Design and Improvement of Poverty Targeting in Rural China International Conference on Taking Action for the World ’ s Poor and Hungry People Xu Hui Department of Planning and Finance, China State Council Leading Group Office of Poverty Alleviation and Development October 17, 2007

Index 1. Poverty targeting and its evolution in rural China 2. Features of poverty standards in rural China 3. Challenges and institutional innovation

It ’ s proved by practice that the flexible and practicable poverty targeting policy adopted by Chinese Government should be an important component of Chinese experiences with rural poverty reduction. What the speech gives is a brief review of targeting policy in China, an analysis of challenges facing it, and recommendations for institutional innovation. Preface

1. Poverty targeting and its evolution 1. Define and expand the connotation of rural poverty Understanding and definition of poverty is the foundation for strategies, policies and measures to reduce poverty. Absolute poverty used to be the focus: the status of individuals and households with their income insufficient to sustain basic life. It was shifted to taking into account both absolute and relative poverty. Based on sufficient subsistence, further efforts were made to improve basic production and living conditions in poor areas, enhance living quality and capability of the poor, and reshape the social, economic and cultural situation in poor areas. Evolution of rural poverty definition in China is consistent with that of the international community.

1.2 Select and identify poverty standard for rural China 1981 ： Per capita income 50 RMB and 40 RMB 1984 ： Per capita income 120 RMB, self- produced grain 200 kg 1986 ： Per capita annual income 205 RMB in 1985, Poor rural population 125 million. Adjusted up to changes of CPI each year 2000 ， Low income standard appeared to be per capita income 625 RMB-865RMB that year 1. Poverty targeting and its evolution

1.3 Formulate and timely adjust poverty targeting policies in rural China 1. Changes of poverty in rural China: from region- based distribution to dispersed and clustered distribution 2. Changes of targeting （ 1 ） Fix the targeting scope subject to adjustments early 1980s ： 18 poor areas targeted In 1986, key poor counties for national support were first selected: counties with farmers ’ per capita annual income lower than 150 RMB and ethnic minority areas and old revolutionary basis areas with per capita annual income lower than 200 RMB in Poverty targeting and its evolution

1.3 Formulate and timely adjust poverty targeting policies in rural China In 1994, criteria for selecting key poor counties was changed: counties with per capita annual income lower than 400 RMB were covered, and those with the income over 700 RMB in 1992 graduated from the coverage. Consequently, 592 key counties came up to cover over 72% of rural poor in China （ 2 ） Regional targeting and community targeting combined Since the 1990s, a shift of focus has been taking place from regional growth to village-targeted efforts to reduce poverty. Information is collected throughout villages within the key poor counties, to produce records at all levels from households to townships and to counties, so that support, projects, service and benefits can be assured to reach household level. 1. Poverty targeting and its evolution

1.3 Formulate and timely adjust poverty targeting policies in rural China （ 3 ） Regional targeting, community targeting and individual targeting are combined to refine the targeting In 2001, poverty reduction in China entered a new stage, in which the government adjusted the composition of the 592 key poor counties, in light of the new fact that the poor swept villages nationwide despite its relative dominance in the mid and west. The key poor counties were mainly in the mid and west of China, but by 2003 the absolute poor covered by key poor counties was only 60.8% and low incomers was 55.3% of national total. Taking this into account, 148 thousand key poor villages were selected to cover 80% of national poor. 1. Poverty targeting and its evolution

1.3 Formulate and timely adjust poverty targeting policies in rural China （ 4 ） Center on human needs and sharpen the targeting It is clearly stipulated by Chinese Government that poverty reduction efforts in the Eleventh Five Year Plan for National Economic and Social Development should be centered on human needs with priorities of targeting the poor and implementing supportive polices. In 2005, information about poor households was collected cross-nation to identify poor villages and poor households. Measures including village-based development, training for labor transfer, and agricultural industrialization were ensured to reach households and individuals to really benefit the poor. 1. Poverty targeting and its evolution

2. Features of poverty targeting 2.1 Base on regional distribution of the poor Three levels of poor distribution in China: - Poor areas conglomerated cross administrative boundaries, with low overall growth and income - Poor counties, as basic administrative units, within certain standards and boundaries - Smaller poor areas within a county connecting townships and villages that have similar conditions and economic status The targeting measures fit the reality and particularities of poverty distribution in China

2.2 Highlight the targets for support Entering the new century, the accuracy of targeting is increasingly emphasized in the efforts to reduce poverty. （ 1 ） In light of the fact that the poor concentrate in rural areas, provincial governments are commissioned to selecting key poor villages for intensified support by criteria of per capita annual grain output, per capita annual income, housing, schooling, medical care, electric power, roads, safe drinking water, basic farmland and other production and living conditions. A total of 148 thousand villages have been targeted to cover 80% poor. 2. Features of poverty targeting

2.2 Highlight the targets for support （ 2 ） Qualitative and quantitative analyses are combined to evaluate and sequence the severity of poverty in key poor villages to plan for poverty reduction with the poorest as the priorities. （ 3 ） Participatory approach, like villagers ’ meetings and village representatives ’ meetings, is adopted to classify rural households before picking up the poor, bulleting them and making records for them. 2. Features of poverty targeting

3. Challenges and institutional innovation 3.1 Challenges Challenge 1: How to target more poor? Three questions need to be answered: poverty standard, units for poverty reduction and urban- rural integration - Poverty standards should be produced to reflex upon poor ’ s needs and national economic strength Standards too high: Overstretched targeting would squander limited resources Standards too low: Difficult to cover the needed poor - Due to increasingly complicated distribution of and diversified causes to poverty, it is more difficult to target poor areas and poor population. - Poverty standard and targeting differ between urban and rural areas. Poor migrant workers is a hard group to touch.

3.1 Challenges Challenge 2: How to tackle profound characteristics of poverty with targeting? - Vulnerability of the poor - Particularities with poverty targeting Development conditions of areas inhabited by the poor; living demands of the poor; economic activities of the poor - Dynamic targeting is required in order to follow the changes of poor communities and poor individuals, so as to raise the accuracy and efficiency of resources delivery to reduce poverty. 3. Challenges and institutional innovation

3.2 Institutional innovation Facing the challenges, innovation and enhancement of five targeting approaches should be the key. （ 1 ） Dynamic targeting On the basis of sound assessments over those out of poverty, a mechanism of inclusion and exclusion of the targets should be put in place by intervals of 3-5 years, so that the villages and individuals with sufficient subsistence can graduate leaving room for those who are eligible but was previously omitted. This may help increase the efficiency of dynamic delivery of poverty reduction funds to maximize the effects of the resources. 3. Challenges and institutional innovation

3.2 Institutional innovation （ 2 ） Targeting for different groups First, by combining cross-nation uniform criteria and region-specific criteria for targeting, the poor can be spotted more accurately and objectively, to prevent overstretch of the coverage or overlook of the poor. Second, by dividing poor villages into different types and conducting strategic studies on how to help the poor villages, the anti-poverty strategy can be more targeted and more effective. 3. Challenges and institutional innovation

3.2 Institutional innovation （ 3 ） Massive participation The capability of the poor communities, groups and individuals to adapt to market economy and of self-management and self-development can be built when they are engaged in the system of poverty reduction delivery. （ 4 ） Participatory monitoring A new participatory monitoring system should be established to involve the roles of poor households, in which the households monitor the effects, implementation and results of poverty reduction policies. 3. Challenges and institutional innovation

3.2 Institutional innovation （ 5 ） Delivery of poverty reduction resources First, minimize the number of government players in the process of resources delivery. Financial resources should be transmitted by region and by project. Second, stream down levels of delivery. Current top-down approach of delivery should be abandoned to remove middle levels, for central finance to reach the targets directly, so as to lower costs and raise efficiency of the delivery. Third, explore the roles of NGOs to play in the delivery to change the current structure where government is the only transmitter. 3. Challenges and institutional innovation

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