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APR Workshop 2010-SS Cooperation Agricultural development and poverty reduction China-Wang Sangui
 

APR Workshop 2010-SS Cooperation Agricultural development and poverty reduction China-Wang Sangui

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    APR Workshop 2010-SS Cooperation Agricultural development and poverty reduction China-Wang Sangui APR Workshop 2010-SS Cooperation Agricultural development and poverty reduction China-Wang Sangui Presentation Transcript

    • Agricultural Development and Poverty Reduction in China
      Wang Sangui
      Renmin University of China
    • Poverty is largely a rural phenomenon in China
    • Trend of rural poverty reduction in China
      According to NBS estimation
      Rural poor population decreased from 250 million in 1978 to 14.78 million in 2007
      A total reduction of 235 million poor people, with an annual decreasing rate of 9.3%
      Poverty incidence decreased from 30.7% to 1.6%
    • Alternative estimations also show dramatic reduction in rural poverty over the past 30 year
      WB $1/day or $1.25/day consumption poverty decreased by more than 500 million , and contributed greatly to the fulfillment of MDGs
      But the reduction was more uneven over the period
    • Economic growth and poverty reduction
    • Elasticity of poverty reduction to growth is 0.52
      Ravallion and Chen(2007) estimated a much large elasticity of poverty reduction to growth (around 3)
    • Agricultural growth has much higher impact on poverty reduction
    • Elasticity of poverty reduction to agricultural growth is 1.13
      the elasticity of poverty reduction to agricultural growth Ravallion and Chen (2007) estimated is 8
      The impact of agricultural growth on poverty reduction is at least twice as big as that of overall GDP growth
    • Why is China’s agricultural growth pro-poor?
      China has maintained long-term agricultural growth (5-6% annual growth rate)
      Growth is based on a rather equal distribution of assets and income when the reform started
      Land was equally distributed to households on a per capita basis
      Gini index of per capita income was only 0.21 in 1978 (NBS, 2000)
      Thus, the poor can equally benefit from growth process when inequality was low
    • The poor depends more on agriculture for their livelihood
      Net income (per capita) from agriculture in 2006 accounts for
      54.5% for poor households
      42.4% for all rural households
      32.8% for the richest 20% rural households
      At the household level, agricultural growth has strong positive externality, e.g. agricultural growth can lead to the development of non-agricultural activities
    • Maintain strong agricultural growth through institutional reform, investment in both physical and human capitals, as well as productivity increase
      Adoption of HRS solved the incentive problem,
      Market and price reforms provided new opportunities for rural households and the base for effective resource allocation
      The improvement of agricultural terms of trade directly benefited all rural household in early reform period
      Institutional reform along accounted for 47% of agricultural growth during 1979-1985 (Lin, 1992)
    • Human and physical capital investments occurred long before the reform
      Primary school enrollment rate
      20% in 1949
      96% in 1978
      99.5% in 2007
      Percentage of primary school graduates that went to middle school
      32% in 1962
      86% in 1978
      99.9% in 2007
      Percentage of middle school graduates that went to high school
      40.6% in 1990
      79.3% in 2007
      Effectively irrigated land areas
      20 million ha. In 1952
      44.7 million ha. In 1978
      56.5 million ha. In 2007
    • Contribution of technology change to agricultural growth(%)
      source:calculated from Zhao and Yuan (2008)
    • China has invested over RMB 300 billion for rural poverty reduction over the past 25 years
      Central government contributed two third of the investment and local governments contributed one third
      Majority of the investment went to agriculture and small scale infrastructure in poor areas
      Targeted poverty intervention
    • Poverty reduction investment has contributed to both agricultural growth and poverty reduction in poor areas
      Agricultural growth rate in poor counties was 7.5% during 1994-2000, higher than the national average (7%)
      Annual growth rate of grain production in poor counties was 1.9%, much higher than the national average (0.6%)
      Net income per capita grow 12.8% annually in poor counties, two percent point higher than the national average
      Income growth was also higher in targeted poor villages in recent years
    • Empirical analysis shows that household income and consumption in the officially designated poor counties/villages grew significantly faster than in other counties/villages
      1.1% faster in per capita consumption (Ravallion and Jalan 1999 )
      2.2% faster(1986-1991) and 0.9% faster(1992-1995)in per capita income, (Park, Wang and Wu 2002)
      Income and consumption growths in poor villages receiving poverty investment was 6-9 percent higher than poor villages without investment in 2001-2004 (Park and Wang 2010)
      The rate of return of poverty investments was estimated to be over 10%
    • Agricultural growth is the main driving force to China’s dramatic poverty reduction
      Agriculture is pro-poor because of:
      Equitable land distribution
      Low income inequality when the growth began
      The poor depend more on agriculture for their livelihood
      China has sustained long-term agricultural growth through
      Institutional and policy reforms to provide the right incentives
      Investment in physical and human capital
      Investment in agricultural R&D to increase agricultural productivity
      Targeted investment in agriculture and infrastructure in poor areas
      Conclusion remarks