#### Poverty Monitoring in Rural China

######### Dr. XIAN Zude

######## Director General, Rural Survey Organization, National Bureau of Statistics, P.R. China

**1. Poverty Monitoring System for rural China**

As a part of the endeavor of poverty reduction of government, National
Bureau of Statistics (NBS) of China has paid a great attention on
poverty monitoring. Since the middle of 1980s, National Rural Household
Survey was used to capture the national poverty incidence. Some regional
poverty monitoring systems were set up to reflect poverty information
and to evaluate the impacts of some regional anti-poverty programs from
1994, A National Poverty Monitoring System was formally set up in 1997
to collect and disseminate information on the national poverty issue, to
evaluate the impacts of the poverty alleviation activities, and to
provide full picture of poverty and its change for policy-makers.

The poverty monitoring program was reformed in 2001 so as to reflect
multi-dimension poverty issues. The indicator system covers following
aspects:

1\) Household income and expenditure, and poverty incidence measured by
income and expenditure, such as poverty headcount rate, poverty gap rate
and weighted poverty gap rate;

2\) Food consumption and nutrition;

3\) Fixed assets and living facility;

4\) Education attainment of adults and schooling of children;

5\) Household capability of accessing market

6\) Income equality and gender disparity

7\) Social security

8\) Coverage, targeting of poverty reduction projects

Since 2000, NBS has published "Poverty monitoring report of rural China"
annually. The report provides a platform to disseminate poverty line,
population size of poor, poverty distribution, poverty characteristics
and factors. It also introduces the poverty reduction policies, programs
and other efforts of various government agency, international
organizations and NGOs.

The national poverty monitoring system of China collects poverty
information through three main data sources: **(1) Rural Household
Survey (RHS).** The data from RHS are used to estimate national poverty
line in term of income/expenditure and poverty distribution; **(2)
National Poverty Monitoring Survey (NPMS).** The data from NPMS are used
to compile estimation of multi-dimension poverty of 592 national poor
counties and to evaluate the impact of national poverty reduction
program; **(3) Special poverty monitoring surveys.**

**[Rural Household Survey (RHS)]{.underline}**

> RHS is an integrated social and economic survey and focuses on the
> income and expenditure of households. Data collected from the survey
> are used to estimate the national rural poverty line. They cover
> household characteristics (educational attainment, electricity,
> distance to public transportation), employment, seasonal labor
> migration, agricultural production, housing conditions, income (income
> by source, in-kind income), expenditure (including health and
> education expenditures), consumption (major food items) , ownership of
> durable goods and fixed assets, and access to social services.
> Community-based data such as the availability of roads, electricity,
> telephone, health facilities and schools are also collected.
>
> A random MPPS(Multi-subjects proportional possibility to size)
> sampling method is adopted in RHS. The sample frame is updated using
> the latest census results and according to the changes in household
> composition in the sample. A rotation sampling scheme is used with a
> 5-year rotation cycle. According to the above sample method, 68000
> households in 857 counties (about one third of the total number of
> counties of China) were selected from 31 provinces, autonomous region
> and municipal cities. The samples are the representative on national
> level as well as provincial level.

RHS collects the household\'s information through a way called \"dairy
book + visiting\". The sampled households record all the economic
activities such as production, purchasing, selling, consumption etc. in
a dairy book. Assistant enumerators are engaged in every selected
village to prompt the households to keep the dairy book, to help those
illiteracies to record, to check and sort up the dairy book
periodically. County interviewers often go to villages to supervise the
recording, to provide guidance or help, and to collect the dairy books
periodically. At the end of each calendar year, visiting interviews are
arranged for collecting community information as well as individual
information, plus some additional household information like fix assets.

After the records in dairy-books were coded, the data were inputted into
computer and checked in the county survey branch by using the data
processing programs developed by headquarter of Rural Survey
Organization (RSO) of NBS. County survey branches report the raw data
through network to provincial organization and then to headquarter in
Beijing. Headquarter in Beijing as well as each provincial organization
is engaged in data checking, aggregating, tabulation and analysis.

Data were collected and published annually as well as quarterly. Up to
now, only aggregated data are published. Part of micro-data is also
released for special research purpose. The main aggregated results could
be found in:

Statistical Year Book of China;

Rural Statistical Year Book of China;

Yearbook of Household Survey

Annual/quarterly Statistical analysis report;

Relevant research papers.

**[National Poverty Monitoring Survey (NPMS)]{.underline}**

NPMS was established in 1997. Its main aim is to get a deep
understanding of poverty distribution and its change of national poor
counties, to supply precise and reliable ground for making policies
concerning the alleviation of rural poverty, and to monitor the impacts
and the processes of the anti-poverty programs for the 592 national
poverty counties listed in the \"8-7 Plan\". Since 2001, NPMS has been
relocated to 592 key counties listed in new national poverty reduction
program.

NPMS uses a random, multi stage systematic sampling method. About 10
villages were selected from each poor county and 10 households were
selected from each selected village. Data collecting method of NPMS is
similar to the RHS. Compared with RHS, NPMS includes more indicators in
social aspects such as rural infrastructure and basic social service,
employment, children schooling, labor migration. NPMS collects the
information on personal, household level as well as community level.
Hence NPMS could measure the poverty not only the economic poverty but
the multi dimension poverty too. NPMS gives out more detailed picture of
poverty of national poor counties.

**[Special Poverty Monitoring Surveys]{.underline}**

> Beside the national poverty monitoring surveys, there are a series of
> regional poverty monitoring surveys for special poverty reduction
> projects. Three of the largest surveys relate to World Bank poverty
> reduction projects in China: South-West Poverty Monitoring Survey
> (SWPMS), Qinba Mountain Area Poverty Monitoring Survey (QBPMS), and
> Inner Mongolia and Gansu Poverty Monitoring Survey (IMGPMS). The
> surveys were carried out by Rural Survey Organization of NBS to
> collect statistics from the poorer areas with the support of the World
> Bank and in cooperation with the Leading Group of Poverty Reduction of
> the State Council in 1995, 1997 and 1999, respectively, and lasted for
> 6 years for each project. Detailed data as well as analyses on poverty
> head count rate, poverty gap, and poverty decomposition by location,
> education attainment, ethnic group, and household structure are
> disseminated through RSO's annual publication, *Poverty Monitoring
> Report*.

The survey has four components covering community, household, personal
and project activities. In the first component, the condition of social
service, such as education and health services, rural infrastructure and
population, is covered. In the second component, data are collected on
expenditure, income, nutrition, social security and housing conditions.
The third component includes questions regarding demographic
characteristics, employment and schooling of individuals of the
household. The last component covers information on access to credit
market and subsidies received by households. SWPMS, QMAPMS and IMGPMS
sample 35 counties in Guangxi, Guizhou and Yunnan provinces, 26 counties
is Sichuan, Shaanxi and Ningxia provinces and 15 counties in Inner
Mongolia and Gansu provinces. The survey methodology is similar to that
of the Rural Household Survey. Poverty lines are established for all
project areas using the same methodology as for the national rural
poverty line.

**2. Poverty Threshold**

Since 1986, National Bureau of Statistics of China estimated the poverty
line on the base of Rural Household Survey for the benchmark year such
as 1985 and 1990, 1994 and 1997 while consumer price index multiplied by
poverty line of previous year was used up to update the poverty line for
subsequent years.

NBS estimated the poverty line for 1997 following the method recommended
by World Bank:

a\. Selecting the minimum calorie level. 2100 calories per day per
person was selected as the minimum nutrition need suggested by
nutritionists.

b\. Setting up food bundle that can satisfy the minimum calorie level.
Data from Rural Household Survey was used to calculate the actual food
consumption structure and food quantities (food bundle) that maintain
the minimum nutrition of low-income population in poor area.

c\. Calculating the minimum food expenditure (food poverty line) with
the prices of low-income group from the survey.

d\. On the base of knowing food bundle and the food poverty line,
regression model was used to estimate the minimum non-food expenditure
of the households with income just reaching the food poverty line.

f\. Food poverty line pluses non-food poverty line equals to poverty
line.

From the method, it is clear that the poverty line is a kind of "low
poverty line". It was 640 RMB Yuan annual per capita net income for 1997
and was about 0.75 US\$ (using PPP exchange rate) per day per capita. It
was published by Chinese government officially so that government could
concentrate the limited resource on the poorest population.

For the poverty line only means basic food and cloth, the households
around the line are still weak. Hence Rural Survey Organization of NBS
set up a low-income line since 1998, based on the same food bundle for
determining poverty line. The unique difference is that the non-food
poverty line is estimated according to 60% food share. In 1998, the low
income line was 880 Yuan, Which was quite near to 1 dollar a day
according to the PPP exchange rate.

**P**overty line 1978-2003,rural China

+--------+---------------+---------+-----------------+---------------+
| Year   | Poverty line  | Year    | Poverty line    | Low income    |
|        |               |         |                 | line(RMBYuan) |
|        | (RMB Yuan)    |         | (RMB Yuan)      |               |
+--------+---------------+---------+-----------------+---------------+
| 1978   | 100           | 1998    | 635             | 880           |
|        |               |         |                 |               |
| 1985   | 206           | 1999    | 625             | 865           |
|        |               |         |                 |               |
| 1990   | 300           | 2000    | 625             | 865           |
|        |               |         |                 |               |
| 1994   | 450           | 2001    | 630             | 872           |
|        |               |         |                 |               |
| 1997   | 640           | 2002    | 627             | 869           |
|        |               |         |                 |               |
|        |               | 2003    | 637             | 882           |
+--------+---------------+---------+-----------------+---------------+

Supported by World Bank Country Statistical Capacity Building Program,
Rural Survey Organization of NBS currently tries to estimate the new
poverty line for China again. One cause is the consumption model of
low-income group changed a lot in past five years. Some expenditure on
primary education, basic health care, housing and durable commodities
were regarded as "basic needs" both by the household and government.
Another cause is that only the calories intake was considered when
setting up food bundle in 1997. The protein and other nutrition factors
in such kind of the food bundle were too low to maintain a healthy life.
The third cause is the unique poverty line could not satisfy the
implementation of poverty reduction for a large country with vase
regional and rural-urban economic gaps such as China.

Taking the above issue in consideration, Rural Survey Organization of
NBS use the household survey data 2002 to estimate the new poverty
line(s). The basic method is similar to that used in 1997, except for
following points.

1)  Sort all the surveyed households by household income. Use the 10-30%
    households from bottom as the low-income group.

2)  Set up food bundles for each region of China.

3)  Use a proportion of 75% calories from grain and the 2100 calories
    intake daily to control the quality and quantity of the food bundle.

4)  Use the actual food price from low-income group of the province to
    calculate the food poverty line for each province.

5)  Use the low poverty line from first round estimation as regional
    price scalar to adjust the income of household. Repeat the
    estimating for several rounds until the poverty lines from two
    rounds are close enough.

According to the results of current research, the average food poverty
line for rural China is 645 RMB Yuan, the average low poverty line is
835 RMB Yuan. The rate of population below the food poverty line is 3.2%
. The rate of population below the low poverty line is 8.5%.

**3. Policy Applications**

Poverty monitoring is closely related to poverty reduction policy-making
in China. Following are the main aspects.

**[Monitoring poverty alleviation progress]{.underline}**

Monitoring results show that the poor population dropped rapidly from
about 250 millions in 1978 to 125 millions in 1985, companied by the
high economic growth in rural areas due to the rural reform. The speed
of rural economy growth and the poverty alleviation slowed down after
1986 compared with the previous years. By the end of 1992, the poverty
population of rural China reduced to 80 millions and poverty headcount
rate was 8.8%. After the strong intervention of government, well known
as " eight-seven" poverty reduction program, the poverty headcount rate
dropped fast again. The poor population of rural China reduced
significantly to 32 millions, and the poverty head count rate was 3.5%
in 2000. Poverty monitoring results also showed it was more and more
difficult to reduce the size of left poor population. In 2003, the poor
population added 0.8 million in rural China due to the serious natural
disasters. The following figure shows the population size of poor and
the headcount rate of rural China from 1978-2003.

![](media/image1.png)

**[Providing poverty distribution for locating poverty reduction fund
and other resource.]{.underline}**

The poverty monitoring results of rural Chins are disseminated to
various government agencies, such as Leading Group Office of Poverty
Reduction, National Commission of Reform and Development, Ministry of
Finance etc. periodically at the beginning of each year. The results are
used to locating the government poverty reduction fund every year and to
determinate the name list of counties with priority in national poverty
reduction program. The poverty distribution also used as important
reference for locating poverty reduction projects by various agencies,
international organization and NGOs.

**[Analyzing poverty characteristics and poverty factors, and providing
suggestion for policy-making]{.underline}**

The analysis on characteristics and factors of poverty helps to forming
the poverty reduction policies. For example, it was found that the
overall economic growth gradually has less and less impact on poverty
alleviation in 1986. Chinese government began to intervention the
poverty alleviation through organizing a lot of large-scale anti-poverty
programs all over China from the middle 1980. At the beginning of 1990s,
it was found that the poor population was more and more concentrated to
remote area with inferior national condition. The backward rural
infrastructures of those areas are the main obstacle of development. In
order to accelerate the poverty alleviation and to attain the aim of
eliminating the poverty at the end of 20th century, Chinese government
launched the \"8-7 Plan\" in 1994 to guide the poverty reduction
activities. The main content of \"8-7 Plan\" is to reduce the poverty
through the tax favorite policy, financial support and social-economic
development program. For the convenience of implementing the \"8-7
Plan\", 592 poorest counties, selected from more than 2000 counties of
China based on the poverty monitoring results, were defined as
\'national poor counties\'. It was estimated that more than 70% of the
80 million poor concentrated in the 592 counties with very bad natural
environments and backward social-economic conditions in 1994.

In 2001, Chinese government started a new poverty alleviation effort to
erase extreme poverty and to help the low-income group to improve their
development capability. The new program plans to enhance the support in
592 poor county, which are re-selected from middle/western China.

**4. Poverty issues in new Century**

The poverty alleviation of rural China slowed down since 2000. According
to the monitoring results, the poverty head count rate of 2003 is 3.1%.
The poverty of rural China in new century has the following
characteristics:

a\. It is difficult for the current poor left under the extreme poverty
line to get out of poverty through overall development methods. The main
cause is that the households in extreme poverty mainly are those without
labor, disable, with serious illness of household member, illiterate,
and those surfer from disaster and inferior national conditions.

b\. The national disasters become the main cause of poverty. According
to the poverty monitoring survey, there are 55% households returning to
poverty due to the serious national disaster such as drought and flood.

c\. The rural infrastructures even in remote area are improved a lot in
past years, however a part of the households still are poor to access
the facilities.

As the results of long term effort of government, the rate of poor
village access to road, electricity, telephone net and TV signal are
similar to the non-poor village, however the rate of household using
electricity, access to safe drink water are much lower in poor than in
non poor.

d\. The social development lagged far behind the economy development.
The basic social service such as primary education and basic health care
are backward in poor area. The labor illiteracy rate of poor household
is 16.3%, 10 percentage points higher than non-poor. The enrolment rate
of children 7-12-years-old is 88.6% for poor households and 96.2% for
other households in poor counties.

e\. The income disparity enlarged to a level that may affect the social
stability. Since the year 2000, the income gap between rural and urban
is 1:3.2, which is larger than before the economic reform. The Gini
coefficient of rural residents is 0.368 in 2003 and the Gini-coefficient
of whole nation is over 0.4.

Based on the characteristics of poverty in new century, Chinese
government pays more attention on social development and household
capacity building in its poverty reduction endeavor. Poor area primary
education program is to enhance the support of central government on
primary education of poor area so as to improve the enrolment rate of
children and to eliminate the illiteracy of those areas. "grain for
green" projects aim to upgrade the environment of poor area. The social
security system of rural China aiming to help those without capability
to implementing poverty reduction project is under the way. Relative
policies and projects encouraging the migration would reduce the
population in inferior environment. The reform of rural credit market is
explored.