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China: Reducing Inequality for Shared Growth

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Reducing Inequality for Shared Growth in Guangdong Province

Reducing Inequality for Shared Growth in Guangdong Province


Overview

Guangdong Province is a powerhouse of economic growth in China, but like other provinces, it faces majorchallenges in tackling inequality. The provincial government has recognized the urgent need to address rising disparities through new poverty reduction approaches. Jointly initiated by the World Bank President Robert B. Zoellick and Guangdong Party Secretary Wang Yang, the Bank conducted a study in 2008-09 to examine inequality issues and develop options for strategic policy interventions. The analytic and advisory activity (AAA)policy note informed the development of Guangdong provincial policy, which took into consideration recommendations made by the study, namely equality of compulsory education, basic medical services, employment and training, and rural finance services.


Challenge

Despite impressive economic growth and poverty reduction in the last three decades,Guangdong still faces the issues of poverty and inequality. Absolute poverty remains a threat to the poor, especially in rural areas. Rural-urban inequality and disparities between and within regions have widened, reaching alarming levels. Inequality in opportunity (access to such things as education and health services) is widespread and feeds into inequality in income and wealth.


Using the US$2 per day poverty line, 10.3 percent of the rural population in Guangdong lived in income poverty and 18.6 percent in consumption poverty in 2007. There is inequality in opportunity in the utilization and quality of basic public services, such as education, training and health care, with significant gaps remaining between rural and urban areas and among different income groups. The Gini coefficient of per capita income for Guangdong stood at 0.394 in 2007, lower than the national level for China, but higher than many other developing countries such as India, Indonesia and Vietnam.


Approach

The study was designed to address policy and knowledge gaps and inform the province’s overall strategy for fostering more pro-poor, equitable growth. In-depth empirical analysis profiled poverty and inequality in the province by using both household surveys and administrative data. Attention was focused on key areas including industrial upgrades, dibao programs (minimum living allowance), basic education, health care, skills development, labor market, rural finance, and land reform.


The study concluded by recommending a three-pillar strategy: (1) eliminating absolute poverty by strengthening the social safety net; (2) reducing inequality in opportunities by ensuring level playing fields in market institutions, and by investing in people through more equitable service provision; and (3) containing inequality in income and wealth.

Results

The study was completed in June 2009 and widely disseminated in Guangdong, generating substantial interest. The impacts of the study are reflected in the following:

  • The analysis substantially deepened the understanding of poverty and inequality in Guangdong. For example, the findings highlighted the acute inequality within the Pearl River Delta region, whereas government attention had been focused primarily on inter-regional disparity. This finding has implications for policy design and resource allocation.
  • The AAA informed the development of a provincial policy document titled The Outline of Equalization of Basic Public Services in Guangdong (2009-2020). This document took into consideration recommendationsmade in several components of the AAA, namely equality of compulsory education, basic medical services, employment and training, and rural finance services.
  • The three-pillar strategy recommended by the study helped the government to integrate and prioritize their interventions. A policy document adopted in 2009 outlined the government’s approach to reducing disparities through equalization of basic public services. This strategy was highly consistent with the report’s recommendations.
  • The study led to experimentation in new approaches. The Bank assisted the provincial statistical bureau to improve their survey instrument and initiated poverty and inequality monitoring. The provincial civil affairs department has been experimenting with more rigorous approaches to poverty targeting. A Bank-financed lending project is also being prepared to support the integration of urban and rural social security programs.

Voices


Guangdong is at a critical juncture in its transition to a trajectory of scientific development. The study provides significant guidance and inspiration for our efforts to reduce urban-rural disparities. Many comments and suggestions in the report are very pertinent and insightful.

— Wang Yang, Party Secretary of Guangdong Province


Bank Contribution

The analytical and advisory policy note on reducing inequality for shared growth in Guangdong provided the analytical foundation for the parent project of US$328,000 in 2008.


Partners

Under the leadership and guidance of the Guangdong provincial authority, several local research teams worked closely with the Bank team. The Policy Research Office of the Guandong Provincial Party Committee and the Provincial Finance Bureau played key roles in ensuring essential support throughout the process.


Toward the Future

A grant of US$350,000 was obtained from the Trust Fund for Bank-Korea Partnership on Poverty Reduction and Socio-Economic Development to strengthen poverty and inequality monitoring in Guangdong, improve targeting of the rural dibao program, and facilitate pro-poor industrial development. A lending operation proposed by Guangdong Province with the objective to develop an integrated social protection system and promote skills development has been endorsed by the national authority.


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