The term xiaokang, or “moderately prosperous” society has been used in various incarnations for at least two millennia in China to describe a well-off society. It re-entered modern political thought in 1979 when Deng Xiaoping launched his economic reforms. The goals were to quadruple the 1980 GDP and GDP per capita by the year 2000. China achieved both goals in 1995 and 1997, respectively, but there were still 130 million living in extreme poverty. In 2012, new goals were announced to double the 2010 GDP and GDP per capita by 2020. In 2015, President Xi Jinping announced that there would be zero citizens living in absolute poverty by 2020.
A Difference in Metrics
President Xi has confidence that the moderately prosperous society is achievable by the end of the year, despite the pandemic and the worst flooding in decades. Poverty, as defined by the national government, only refers to the rural areas. Cities set their own poverty lines, which are not measured by national standards. The current poverty line is 2,300 RMB (US$340) per year in constant 2010 prices, the equivalent to 6.30 RMB (US$0.94) per day. The international poverty line is 12.66 RMB (US$1.90) per day in constant 2010 prices. China’s national definition is not even half of the international standard. Both lines represent what each considers to be extreme poverty.
Surveying China’s Anti-Poverty Policies
The policies Xi Jinping has put into place to reduce rural poverty stem from his initial actions to increase urban populations and to eradicate urban poverty. In 2015, poverty was declared nearly-eradicated in China’s cities. This achievement was aided by a government subsidy that brought annual urban incomes to a minimum of 4,476 RMB (US$700 in 2015). Today, rural areas are receiving subsidies of their own designed to bring people out of extreme, absolute, poverty. These subsidies, unlike the urban ones, are focused on incentivizing job creation and improving living conditions within the poorest villages. However, the subsidies will eventually end when the village is removed from the poorest list.
Another key component of China’s anti-poverty effort is resettlement. The central government encourages its poorest rural citizens to move closer to urban areas, which has been a common theme in the government’s economic policies. However, there are a few challenges to this policy. First, the hukou system, which registers individuals by their place of origin, means rural hukou bearers could potentially work as migrant workers in their newly-adopted city, but discrimination prevents them from enjoying the same benefits afforded to urban residents.
Hukou discrimination, especially as China encourages resettlement to urban areas, presents a challenge to truly eliminating poverty. Urban areas are able to provide various benefits to the citizens that hold urban hukou, such as health insurance, government jobs, easier access to local public schools, and the ability to participate in local university exams. Migrant workers are unable to utilize these benefits like their urban counterparts. A rural hukou does not offer comparable benefits, but it does allow holders to own and use agricultural land. Changing one’s hukou is considered a messy and difficult bureaucratic process, limited by the quotas and policies of each urban area. Often, this means poor rural residents are not able to improve their socioeconomic status simply by moving to a city.
The Claim Could Be Made, but Does It Mean Anything?
By the end of 2020, China will likely claim that it has eradicated domestic absolute poverty. However, there are several issues with this claim: the elimination of absolute poverty does not consider income inequality, nor does it consider absolute poverty based on each urban area’s definition of the term.
In developed countries, the poverty line changes to ensure the poorest can obtain the assistance they need to survive. For example, the 2020 U.S. federal poverty level for a single person is $12,760 per year, or $34.96 per day. In the U.S., poverty is set at an income that is roughly 70% less than the total median. In absolute terms, there is no poverty by international standards, but by the United States’ own definition, 10.5% of the population lives below the poverty line.
China’s poverty level, by comparison, is set at 92% less than the median income across the country. When separating out by household registration (hukou system), the poverty level is 94% less than the median urban income, but only 84% below the median rural income in 2019. Based on China’s current definition, there were only 5 million people living in poverty before the COVID-19 pandemic, or .03% of the population. The number of people in poverty today is not yet known, but is expected to be higher than before the pandemic. The number of people living below the international standard today is not reported, making conclusions about the true number living in poverty by this definition difficult to ascertain.
Main Takeaway
The end of absolute poverty is not the end of poverty in a country and China is not likely to achieve its goal by the end of the year. Subsidies will eventually end as rural villages rise above the low poverty definition, leaving residents to worry if the villages can sustain economic growth. China’s hukou discrimination has caused a widening gap in income inequality between rural and urban residents that is exacerbated by relocation and will require further reforms to alleviate. The goal of a xiaokang society is admirable and achievable, but it will require government leadership at all levels to be realistic about the situation facing rural and urban citizens, and about the reforms needed to overcome systemic issues.
(Image Source: China Daily)
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Alex Schiller
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