This paper investigates the recent trends in poverty and income distribution since the 1990,
distinguishing between the pre-crisis and the after- crisis periods. To contributing to the recent
debate, we also attempt to decompose poverty reduction into two parts, one attributable to
growth and the other attributable to inequality. Then we investigate the issue of how much
the poor benefit from growth.
We found that despite past progress, both internal and external factors have led to a
slowdown in China's export and economic growth between 1997-1999, which in turn might
have adversely affected the poor: There was a slight increase in the poverty headcount
between 1997-99 using lower poverty lines, and a worsening of poverty gap index. The real
average per capita consumption declined for farmers, especially for those living in the poor
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regions such as Gansu, Heilongjiang, Shanxi, and Xinjiang. However, it remains unclear to
what degree this decline was due to financial crises in Asia.
Second, during the period from 1990 to 1999, there was a significant worsening of
both rural and urban income distributions. During the Asian crisis however, it has remained
relatively stable.
Third, after decomposing the poverty reduction into two parts, we found that
economic growth contributed significantly to poverty reduction, while a rising inequality has
increased poverty, except for one period. Moreover, the poor benefited much less than the
rich fromr, the economic growth, and it was only the top 20 percent of the population whose
income growth had reached or exceeded the average growth rate.
Finally, we examine the relationship between human capital, growth and poverty. Our
preliminary results show that the accumulation of human capital had slowed during the reform
period and contributed less to economic growth than that for pre-reform period. There is a
huge regional disparity in human capital stock across province, and the distribution of
education is beco;-.-cdig increa6ilugly skewea. .- is a milatter of concem as human capital is
the poor's main asset, and education is positively and significantly related to growth and
poverty reduction. This issue should be addressed if China is to succeed in its efforts to attack
poverty and inequality.