Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development DIRECTIONS INDEVELOPMENT Shared Growth inChina Growth Shared Reducing Inequality for Strategy and Policy Options for andPolicy Strategy Guangdong Province Reducing Inequality for Shared Growth in China Reducing Inequality for Shared Growth in China Strategy and Policy Options for Guangdong Province © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8484-8 eISBN: 978-0-8213-8501-2 DOI: 10.1596/978-0-8213-8484-8 Library of Congress Cataloging-in-Publication Data Reducing inequality for shared growth in China : strategy and policy options for Guangdong province. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8484-8 — ISBN 978-0-8213-8501-2 (electronic) 1. Guangdong Sheng (China)—Social conditions—21st century. 2. Guangdong Sheng (China)—Social policy. 3. Guangdong Sheng (China)—Social planning. 4. City planning— China—Guangdong Sheng. 5. Education—China—Guangdong Sheng. 6. Social change— China—Guangdong Sheng. 7. Guangdong Sheng (China)—Politics and government—21st century. I. World Bank. HN740.G83R43 2010 307.3'4095127—dc22 2010030042 Cover photo: Panorama Media Limited Cover design: Naylor Design, Washington, DC Contents Foreword by Wang Yang xvii Foreword by James W. Adams xxiii Acknowledgments xxvii Abbreviations xxix Overview 1 Background of Guangdong Province 3 The Challenge of Inequality in Guangdong 4 Reducing Inequality with Spatially Unbalanced Growth 10 Reducing Inequality: A Three-Pillar Strategy 12 Eliminating Absolute Poverty through the Dibao System 15 Boosting Rural Income by Giving People Opportunities 18 Investing in People through More Equitable Service Delivery 29 Conclusion 39 Notes 41 References 42 v vi Contents Chapter 1 Understanding Poverty and Inequality in Guangdong 45 Measuring Poverty in Guangdong 49 The Current Poverty Situation in Guangdong 53 Profile of the Poor 62 Inequality in Guangdong 65 Summary and Policy Implications 74 Notes 76 References 76 Chapter 2 Supporting the Poor through Rural Dibao 79 How to Evaluate a Social Assistance Program 81 Evolution and Main Policy Features of Rural Dibao in Guangdong 83 Challenges Faced by the Dibao Program in Guangdong 86 Building a Dibao Program for the Future: Policy Recommendations 98 Notes 102 References 102 Chapter 3 Developing an Efficient and Integrated Labor Market in Guangdong Province 103 Labor Market Overview 106 Barriers to a Mobile and Flexible Labor Market 116 Policy Implications 120 Notes 124 References 124 Chapter 4 Making Finance Work in Reducing Inequality and Poverty in Guangdong 127 The Current Situation 131 Issues and Problems 147 Conclusions and Summary of Recommendations 157 Annex 4.1 Comparison of the Regulation Framework for Commercial Banks and Rural Financial Institutions, 2008 162 Annex 4.2 Different Requirements for Microloan Companies by Central versus Local Authorities 164 Contents vii Annex 4.3 Innovative MSE Lending Project in China 168 Annex 4.4 Mutual Societies in Poor Villages 170 Notes 171 References 171 Chapter 5 Guangdong: Reforming Land Policy for Better Rights Protection and a Healthier Development Pattern 173 A New Platform for Pursuing Bolder Innovations 174 Conclusions 190 Notes 192 References 192 Chapter 6 Spending for Compulsory Education in Guangdong 193 Key Outcome Gaps in Compulsory Education 195 Spending Gaps in Compulsory Education and the New Free Compulsory Education Scheme 204 Conclusions and Policy Implications 235 Annex 6.1: Outcome Indicators in Guangdong Province 244 Annex 6.2: Spending Indicators in Guangdong Province 247 Notes 259 References 260 Chapter 7 Skills Development in Guangdong Province 261 Preparing for Change 264 Meeting the Challenge for Skills Development 274 Annex 7.1: Tables 287 Annex 7.2: Rural and Urban Household Surveys 296 Notes 299 References 300 Chapter 8 Reducing Regional Disparities in Health Services in Guangdong Province: Challenges and Options 303 The Challenge of Inequality and Regional Disparities 305 viii Contents Resource Mobilization and Allocation 314 Summary and Recommendations 320 Improvement of the Efficiency and Equity of Health Protection Schemes 321 Strengthening of Health Services Delivery Capacity in the Lagging Areas 332 Issues Needing Further Attention and Suggestions for Further Study 340 Notes 341 References 342 Index 343 Boxes 1.1 Guangdong Rural and Urban Household Survey Data 48 1.2 Measuring the Incidence, Depth, and Severity of Poverty 54 1.3 Measuring Inequality 66 3.1 Measuring Inequality 105 4.1 Understanding Finance 128 4.2 The Financial Crisis Legacy in Guangdong 135 4.3 The Microlending Experiments by China Postal Savings 147 5.1 Vietnam: Land Policy Reforms and National Land Registration Program 177 5.2 Transferable Development Rights (TDRs) 181 5.3 The Case of Atlanta 184 5.4 Smart Growth 185 5.5 Property Tax as Good Local Tax 189 6.1 Examples of Funding Formulas in Central America 240 8.1 MA Pilot in the Yubei District of Chongqing Municipality 331 8.2 Practice on Retention of Rural Health Workers 338 Map O.1 The Four Regions of Guangdong Province 3 Figures 1.1 Comparison of GDP and Per Capita GDP across China’s Provinces, 2007 46 Contents ix 1.2 GDP of Guangdong and East Asian Newly Industrialized Economies, 2007 46 1.3 Per Capita GDP of Guangdong and East Asian Newly Industrialized Economies, 2007 47 1.4 Ratio of Rural and Urban Incomes and Per Capita GDP 48 1.5 Comparison of National Poverty Lines 52 1.6 Urban and Rural Income Distribution in Guangdong, 2007 56 1.7 Sensitivity to the Poverty Line in Urban and Rural Guangdong, 2007 57 1.8 Rural Income and Consumption Growth in Guangdong by Quintile, 2005–07 60 1.9 Comparison of Gini Indexes of Income Inequality, 2007 67 1.10 Trends in Rural-Urban Disparity: Guangdong and China 68 1.11 Lorenz Curves for Per Capita Rural and Urban Income, 2007 69 1.12 Regional Income Disparity in Guangdong and China, 1998–2007 69 1.13 Distribution of Regional Population and Economic Activities in Guangdong, 2007 70 1.14 Urban-Rural Distribution of Population and Economic Activities in Guangdong, 2007 71 1.15 Income Decomposition of Pooled Rural and Urban Households in Guangdong, 2007 72 1.16 Sources of Urban-Rural Income Disparity 73 1.17 County-Level Income Inequality Decomposition in Guangdong, 1998–2007 74 2.1 Regional Differences in Rural Dibao Coverage 87 2.2 Correlation between Dibao Standards and Economic Strength, Selected Counties 89 2.3 Distribution of Rural Dibao Recipients across Income Quintiles, 2007 91 2.4 Rural Dibao Expenditure in Guangdong in Comparison with Other Provinces 2007 94 2.5 Financing of Rural Dibao by the Provincial and Local Governments 96 3.1 Rural Household Income in Guangdong by Source, 2007 104 3.2 Income Inequalities and Share of Labor Income, 2007 105 3.3 Employment by Sector in Guangdong 107 xContents 3.4 Labor Allocation, 2005 and 2007 108 3.5 Regional Employment Structure, 2000 and 2005 116 3.6 Average Minimum Wage Standards in Guangdong and China 119 4.1 L/D Ratio of Financial Institutions in Urban and Rural Areas, 2007 132 4.2 L/D Ratio of Selected Financial Institutions, 2007 133 4.3 NPL Ratio of Financial Institutions, 2007 134 4.4 NPL Ratio of Five Largest Banks, ABC, and RCC, 2007 134 4.5 Rural Households with Access to Bank Loans, 2007 137 4.6 Rural Households with Access to Informal and Formal Channels, 2007 137 4.7 Small Businesses with Access to Banks Loans, 2007 138 4.8 Farming Households with Access to Savings Deposit Accounts, 2002 139 4.9 Farming Households with Access to Savings Deposit Accounts, PRD Area vs. Non-PRD Area, 2007 140 4.10 Average Holdings of PSB Banking Cards, 2006 140 4.11 Average Holdings of Deposit Accounts, 2006 141 4.12 Number of Bank Branches in Selected Countries 142 4.13 Number of Bank Branches in Selected Countries 142 4.14 Number of Bank Branches, 2007 143 4.15 Number of Bank Branches, 2007 143 4.16 Average Number of Banking Outlets Per Township, 2007 144 4.17 Average Number of Banking Outlets Per Administrative Village, 2007 144 4.18 Number of Bank Branches, PRD Area vs.