There has been a lot of talk about the true state of poverty in China after the GDP (PPP) reevaluation. Henan is a great example of the challenges facing China. It is one of the most populated provinces in China (in overall people and density) and has a very poor and restless population.

I think the CCP is in a race to develop China before a serious uprising occurs due to inequality and the relatively uncontrollable spread of information. The more open China is, the more potential for economic uplift, but also the less control over information. As rural people know how people outside of their areas in China live and how foreigners live (like in the West or even Hong Kong and Taiwan) there will be more unrest. The CCP knows Chinese history well; they know many uprisings have come from rural areas, especially in bad economic times and from nongovernment controlled religious groups. All boats are rising, but not at the same rate, and the rate of change between them is increasing, not decreasing. This is why Hu Jintao spent so much time speaking about creating a “harmonious society” during the 17th Party Congress last year.

I think Western people often get the idea that China is a prosperous country, even a developed one, but in reality it is really a developing country with rural poverty on the same level of many sub-Saharan African nations, less than 2 or even 1 USD a day; there are 450 million of these people (35% of the total pop). This is equal to trying to lift 1/2 of Africa’s population out of poverty.  I would qualify that by saying there are not many starving people in China, when I speak of African like poverty I’m not speaking of famine.

I am also highly skeptical of data coming out of China, especially from rural areas, as party officials are known to inflate their numbers and act like little emperors in their region. Stealing and misallocating public funds, creating local taxes by fiat are not uncommon. I have blogged about this before. So can China win the race. I’m very optimistic, but not “sold”.

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Grinding poverty defies China’s boom

Sunday, January 13, 2008
YANGMIAO, China: When she gets sick, Li Enlan, 78, picks herbs from the woods that grow nearby instead of buying modern medicines.This is not the result of some philosophical choice, though. She has never seen a doctor and, like many residents of this area, lives in a meager barter economy, seldom coming into contact with cash.”We eat somehow, but it’s never enough,” Li said. “At least we’re not starving.”In this region of southern Henan Province, in village after village, people are too poor to heat their homes in the winter and many lack basic comforts like running water. Mobile phones, a near ubiquitous symbol of upward mobility throughout much of this country, are seen as an impossible luxury. People here often begin conversations with a phrase that is still not uncommon in today’s China: “We are poor.”
China has moved more people out of poverty than any other country in recent decades, but the persistence of destitution in places like southern Henan Province fits with the findings of a recent World Bank study that suggests that there are still 300 million poor in China – three times as many as the bank previously estimated.Poverty is most severe in China’s geographic and social margins, whether the mountainous areas or deserts that ring the country, or areas dominated by ethnic minorities, who for cultural and historic reasons have benefited far less than others from the country’s long economic rise.But it also persists in places like Henan, where population densities are among the greatest in China, and the new wealth of the booming coast beckons, almost mockingly, a mere province away.”Henan has the largest population of any province, approaching 100 million people, and the land there just cannot support those kinds of numbers,” said Albert Keidel, a senior associate at the Carnegie Endowment for International Peace and a specialist in Chinese poverty.”It is supposed to be a breadbasket, but there has always been major discrimination against grain-based areas in China. The profit you can get from a hectare of land from vegetables, or a fish farm or oils, is so much more.”
Other experts say that Henan and other heavily populated parts of the Chinese heartland are often excluded from the financial support that goes to the coastal areas, and what antipoverty measures there are have little effect. Typically, residents of these areas say, money intended for them is appropriated by corrupt local officials, who pocket it or divert it to business investments.Paradoxically, they say, they are overlooked precisely because of their proximity to the major economic centers of the east, forced to fend for themselves on the theory that they can make do with income sent home by migrant laborers and other forms of trickle-down wealth.

“Previous poverty alleviation policy focused more on western China, places like Gansu, Qinghai or Guizhou, which were poorer,” said Wang Xiaolu, deputy director of the National Economic Research Institute, a Beijing nongovernmental organization. “Besides, the situation in the border regions is more complicated, because if things go wrong there, it becomes more than a poverty problem. That’s why policy leaned toward them.”

Here in Henan’s rural Gushi County, only 73,000 of 1.4 million farmers fall below the official poverty level of $94 a year, which is supposed to be enough to cover basic needs, including maintaining a daily diet of 2,000 calories.

“We should bear in mind that this poverty standard is very low,” Wang said, echoing the view of many Chinese economists.

Many more people in this part of Henan subsist between the official poverty line and the $1 a day standard long used by the World Bank.

Last month, the World Bank’s estimate of the number of poor people in China was tripled to 300 million from 100 million, after a new survey of prices altered the picture of what a dollar could buy.

The new standard was set according to what economists call purchasing power parity. By the new calculations, estimates of the overall size of the Chinese economy also shrank by 40 percent.

Given the huge size of the Chinese population, even a small change in the definition of poverty can produce widely different estimates.

“The difference between $1 and $2 a day income is a huge number of people, say 450 million people,” said Khalid Malik, the resident representative of the United Nations Development Program, in Beijing.

Peasants here are the first to tell a visitor that whatever the statistics say, they remain mired in deep poverty. Villagers throughout this county said that several recent, highly publicized measures by the central government to improve the lot of peasants had produced only a modest effect on their lives. These included an abolition of agricultural taxes for peasants, the cancellation of school tuition fees for their children and new pension and health care plans that appear on paper to be more generous for the rural poor.

Since most peasants here have only a glancing contact with the cash economy, the tax exemption is largely irrelevant.

Even with the abolishment of tuition fees, many said, they were still squeezed by a proliferation of other school fees. Similarly, others said, participation fees and deductibles placed the pension and rural health insurance plans out of their financial reach.

“We’re deadly poor,” said Zhou Zhiwen, 55, whose brick house in Yangmiao marks her as better off than most people, who still live in earthen structures. “We grow just enough food for ourselves to eat, with no surplus grain. We don’t have to pay the grain tax anymore, but our lives aren’t much better.”

Asked how she managed, Zhou said she received help occasionally from relatives who had migrated elsewhere for work. “If people lived well at home, who would want to migrate?” she asked. “All of our young people are working elsewhere.”

For many villagers, the central government is out of touch with rural realities in places like this, and the local government is filled with venal officials who shower spending intended for the rural poor on provincial towns and cities or simply take the money for themselves.

“Ordinary people don’t get any real benefits from poverty alleviation programs,” said Li Guangyi, 35, a farmer who lives in the village of Zhangyoufang. “How could relief money get into our hands? It goes first toward relieving the local officials, who get rich on the tragedies of the nation.”

David Dollar, a World Bank official in Beijing, played down the importance of the central government in relieving poverty, saying that provincial results had much more to do with the success of local officials in creating an attractive investment climate.

Much of the remaining poverty, he said, involved households that lacked migrant laborers or able-bodied workers. “Very often poverty is related to a health shock or an injury, or the lack of an able-bodied person,” Dollar said. “Traditionally, the Chinese government approach has been helping the village grow, but if there are few able-bodied people, you have to work on safety net issues.”

In Gushi County, however, even families with members who migrated east for work remained stuck in poverty, and the situation of the migrants themselves often remained precarious.

Shen Kexia, 33, who left her village with her husband for work in Hangzhou, a booming southern coastal city, recently returned home for the birth of her second daughter. She and her husband plan to leave their two daughters with Shen’s elderly parents as soon as the baby is big enough.

“If my in-laws get sick, we won’t be able to leave,” she said.

“We’re home to have this baby because we cannot afford to in Hangzhou, but if we have money, we won’t come back.”

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