Millennium Post

To the power of ten million

During his government work report delivered earlier in the year, Chinese Premier Li Keqiang proposed to reduce by 10 million the number of Chinese citizens living below the official poverty line before the end of 2014, the first time the central government has imposed an annual target for poverty alleviation.

According to its own government’s statistics, China is home to nearly 100 million rural people living in poverty. Both the current administration and its predecessor have vowed to make a ‘moderately prosperous society’ by vastly reducing rural poverty by 2020.

To discuss Beijing’s strategy and whether or not it can be successfully implemented,NewsChina secured an exclusive interview with Liu Yongfu, director of the Leading Group Office on Poverty Alleviation and Development under the State Council.

NewsChina: Li Keqiang has vowed to lift 10 million people out of poverty this year. How can this goal be achieved?

Liu Yongfu:
Current poverty reduction mechanisms and related policies need to be improved. It is still a gnawing problem that some people who had managed to rise above the poverty line are being reduced to poverty once again by illness or accidents.

Chinese Vice Premier Wang Yang said during a meeting on poverty alleviation that there are three key tasks in 2014. The first is working hard to cut the impoverished population by 10 million. The second is the drafting of more favorable policies and granting fiscal support to areas performing well when it comes to poverty alleviation. [Wang’s] third criterion is improving performance assessment of [officials in] poor counties to curb malpractice and to ensure that areas recently lifted out of poverty continue to receive policy support.

The living standards of the poor have barely changed. A good harvest plus government relief can see households lifted out of poverty. But if there’s a bad harvest the following year, you’ll see backsliding. Other counties were plunged back into poverty by natural or man-made disasters.
Formerly impoverished counties that have established relatively stable prosperity should be de-listed. But the fact is that many resist, as being de-listed means losing access to preferential policies. These policies should only benefit those living in poverty. Funds need to get to where they are genuinely needed.

NC: What challenges does the government face in accomplishing its 2014 poverty reduction goal?
LY: China introduced a system for identifying under-developed counties and flagging them as key areas for poverty alleviation work in 1986. This list was updated three times; in 1994, 2001 and 2011. In 2011, 38 counties were de-listed, while 38 more were listed for the first time.

After new poverty alleviation standards were released, a succession of counties were able to successfully remove themselves from the government list. However, those that remained have proven difficult to tackle. The current economic downturn has affected poverty reduction targets by causing reductions in rural budgets, increasing rural employment pressures and depressing income growth.

I recently visited several provinces and was glad to find that many county Party chiefs have shifted their focus to poverty alleviation. In Laishui County, Hebei Province, the county head has pushed forward micro-credit programs worth 400 million yuan (US$64m) in total, which have boosted the local economy and incomes. I believe that difficulties will be overcome as long as favorable policies are in place.

NC: The central government has proposed to restructure poverty alleviation mechanisms. Can you give us any specific measures?

LY: A basic survey of local conditions has to be conducted first. Then, government officials are dispatched to the area in question to ensure that each village has a working team and that each impoverished household has been assigned a duty officer.

Policies targeting the management of relief funds will be improved, including project transparency, the competitive allocation of funds and government procurement of public services. We will reinforce supervision to remove loopholes, work to incentivize financial institutions to take part in the poverty alleviation through the introduction of more preferential policies in credit and loan applications as well as social insurance.

The government will also maximize the efficiency of targeted poverty alleviation to ensure that poor counties get matched up with wealthy ones in eastern areas under an aid ‘buddy system.’

NC: What will be the role of working groups stationed in poor villages?
LY: China is home to roughly 120,000 villages living below the poverty line. Every one of them will have a three-person work team, and each household will be assigned an official overseer. Work teams will include village officials with college degrees, local Party chiefs, technical staff, and poverty alleviation coordinators. It is vital all these people are competent and familiar with rural conditions- we’ve had past issues with officials who were unable to communicate with rural residents. The performance of these work teams will also be carefully monitored and evaluated.

In total, we’re looking at 400,000 individual officials directly engaged in poverty alleviation, a globally unprecedented mobilisation.

NC: What is your view of alleviating poverty through financial incentives?
LY: It is not easy for rural residents, let alone an impoverished household, to obtain a loan. Financial departments and banks at different levels are trying to work out a solution to this problem. Despite its limited rural presence, China Development Bank has done a good job of aiding local economic growth. Rural Credit Cooperatives, regional financial organisations that offer financial services to boost economic growth, have also played a significant role- issuing 80 per cent of the total loans to villagers.

However, these measures are still in their infancy. China’s national fund for poverty alleviation totals 40 billion yuan (USD 6.4bn), not a lot to split between 100 million Chinese people living in poverty.

The comprehensive poverty alleviation fund, including preferential policies on local communications, irrigation, education, and healthcare, has an amount of 400 billion yuan (USD 64bn), or 4,000 yuan (USD 644) per person, per year. Work done in Guangdong Province has showed that, on average, a person living below the poverty line needs an additional 20,000 yuan (US$3,220) per year to cross this line.

NC: Do you feel there is still room for big financial institutions to contribute to poverty alleviation?
LY: Absolutely! In the future, the government will cooperate with financial institutions to introduce more preferential policies targeting poor communities and individuals. We have already recommended that financial institutions grant 50,000 yuan (USD 8,050) loans with terms under five years to poor households according to the national benchmark interest rate. But there’s more to do.

Starting this year, the central government poverty alleviation office will create a new platform to ensure that loans are granted to poor villages and households. Central and provincial aid needs to be provided in the form of subsidies. Risk funds and micro-financial insurance should be set up and a credit rating system introduced for impoverished households, extending collateral-free loans to poor families to create jobs and boost incomes. However, hardship loans should only be granted to households approved by village, township and county authorities.

NC: You have said that the public nowadays plays a limited role in poverty alleviation. How can this situation be changed?
LY: It will take a long time. The wealthy are willing to take more responsibility, but currently we lack the platform to mobilise them. What’s more, private enterprises, social organisations and individuals are concerned about transparency and the misappropriation of charitable donations. Additionally, if an entrepreneur donates 100 million yuan (US$16m), they will be taxed on the full amount. Unless they’re receiving an award or some other form of recognition, their motivation will remain low.

The government should encourage and guide the public, but we need to put an end to ‘compulsory charity’ and the arbitrary solicitation of donations. This is step-by-step work and we can’t afford to be idealistic. In my view, simply raising awareness of the role of public social responsibility in poverty alleviation is far more valuable than simply compelling citizens to donate to charity. LINK TIMES
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