MercoPress. South Atlantic News Agency

World Bank: China's 10% poorest situation has worsened

China must concentrate on social security and welfare programs now that it has advanced in achieving a reduction in poverty, said the World Bank Friday.

However "income shock" such as failing crops, health problems and injury were the main cause of a decline in the incomes of the poorest 10% of China's 1.3 billion people from 2001 to 2003, points out the WB.

Economists from the bank revealed last week that the incomes of more than 100 million Chinese had fallen by 2.4% during a period when China's economy was growing at an average of about 10% annually.

"China's impressive growth has been an important driver of poverty reduction, but it is true that not everybody has equally benefited from this growth," David Dollar, the World Bank's China director, told reporters.

"It is becoming clear that the nature of poverty in China is changing as the poverty rate declines," Dollar said.

"You can go just 100 kilometres from Beijing to villages where there is not a large number of poor, but almost every village will have a few people living in poverty.

"This means that growth and developmental policies still remain important for poverty alleviation, but in addition the policies emphasized by the current government, which target individual vulnerability such as health insurance and 'dibao' (basic social security), gain in importance" he said.

In a report on its preliminary analysis of poverty in China, the bank said the number of poor declined from 16% to 10% from 2001 to 2004.

"Between 1990 and 2002, the latest year for which global poverty numbers are available, China reduced poverty by 195 million people according to the 1 dollar per day consumption standard". But income inequality rose between urban and rural areas, as well as within all areas of China.

The bank saw the rising income inequality as "in part the result of desirable developments" such as greater incentives created by economic reforms and skill-based wages paid "according to market principles".

It found "considerable movement in and out of poverty" from 2001 to 2004. About 70% of those on the lowest incomes were "temporarily poor because an income shock, such as layoff, injury, ill health, or crop failure had pushed them into poverty".

"The preliminary policy implications are that overall growth continues to provide a good environment for improving lives of the poor" said the WB.

"However, the findings suggest that, as in other countries, there are poor people in China who will not escape poverty by growth alone".

Dollar said better health care and social security systems would also make families "more confident about increasing their consumption" and help to shift China's growth towards domestic markets.

Last month, the World Bank forecast a "modest slowdown" in China's economic growth to 9.6% in 2007 and urged Beijing to promote domestic consumption, limit investment and curb its rising trade surplus.

"We are concerned about some of the global imbalances" Dollar said, adding that China's exports had increased by an average of 29% annually since it joined the World Trade Organisation in 2001.