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Strategizing the War on Poverty

"Economic growth can effectively lift low-income groups out of poverty, but this does not necessarily mean poverty will obviously be alleviated when the economic growth reaches a certain degree," said Wang Sangui, a researcher in poverty and development with the Chinese Academy of Agricultural Sciences.

Wang's conclusion is based on both his own survey and that of international experts in China's 500-plus State-level poverty-stricken counties.

Official statistics suggest there were 290 million poverty-stricken residents of China at the end of 2003, meaning they had an annual net income of less than 625 yuan (US$75).

The central government allocates billions of yuan each year for poverty reduction and relief. The affluent provinces and municipalities in the east help their counterparts in the west reduce poverty. Between 1978 and 2003, China's poverty-stricken population was reduced by 8.7 per cent every year.

However, the current strategy and method of poverty reduction needs some adjustment to meet the challenges, experts said over the weekend at a workshop jointly sponsored by China Centre for Economic Research of Peking University and Aid-the-Poor Development Office of the State Council.

To reduce poverty effectively, the State must closely link that goal with efforts to boost economic growth. Most poverty reduction projects have been carried out to help the financially disadvantaged acquire the ability to make an living on their own, like offering loans and training, rather than simply giving them money.

According to Wang's research, economic growth plays a key role in reducing poverty on a large scale, especially development in agricultural production. And the average income of farmers, who are the primary target group of poverty reduction programmes, increased faster than the income of all other impoverished groups.

However, as some officials and experts pointed out, such a method of binding poverty reduction with economic growth may not be as effective as expected.

Wang and his peers' findings could indicate that certain groups cannot benefit from economic growth regardless of their surroundings. These people are mostly the elderly, the disabled, the ill, and the childless.

At the same time, it is not clear whether all people in the target regions enjoy the benefits of the poverty reduction programme. After all, current governmental programmes are mainly granted to counties, rather than villages or individuals.

In practice, such a scenario may only benefit the local people rather than be used more specifically to help those with the greatest need. And there is also the danger of local officials using the capital or materials of these programmes for other purposes.

Experts attending the workshop also challenged the common practice of evaluating achievement of poverty reduction mainly by indices like per capita GDP or average income.

These economic indices, though useful to indicate economic progress, are far from enough to reveal the real life hardships of poverty-stricken people, they said.

They also pointed out that as poverty reduction is now mainly carried out by governmental branches with the capital allocated by governments at all levels, non-government organizations and individuals are yet to be fully involved or mobilized.

To adapt poverty reduction methods to these challenges, the first work should be redefining the target population of poverty reduction, said Hu Angang, a renowned economist and director of the Centre for China Studies under Tsinghua University.

Hu suggests that rural residents with an annual income of less than 625 yuan -- the segment called the "poverty-stricken population" -- should receive financial relief. Most people in this group have difficulty making a living on their own no matter what project they get because of their acute lack of access to resources.

For rural residents with an annual income of between 625 and 865 yuan (US$104) -- the segment known as the "low-income population" -- efforts should be made to help them acquire the ability or skills to increase income by themselves, Hu said.

Du Runsheng, former director of the Research Centre for China's Rural Development under the State Council, urged that poverty reduction work should focus on accelerating social development, like improving education, medical service and infrastructure for poverty-stricken people.

Tang Min, chief economist of the Asian Development Bank resident mission in China, suggested financial institutes should be involved in the effort to reduce poverty.

Since the small-sum loans for farmers are interest-free or feature very low charges, financial institutions are reluctant to extend such loans for marginal profit and relatively large risk.

If the government can set an interest rate for small-sum loans for farmers that is a bit higher than other loans, or place a mortgage for farmers' loans, financial institutes could be motivated to participate in reducing poverty, Tang said. This way, they can share much of the government's workload, even with a higher efficiency.

Experts also agreed that NGOs should play their roles in poverty reduction. Foundations, public or private, should be encouraged to contribute their strength. As a matter of fact, quite a few have done excellent jobs in delivering training in technology, legal knowledge and skills.

There are private schools helping farmers of the underdeveloped areas get education and professional skills they need to find jobs in urban areas.

The government should join hands with, or even offer some incentives to institutes and individuals that work towards that goal, said the experts.

(China Daily April 12, 2004)

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