How China Beat Extreme Poverty; And What Lessons It Holds For India

Subject: Economy

Context–

According to the latest World Bank report on global poverty,India has the most number of poor people (5.6 crores).
The report found that the number of Indians living in extreme poverty— surviving on less than Rs 46 a day — increased by 56 million (5.6 crores) in 2020.
Further, it states that close to 600 million Indians survive on less than Rs 84 a day.
China, comparable in population size, alleviated poverty at historically unprecedented speed and scale between 1978 and 2018.

What is extreme poverty? How is it defined?

The World Bank (WB): Anyone living on less than $2.15 a day is considered to be living in extreme poverty. About 648 million people globally were in this situation in 2019.
The very first international poverty line — a dollar a day — was constructed in 1990 using the 1985 prices.
It was then raised to $1.08 a day in 1993, $1.25 a day in 2005 and $1.90 a day in 2011. The $2.15 one is based on 2017 prices.

What did China achieve?

The World Bank found that between 1978 and 2018,China’s poverty head-count dropped from 770million to 5.5 million people.
It means that on average, for 40 years on the trot, every year China pulled 19 million people out of extreme poverty.
In doing so, it accounted for almost 75 per cent of the global drop in the number of people living in extreme poverty in this period.
In 2021, China declared that it has eradicated extreme poverty according to the national poverty threshold, lifting 765 million people since 1978, and that it has built a “moderately prosperous society in all respects”.

How did China do it?

The first pillar was rapid economic growth, supported by broad- based economic transformation.

Reforms began in the agricultural sector, where poor people could benefit directly from improvements in productivity associated with the introduction of market incentives.
The development of low-skilled,labour intensive industries provided a source of employment for workers released from agriculture.
Urbanisation helped migrants take advantage of the new opportunities in the cities, and migrant transfers boosted incomes of their relatives remaining in the villages.
Public investment in infrastructure improved living conditions in rural areas but also connected them with urban and export markets.

The second pillar was government policies to alleviate poverty, which initially targeted areas disadvantaged by geography and a lack of economic opportunities, but subsequently focused on poor households irrespective of location.

A component of these policies was social protection policies for poor households, including programmes in social assistance, insurance, and welfare.

Other factors-

China’s size necessitated decentralised implementation arrangements, with significant scope for local experimentation and a high degree of competition among local governments.
China also benefited from favourable conditions at the time of opening up, such as a relatively high level of human capital endowments.
In 1949,7 percent of those aged 15–64 had completed primary school in China.
Massive investment in education and expansion of health care since the 1950s resulted in real achievements: in 1978, the infant mortality rate was 52 per 1,000 births, less than half of the average in China’s income group; life expectancy at birth at 66 years far exceeded that of other developing countries; the primary school enrollment rate was 96 per cent; and the secondary school enrollment rate was 49.9 percent.