ending poverty in China

Elimination of poverty is no easy task. Even if the state obtains adequate resources for the project, there remains the problem of transferring income to those living in abject poverty.

In China, the targeting of relief for the poor is improving, but is still fraught with incompetence and fraud. As a result, there are huge errors of inclusion (benefits that go to the non-poor) and exclusion (the poor who receive no benefits).

China has been a hero of the world’s poverty-reduction efforts. It has eradicated poverty in cities (by its definition, at least) and reduced the number of rural people below the official poverty line … from 775m in 1980 to 43m in 2016. Its aim now is to have no one under the line by 2020. ….

But the last stage of poverty reduction will be the most difficult. ….

Targeting individuals will help. By 2014 the government had compiled a “poverty-household registry” of every person and household below the poverty line. ….

There are signs that China’s is indeed improving its main form of poor relief, which is called “subsistence guarantee”, or dibao. The dibao programme has been notoriously inefficient. Many households that qualify for payments do not receive them because of corruption and bureaucratic failings. A survey by the World Bank found that between 2007 and 2009 just 10% of those that did get the dibao had household incomes below the poverty line (ie, 90% did not qualify for the handouts they were getting). The system is also corrupt. In 2015 an official in Henan province was found to have 267 bank deposit books in the names of extremely poor people, from which he had misappropriated 500,000 yuan of welfare payments. ….

Ben Westmore of the OECD … found [in five provinces] that in 2014 about a third of rural households receiving dibao payments were below the poverty line—not good, but better than 10%.            ….

[M]ost poor households still do not get dibao money. In the sample studied by Mr Westmore, three-quarters of them did not. ….

Worse, some poor people are not even included in the registry. In a village of 100 poor households in Shanxi province, only ten families are in it—friends of the party boss. If the registry is flawed, poverty relief is all the more likely to be flawed too.

China’s new approach to beating poverty“, The Economist, 29 April 2017.

The Economist suggests “Targeting individuals will help”, but this is the system that has failed.

China should consider elimination of targeting, i.e.introduction of a universal basic income. This would truly be a “new approach to beating poverty”.

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