Poverty and inequality has long been a feature of Chinese society (Li, 2003; Khan, et al., 2002). The long period of economic growth in China after reform has helped many people become richer. With an average annual GDP growth rate of 9.7 per cent since 1980, China “has had the largest and fastest poverty reduction in history” (World Bank 2008: 22). China has been the most rapidly growing economy in the world over the past 25 years. This growth has led to an extraordinary increase in real living standards and to an unprecedented decline in poverty. The World Bank estimates that the poverty rate in China fell from 64 per cent in 1981 to 7 per cent in 2007 using a “cost of basic needs” poverty line (World Bank 2008). A series of research studies in the late 1990s, however, unveiled a disturbing fact that alongside the ‘new rich’, there are people suffering from absolute poverty including urban marginalized groups, such as the long term unemployed (or laid-off workers) and low income households, rural-urban migrant workers, and farmers living in remote rural areas. The economic and social conditions of the poor contrasts sharply with the conditions of the booming middle class.
China's reform and opening up are always seen as a strong driving force for social and economic development and the country now faces new opportunities and challenges. Over the last thirty years, China has made notable and important progress in the reform of some crucial sectors, such as improving economic structure and the environment for private businesses, and promoting the reforms related to fiscal, taxation and financial systems (Tang & Ren 2003). However, it is never to be over looked that there are also downsides and negative outcomes result from this rapid progress since the great reform in China. For example extreme poverty, extreme polarization and social inequality, fragmentary social welfare system, serious natural resource scarcity and environmental degradation etc. At this point, Chinese government unavoidably comes to a central policy dilemma. Without sufficient financial resources, the state will not be able to handle social problems yet without dealing with the social problems, economic growth cannot be sustained. In this essay, I will briefly review the main elements of China’s economic reform and its impact on per capita income and the poverty level. I will also examine some forms of inequality in China and suggest that there need to be efforts to get the government out of the dilemma.
China’s economic reform and poverty
Poverty may mean different things to different people. Openheim and Harker (1996) state that “Poverty means going short materially, socially and emotionally. It means spending less on food, on heating and on clothing than someone on an average income.” There isn’t an official definition for poverty but it is suggested that if an income is half of the national average then it indicates poverty. (BBC Scotland.) The World Bank Organisation says that poverty is mostly based on incomes and writes that “A person is considered poor if his or her income falls below some minimum level necessary to meet basic needs.” The minimum level that is referred to in this quote is commonly known as ‘the poverty line’ and varies is different parts of the country.
Poverty usually refers to three different types of poverty; absolute poverty, relative poverty and social exclusion. Absolute poverty is defined as a lack of sufficient resources with which to provide necessary needs for an individual. Relative poverty regards income in relation with the average. Relative poverty is concerned with an absence of materials that may be needed in daily life. Social exclusion is described as a label for what can happen when an individual or area suffers from multiple issues including unemployment, poor housing and low incomes. Often people who are living on benefits such as housing benefit and council tax benefit are...
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