FOREWORD This report presents the findings and recommendations from policy studies on the challenges and responses to poverty reduction in China at this important juncture of the country’s development. This joint research was undertaken over the course of the past year and a half, by the United Nations Development Programme (UNDP) and the International Poverty Reduction Centre in China (IPRCC), to inform China’s poverty reduction efforts for the next ten years. This year marks the beginning of China’s new ten-year poverty reduction strategy and represents the last decade for achieving an all-round Xiaokang society by 2020. The year 2011 also marks the commencement of the 12th Five-Year Plan. And this year also constitutes the beginning of the last 5 years of the Millennium Development Goals. This is clearly a significant juncture for human development, both for China and for the whole world. Over the past thirty years, UNDP has witnessed China’s outstanding performance in poverty alleviation, achievements which have exceeded even the greatest expectations of China’s many observers. However, as China has developed, her challenges have become more complex, and further poverty reduction will undoubtedly prove more difficult to tackle than in previous years. One reason for this is that reducing the absolute number of poor people often masks increases in relative poverty. As a result, poverty reduction efforts will need to be redirected towards the substantial number of people that have been left behind. This includes the elderly, children, ethnic minorities, migrant workers, people living in remote areas, etc. Contemporary poverty in China has also shown signs of some typical “transitional poverty” characteristics, either toward or away from residual poverty largely determined by the suitability of macro-economic frameworks and the quality of institutional governance. It is therefore crucial that these issues be addressed as the contours of China’s development shifts from a largely exported-oriented growth model to one based more on domestic consumption. To compound the challenge, many of China’s poor live in or around ecologically fragile areas that are highly sensitive to the effects of environmental and climate change. Thus, addressing these vulnerabilities in the context of sustainable livelihoods and equitable growth will require the integration of climate change and poverty reduction strategies with immediate effect. As the complexity of China’s poverty reduction challenge increases, it is all that much more important that China moves beyond the global obsession with income as the main measure of human progress. Income poverty measures such as per capita income and poverty gap indices are useful but only provide us with part of the picture. What is required is a more sophisticated and multi-dimensional measures to analyze poverty. Only then can we hope to identify the appropriate policy combinations required to adequately address the challenge of reducing poverty and its devastating effects. In this regard, the present study tackles several important, relevant topics in the formulation of China’s national poverty reduction strategy. Building on the outcomes of intensive consultations between UNDP, Policy Study on the Challenges and Responses to Poverty Reduction in China’s New Stage 1 IPRCC and Chinese State Council’s Leading Group Office of Poverty Reduction and Development (LGOP), and in close collaboration with the Chinese Government and key think tank organizations, a number of policy and programmatic options were explored in the areas of: i) multi-dimensional poverty, planning and targeting; ii) rural governance that ensures more equitable distribution of development outcomes; iii) integrated rural-urban poverty reduction strategies on migration, urbanization and the demographics of an aging population; and iv) climate change, ecosystems and poverty reduction. UNDP engaged a largely national consultancy team for this analysis, but also involved international poverty reduction experts. An advisory panel, with both senior national and international advisers reviewed the intermediate and final results of this research. To validate the conclusions and recommendations, UNDP, IPRCC and LGOP organized an international workshop in Beijing on 25 February 2011 with the Government, other UN agencies, academia and NGOs. In concluding, I would like to take this opportunity to express my sincere appreciation to all the members of the consultancy team and to the IPRCC, for their dedicated efforts and valuable contributions to this most important endeavor. I would also like to express my gratitude to LGOP, and in particular, to Vice Minister Zheng Wenkai, for his invaluable insights and strategic guidance in support of this work. Renata Lok-Dessallien Resident Representative United Nations Development Programme in China Beijing, May 2011 2 Policy Study on the Challenges and Responses to Poverty Reduction in China’s New Stage PREFACE In the past ten years, the government at all levels has made efforts to ensure smooth implementation of the National Guideline of Rural Poverty Reduction and Development 2001–2010 and achieved remarkable progress. Poverty in China has been dramatically reduced. Progress has also been substantial in terms of human development indicators. The infrastructure in rural areas has been upgraded, while deterioration of ecosystem is being contained. This period also witnessed rapid development of county level economy and improvement of social landscape. It is recognized poverty reduction in many ways continues and in some respects has become more demanding in the next stage. China still has a large number of poor people. Disparity is getting wider. People getting out of poverty are still vulnerable to the risks of returning to poverty. Poverty reduction work in the next stage is undoubtedly more difficult than before. The study identified the key topics in poverty reduction in the next ten years and proposed a number of policy options based on consensus of UNDP, IPRCC/LGOP, and the findings and policy recommendations in the areas of multi-dimensional poverty measurement and targeting, rural governance and poverty reduction, poverty reduction in the process of urban-rural integration, and climate change poverty reduction were presented in the international workshop, held in Beijing on 25 February 2011 with participants from the Government, other UN agencies, academia and NGOs. These findings and conclusions are of high value to formulation of the national guideline of poverty reduction for the next 10 years. I am very pleased to share the study with more people in the endeavor of poverty reduction. Zheng Wenkai Deputy Director Leading Group Office of Poverty Reduction and Development, State Council Beijing, 1 August 2011 Policy Study on the Challenges and Responses to Poverty Reduction in China’s New Stage 3 ACKNOWLEDGEMENTS This policy study on the Challenges and Response to Poverty Reduction in China’s New Development Stage was made possible by the cooperation and dedication of numerous institutions and individuals. The United Nations Development Programme (UNDP) and the International Poverty Reduction Centre in China (IPRCC) would like to acknowledge, firstly, the planning, design, analysis and writing of the policy study and reports by a consulting team composed of a working group to produce a chief policy note and sub-section policy notes on key issues and an advisory panel to review the intermediate and final results. The work of all the members of the research team is highly appreciated, for their dedicated efforts and contribution to the report. The working team comprised the following members: Li Xiaoyun, team leader, Dean and Professor of College of Humanities and Development, China Agricultural University; John Taylor, Professor and Director of Development Research at London South Bank University who is responsible for the references to international experiences and case studies; and Wang Sangui, national consultant responsible for the overall study, Professor at School of Agricultural Economics and Rural Development, Renmin University of China. Within the working team, Wen Tiejun, Dean and Professor at the School of Agricultural Economics & Rural Development, Renmin University of China and his assistants Dr. Yuan Xiaoxian and Dr. Yang Shuai, were responsible for the study on rural governance; Wang Haimin, Professor at the Centre for Integrated Agricultural Development (CIAD) of the China Agricultural University, for the study on multinational poverty and targeting; Lin Wanlong, Professor at the School of Agricultural Economics and Management, China Agricultural University and his assistants, Associate Professor Chen Tianheng and Dr. Qi Gongshen, for the study on rural-urban integration; Qi Gubo, Professor at CIAD of China Agricultural University, for the research on climate change and poverty, and Daniel Wang Dexiang, technical coordinator of the study, Socio-economic Policy Advisor of the UNDP China Poverty Reduction and Social Inclusion Team;. The advisory panel includes following distinguished members: Wang Pingping, Director, Department of Household Surveys of the National Bureau of Statistics; Pu Yufei, Deputy Director General, Comprehensive Management Department of State Information Center; Prof. Zhao Shukai, Deputy Secretary General of the China Development Research Foundation; Prof. Feng Kaiwen, College of Economics and Management, China Agricultural University; Dr. Dong Zhong, Deputy Director