sample coverage between the different data sources. However, this data discrepancy has little effect on the regression results presented in this article.
48. T. Sicular, "The Quest for Sustained Growth in Chinese Agriculture," in Current Issues in Agricultural Economics, ed. A. J. Rayner and D. Colman (London: Macmillan, 1993), pp. 127-153. Also see Yao, "Industrialization and Spatial Income Inequality in China" (n. 11 above).
49. T. Sicular, "The Quest for Sustained Growth in Chinese Agriculture," in Current Issues in Agricultural Economics, ed. A. J. Rayner and D. Colman (London: Macmillan, 1993), pp. 127-153. Also see Yao, "Industrialization and Spatial Income Inequality in China" (n. 11 above).
50. See Yao, Agricultural Reforms and Grain Production in China (n. 8 above), pp. 58-60.
51. Ibid., pp. 93-94 and table 2.11.
52. See Sicular, pp. 127-53.
53. Joyce Bamathan, "Now, Even Peasants Hate Beijing," Business Week, July 5, 1993, p. 47.
54. The average annual growth rate is the exponent of the estimated coef-ficient of time period in eq. (5) minus one.
55. See "My Country Sets a Target to Support the Poor This Year" (n. 40 above), p. 1.