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China raises poverty level for rural poor

This week, the Chinese government has revised its definition of rural poverty which means an extra 100 million rural dwellers will now be classified as poor.

Previously, only those with an annual earning of less than 1196 yuan (188 dollars) fell beneath the official poverty line, equating to 26.9 million Chinese. Now, the set amount has nearly doubled, so that those earning less than 2,300 yuan (361 dollars) will be included. This brings the total number to 128 million rural poor, who will be entitled to a variety of state benefits.

The change has been welcomed by many, since it reflects the improving living standards of many Chinese after three decades of economic growth. The move also brings China’s poverty levels more in line with international standards. The new level set for rural poverty is close to the World Bank’s global definition, which is currently less than 1.25 dollars each day. However, comparisons are not exact. This is because the World Bank’s measure is based on ‘purchasing power’; it takes into account how much can be purchased with 1.25 dollars, given that poorer countries tend to have lower prices.

This welcome announcement by the Chinese government comes at a worrying time for many of its citizens. Based on recent surveys of purchasing managers, manufacturing activity is at its lowest since 2009. The success of the manufacturing sector in China has been instrumental in the country’s economic growth. But consumers in Western economies – China’s largest export markets are the USA and Europe - are buying less. In response, China has cut the amount which banks have to keep in reserve within the central bank, in the hope this will free up credit and lending. But ultimately, if the slowdown in demand from Western consumers continues, the pace of growth in China will fall.

As China becomes a middle income nation, consumer buying at home is on the rise, particularly among the younger generations. So the country’s own domestic market will play an increasing role in its economy. However, as one expert commented to the BBC, “unlike the Germans” (renowned for their careful spending), “we make so little of the things the Chinese want”.

For the very poorest of China’s citizens, concerns about the country’s future economic growth are a long way from their worries of daily survival. As well as the announcement about the rural poverty measure, a report in the China Daily adds that funding for poverty relief will be increased by more than 20% this year to 27 billion yuan (4.2 billion dollars). These changes should have a real impact on the lives of the poorest.

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