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The 8-7 National Poverty Reduction Program in China: the National Strategy and its Impact

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Title: The 8-7 National Poverty Reduction Program in China: the National Strategy and its Impact


1
The 8-7 National Poverty Reduction Program in
China the National Strategy and its Impact
  • Wang Sangui, Li Zhou, Ren Yanshun

2
Background Evolution of Chinas Poverty
Reduction Policies
  • During the post-1978 reform period, large-scale
    poverty reduction benefiting from specific
    government policies as well as fast economic
    growth has been one of Chinas greatest
    accomplishments.
  • Rural poor population decreased from about 200
    million in 1981 to 28 million in 2002 (official
    estimation)
  • Or from about 490 million to 88 million (1 one
    day poverty line).

3
The Numbers of Poor in China, 1986-2002
4
Background (Cont.)
  • Chinas poverty reduction policies can roughly be
    classified into four phases since 1978.
  • Rural Reform (1978-1985)
  • The National Targeted Poverty Reduction Programs
    (1986-1993)
  • The 8-7 Plan (1994-2000)
  • Poverty Reduction Strategy in the New Century
    (2001-2010)

5
Background (Cont.)
  • Poverty reduction was much more dramatic in early
    1980s and during 1994-1996 when fast economic
    growth were accompanied by the increases of the
    rural-urban terms of trade as agricultural
    prices increased.

6
Objectives of the 8-7 Plan
  • The overall objective of the 8-7 Plan was to lift
    the majority of the remaining 80 million poor
    above the governments poverty line during the
    seven year period 1994-2000.
  • Where are also a number of specific objectives.

7
Measures of the 8-7 Plan
  • Designate 592 national poor counties
  • Assign poverty reduction responsibility to the
    local governments (four to provinces)
  • Establish a framework for East-West counterpart
    poverty reduction activities,
  • Strengthen departmental poverty reduction
    efforts,
  • Significantly raise poverty reduction funds.,
  • Introduce tax reduction policies ,
  • Experiment with different poverty reduction
    approaches,
  • Encourage international and NGOs to contribute to
    poverty reduction .

8
Organizational Structure of the 8-7 Plan
9
Fund Allocation
  • RMB 113 billion (or US 13.6 billion), or about 5
    to 6 percent of total govt. expenditures were
    funded from the central govt.
  • The allocation of poverty funds mainly reflected
    the numbers of poor counties and poor population
    in each province and the bargaining power of
    local governments.
  • Within provinces, allocation to counties followed
    different criteria.
  • Fund allocation among sectors is in favor of
    production activities and infrastructure
    construction.

10
The Main Types of Poverty Programs
  • Subsidized Loans
  • The subsidized loan program was to support the
    production activity and economic development of
    poor areas as well as the poor directly
  • accounting for over one half of the total poverty
    funds
  • Managed by ABC
  • Poor targeting and low repayment rate are major
    problems.

11
The Main Types of Poverty Programs (Cont.)
  • Food for Work
  • The FFW program aimed at making use of surplus
    labor in poor areas to build infrastructure in
    poor areas
  • the FFW program accounted for nearly 30 percent
    of the total poverty funds
  • Managed by NRDC
  • Has done a relatively good job in constructing
    infrastructure that has benefited poor areas, but
    could have done better in immediate poverty
    alleviation.

12
The Main Types of Poverty Programs (Cont.)
  • Budgetary Grants
  • Government budgetary grants supported investment
    in poor areas including productive construction
    projects, small-scale infrastructure, basic
    education and health care, culture promotion,
    science and technology extension, training and
    industry promotion
  • accounted for less than 20 percent of the total
    poverty funds
  • MOF has been responsible for the budgetary grants
  • Their effectiveness could have been improved by
    measures to limit their diversion .

13
Other poverty reduction efforts
  • Departmental Efforts
  • East Supports West
  • Poverty Reduction Activities of NGOs
  • Poverty Reduction Activities of International
    Organizations

14
Outputs
  • The magnitude of outputs is enormous . The rural
    poverty monitoring survey indicates that during
    1997-2001
  • the 8-7 Plan directly supported 30.7 million
    households and 125 million persons,
  • employed 17.24 million workers in poverty
    reduction activities,
  • newly developed 3.25 million hectares of cash
    trees,
  • 320 thousand km of roads ,
  • 360 thousand km of electricity lines ,
  • drinking water for 53.5 million persons and 48.4
    million animals, etc.

15
Impact
  • Officially designated poor counties delivered
    higher than average growth in grain and
    agricultural production, and in household net
    income.
  • Empirical analysis shows that household income
    and consumption in the officially designated
    poor counties grew significantly faster than in
    other counties.
  • The rate of return of poverty investments were
    estimated to be over 10.
  • What is not sure is how the benefits are
    distributed within the county.

16
Key Factors
  • Stable political environment and rapid economic
    growth established an important context for
    successful poverty reduction.
  • It is especially agricultural GDP growth that is
    highly correlated with poverty reduction.
  • Similarly to the agricultural growth, also the
    rapid development of the private economic sector
    contributed to poverty reduction.
  • Government commitment and the strong resources
    mobilizing capacity of Chinese government .
  • The implementation of the 8-7 Plan was supported
    by a well-established administrative system.

17
Institutional Innovation
  • China turned from relief dependent poverty
    reduction to poverty reduction emphasizing
    development.
  • China has moved from purely government-led
    poverty reduction effort to involving the entire
    society.
  • China set up a multi-departmental coordinating
    mechanism.

18
Learning and Experimentation
  • China poverty reduction is a process of constant
    learning and exploration.
  • There have been a number of changes in poverty
    reduction project and fund management.
  • The mode of delivery and management of credit
    funds for poverty reduction has changed.
  • China introduced participatory approaches to
    poverty reduction.

19
Lessons
  • Economic Growth Is Critical for Poverty Reduction
  • Basic Insurance Programs Need to Complement
    Poverty Reduction Effort
  • Targeting and Participation of the Poor Matter
  • Objectives Need to Be Clear
  • Human Development Deserves Special Emphasis
  • Poverty Alleviation Requires a Coordinated Effort
  • Poverty Alleviation Effort Should Break the
    Traditional Rural-Urban Segmentation .
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