Poverty Has Significantly Reduced in China
According to the World Bank report “Four Decades of Poverty Reduction in China,” China has lifted 800 million people out of extreme poverty over the last four decades. The country has contributed almost three-quarters of the global reduction of extreme poverty population whose income is below the poverty line. With the 800 million people out of poverty, poverty rate in China dropped significantly—from over 90% to 0.1%.
The infographic above visualizes how poverty rate in China changed in the last 40 years, pulling data from Our World in Data sourced from the World Bank. The poverty headcount ratio or poverty rate is defined as the ratio of the number of people whose income falls below the poverty line, i.e., $2.15 per day.
It is worth noting that the World Bank updated its poverty line from $1.90 to $2.15 per day in September 2022. Consequently the infographic uses data with the updated definition.
Almost 97% of Rural Population Was Extremely Poor in 1981
In 1981—when the world was amid the Cold War, and the year when the wedding of Lady Diana and Prince Charles took place—China was nowhere near the global economic superpower. In fact, 96.9% of the rural population and 70.8% of the urban population lived on an income below the poverty line in China. Overall, 91.6% of China’s population was earning less than $2.15 per day.
However, the country had been planting the seeds of economic growth. In 1978, following the death of Mao Zedong and hence the end of the Cultural Revolution in 1976, the Four Modernizations were set by Deng Xiaoping to rejuvenate China’s economy. This economic reform is known as “Reform and Opening-Up” (改革开放), which fundamentally changed China’s agricultural and industrial system. The reform later turned out to be a huge success contributing to China’s economic transformation.
Bold Reforms Transformed the Chinese Economy
The seeds started sprouting and bearing fruits during the 1990s and the 2000s, despite the economic sanctions by the West as a result of Tiananmen Square protests that occurred in 1989. Indeed, Deng Xiaoping was more resolute in accelerating the reform following the political and social crisis. Being already quite old, Deng Xiaoping visited the Special Economic Zone in southern China in 1992: Shenzhen, Zhuhai, Guangzhou, and Shanghai.
He emphasized the importance of the economic reform through his speeches during the visit. Here are some famous remarks that encouraged the reform:
[The Shenzhen government] should be bolder in carrying out the Reforms and Opening-up, dare to make experiments and should not act as women with bound feet. If you think something is right, then bravely test it and embrace it. The important experience of Shenzhen is the daring spirit. Without this daring spirit and the courage, without the energy, you can not find a good path or a new path, and you can not create a new career.
Furthermore, he encouraged investment, promoting the newly-established stock exchanges in China:
It’ll take careful study to determine whether stocks and the stock market are good for socialism or not, or whether they only belong to capitalism. This also means that we must first try it out!
The aftermath of Deng Xiaoping’s southern tour (邓小平南巡) saw China’s booming economy. The country soon picked up the status of “the World’s Factory,” replacing the USA and Japan. China’s GDP grew by about 10% each year from 1991 to 2010.
China’s Poverty Rate Dropped as Its Economy Grew
The wave of China’s booming economy first swept out urban poverty. The poverty rate in urban China dropped from 39.3% in 1990 to 1.9% in 2008. Although there was a noticeable gap between the urban and rural China, the poverty rate in rural China also dropped remarkably. In 1990, 83.7% of the rural population lived under the poverty line; in 2008, the number dropped to 31.9%. Overall, the country downsized its poverty rate from 72.0% to 18.0% during the same period.
China’s efforts to eradicate poverty continued throughout the following decade. From 2010 to 2019, the poverty rate in urban China declined from 1.1% to 0.1%. More significantly, the poverty rate in rural China fell from 26.3% to 0.3%. Overall, the poverty rate in China is as low as 0.1% today. This is one of the lowest levels in the world, pushing the country to the world’s second largest economy.
Two Pillars in China’s Poverty Reduction
The World Bank report pointed out two pillars that supported China’s poverty eradication. The first pillar is broad-based economic transformation. This pillar was further supplemented by growing agricultural productivity, incremental industrialization, managed urbanization and rural-urban migration, and infrastructure. Then the second pillar is targeted poverty alleviation strategies, which were implemented through area-based realization, social protection policies, and micro-level support.
China Highlights a Carbon-Neutral Development towards Future
Although China successfully reduced poverty, the country continues upgrading its growth model. For instance, China is often named as the world’s largest greenhouse gas emitter. Acknowledging the unwanted title, China has shifted its economic structure to support a reduced carbon footprint or decarbonization. And eventually, the country aims to achieve a zero-carbon future by 2060.
Another highlight China aims to promote is rebalancing the current economic growth model led by investment and export towards one focusing on domestic consumption, services, and increased productivity. This includes improvements in skills as well as adjustment to the digital era.
Four decades ago in 1981, more than 90% of the Chinese population lived on an income below $2.15. Particularly, the poverty rate in rural China was enormously high at 96.9%. Fortunately, the economic reform led by Deng Xiaoping in the late 1970s started making significant progress in the late 1980s onwards. By 1990, the poverty rate in China fell to 72%, and China continued eradicating poverty in the following decades.
Although the urban population was lifted from poverty much earlier, the rural population also caught the wave of economic development in the 2000s. The poverty rate in rural China declined steadily from 96.6% in 1981 to 0.3% in 2019.
Today, China stands as an upper-middle-income country. As the country’s position in the world changes, its roles and responsibilities also change in contribution to a better future of the world. Rightly so, China is shifting its growth model to cater to the arising global needs, such as sustainability and digitalization.