China has made remarkable progress in its war against poverty since the
launching of economic reform in the late 1970s. This paper examines some of the
major driving forces of poverty reduction in China. Based on time series and
cross-sectional provincial data, the determinants of rural poverty incidence are
estimated. The results show that economic growth is an essential and necessary
condition for nationwide poverty reduction. It is not, however, a sufficient condition.
While economic growth played a dominant role in reducing poverty through the
mid-1990s, its impacts has diminished since that time. Beyond general economic
growth, growth in specific sectors of the economy is also found to reduce poverty. For
example, the growth the agricultural sector and other pro-rural (vs urban-biased)
development efforts can also have significant impacts on rural poverty.
Notwithstanding the record of the past, our paper is consistent with the idea that
poverty reduction in the future will need to rely on more than broad-based growth and
instead be dependent on pro-poor policy interventions (such as national poverty
alleviation programs) that can be targeted at the poor, trying to directly help the poor
to increase their human capital and incomes.