By Wan Guanghua/Beijing Review
2020 marks the year China will eradicate poverty and achieve a moderately prosperous (xiaokang) society, two major development goals of the Chinese government and Chinese people. Also, China's poverty reduction effort featured most prominently under the Millennium Development Goals (MDGs) of the United Nation.
According to the poverty line of $3.2 per person a day set by the World Bank, 99.7 percent of Chinese were poor in 1978 and this percentage reduced to 4.7 percent in 2018. According to the abject poverty line of $1.9 per person a day also set by the World Bank, 93.1 percent of Chinese were poor in 1978 and this percentage dropped to 1.4 percent in 2018. These data mean that China has already eliminated abject poverty.
MDGs call for halving poverty between 1990 and 2015, during which China contributed 63.9 percent to global poverty reduction. This is why it has been well recognized that if China was excluded from consideration, the world could not have achieved the poverty goal of the MDGs. As a matter of fact, if one shortens the time horizon to 1990-2010, China's contribution to global poverty reduction rises to 74.4 percent. And if we further focus on the first 15 years of the MDG agenda (1990-2005), the contribution of China amounts to a remarkable 93.2 percent. In other words, from 1990 to 2005, all other developing member economies of the United Nations only managed 6.8 percent contributions to the poverty goal of MDGs.
Economic growth is the key
China's achievement in poverty reduction owes a great deal to her fast growth—almost 10 percent on average annually since 1978 when the policy of opening-up and reform was initiated. In the past few decades, China contributed around 30 percent to the global growth. It is thus fair to say that China's achievement in poverty reduction, like its economic growth, is a miracle too.
How to explain or interpret this poverty elimination miracle? Undoubtedly, economic growth has been playing the most important role. Growth, very much like a rising tide, helps lift people's income which is like boats. According to our analysis, almost all of China's poverty reduction can be attributed to her economic growth. Of course, even if there was no growth, poverty can still be reduced by taking from the rich and giving to the poor. This is called redistribution effect, which comes with distortions and administrative costs. In other words, it is preferable to reduce poverty through growth.