China has dramatically reduced rural poverty over the past 30 years. The rural poor population decreased from 250 million in 1978 to 14.78 million in 2007 according to government estimates. Agricultural growth has been the main driver of poverty reduction in China. Agricultural growth benefits the poor because land was initially distributed equally and inequality was low, and the poor rely more on agriculture for their livelihood. China has maintained long-term agricultural growth through institutional reforms, investments in physical and human capital, and increases in agricultural productivity from technology changes. Targeted poverty reduction investments have also contributed to higher agricultural and economic growth in poor areas.

1. Agricultural Development and Poverty Reduction in China Wang Sangui Renmin University of China

2. Poverty is largely a rural phenomenon in China

3. 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%

4. 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

8. Economic growth and poverty reduction

9. 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)

10. Agricultural growth has much higher impact on poverty reduction

11. 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

12. 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

13. 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

14. 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)

15. 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

16. Contribution of technology change to agricultural growth（%） source：calculated from Zhao and Yuan (2008)

17. 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

19. 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

21. 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%

22. 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