ADB-Principles and Philosophy Underlying County Poverty Alleviation Planning-China Case Study

8/3/2019 ADB-Principles and Philosophy Underlying County Poverty Alleviation Planning-China Case Study

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by Asian Development Bank ( ADB, 2001)

Principles and Philosophy Underlying County Poverty Alleviation Planning (CPAP)

ADB/TA3610-PRC: Preparing a Methodology for Development Planning in Poverty Alleviationunder the New Poverty Strategy of PRC/Final Report/November.2001

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Principles and philosophy underlying County

Poverty Alleviation Planning (CPAP)

1.1 Introduction

38 No country in recorded history of recent economic development has achieved as

much in reducing rural poverty than China (Wang 2001, World Bank 2001, 1992; LGOP,

UNDP and World Bank 2000, and UNDP and ILO 2000). Against an official rural poverty

line of $USA0.66 per person per day, the incidence of poverty in China is estimated to have

declined from more than 300 million people in 1978 to 120 million in 1988, and 42 million in

1998 (LGOP, UNDP and World Bank 2000). Even against the World Banks more stringent

poverty line of $USA1 per person per day, the number of rural poor is estimated to havebeen 287 million in 1991, falling to 106 million in 1998 (World Bank 2001b). In 2001 the

State Council announced a new national poverty reduction strategy, based on village

poverty reduction, which revised the 8-7 Poverty Alleviation Program introduced in 1994

(People Daily, 2001) This policy initiative reflects the determination of the State Council to

continue Chinas good record in poverty reduction and reverse what is widely recognized

as evidence that rural poverty reduction has stalled, if not reversed, since at least the mid

1990s (World Bank 2001b). The new national poverty reduction strategy, based on county

led village poverty reduction, referred to here as County Poverty Alleviation Planning

(CPAP), has set a goal for the abolition of rural poverty for all 30 million poor in Chinas key

working counties (KWCs) over the next decade. (People Daily, 2001)

39 This report is a collaborative contribution to the reassessment by China of its

national poverty alleviation strategy. It responds to concern in China and elsewhere that

extant poverty alleviation policy, which has served China well for more than two decades, is

in need of revision to stem the leakage of poverty resources and tighten national focus on

reduction of hard core poverty. In May 2001, the State Council convened a national

consultation on poverty in China, coordinated by the Leading Group Office of Poverty

Alleviation and Development (LGOP), the State Council's premier body for formulation and

implementation of national poverty intervention strategies. The result of this meeting was adecision to address hard core poverty by directly targeting poverty at its source, in village

China. This paper is a contribution, at the invitation of the LGOP working in collaboration

with the Asian Development Bank (ADB), to the thinking that is on-going concerning the

methodological implications of this important policy decision.

1.2 Institutional Change, Governance and Important Poverty Policies

40 Poverty policies in China have encompassed four major strategies between 1950

and 1980.

1


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41 The firststrategy, implemented in the 1950s, involved a land reform program that

enabled poor farmers to gain access to land, which was further strengthened through later

initiated rural collectivization movement albeit only within the framework of state farms and

rural production brigades.

42 The secondstrategy focused on the modernization of Chinas economy through

the industrialization of manufacturing and rural production, a primary outcome of which

was a significant shift in employment from the rural sector to the urban after the end of

1970s.

43 The thirdstrategy, first adopted in the 1960s, was a national welfare program

called the Five Guarantees for Households in Extreme Poverty in both rural and urban

areas (Shi Youjing 1999). The five guarantees program, administered by the Ministry of

Civil Affairs, has been especially important to the aged and the disabled, as well as those in

rural households subject to chronic food insecurity for all or part of the year. Nonetheless,financial constraints meant that this welfare program was always limited in its outreach,

with not more than one percent of the rural population and less than one percent of the

urban population covered.

44 The fourth strategy utilized central government subsidies for poor region

development, to support provincial programs in education, healthcare and related human

resource development expenditures, plus infrastructure development. The latter typically

dwarfed the former my a factor of ten. Central government support of this sort was

managed by the State Development Planning Commission (SDPC), using top-down

planning methods reflecting political priorities and resource availability rather than locally

defined needs or opportunities.

45 Prior to 1980, these four strategies constituted national poverty policy, but there is

no sense in which these four independent strategies amounted to a well integrated and

systematic approach to planning, monitoring and evaluation of national poverty reduction

policies.

46 Significant national poverty policy reform in China had to await, rural sector

reform, which was launched in earnest towards the end of the 1970s as part of Chinas boldsteps into the international networks of world trade and economic modernization through

joint ventures with foreign partners (Lardy 1992, Watson 1994, Findlay 1995, and Sun and

Parikh 1999). Adoption of the individual responsibility system, to replace wholesale control

of rural production decisions dictated from above through production brigade hierarchies,

brought about a remarkable change in the productivity of rural household production and

sustained increases in average rural household income (Longworth 1989).

47 In step with the shift in favour of market driven rural production decision making

under the household responsibility system, the GoC also established a central body called


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the Leading Group for Three West Area Reconstruction, which was affiliated to the SDPC

under the leadership of the State Council, and which has evolved into the Leading Group

for Poverty Alleviation and Development (LGOP). In 1982, the State Council launched the

Three West Area Construction Program, under which program a large-scale land

reclamation, irrigation and resettlement program was adopted for the resettlement of

700,000 people into reclaimed irrigated areas. The program involved an annual

commitment of 200 million, 1983 to 1993 (Li Zhou 2001, Lin Zhibin 2002). This

resettlement program was based on official belief that poverty in the western areas

targeted is the result of natural conditions that can not support peoples livelihood above

the poverty level without resettlement. No attempt was made to confirm or test these

assumptions against local peoples perceptions of the reasons for their poor livelihood and

assistance needs (Lin Zhibin 2002). Planning for the Three West Area Construction

Program was carried out based on top-down methods, including externally sourced

technical assistance, which addressed irrigation as the single most important constraint to

improved rural production, the complex of community knowledge of their environment,social and cultural issues notwithstanding. Nonetheless, official attitudes reflected the

growing belief that the beneficiaries of such schemes should contribute to the cost of their

resettlement.

48 In the past two decades, user pays philosophies of development have become

increasingly popular in development planning in China. However, it took time for the public

sector to realize that the implementation of user pays strategies also increases the level of

attention that must be given to targeting and the distribution of the benefits of development

investments. Hindsight has shown that rural households that are either not poor or not

among the poorest households have an advantage in garnering the benefits of top-down

poverty reduction development planning. The least poor rural households are better

prepared to benefit from resettlement schemes, and more likely to resettle successfully

than their poorer neighbors. User pays provisions based on household contributions to

matching fund programs exclude the poorest from participating, with the result that the poor

continued to lack access to irrigated areas, resettlement schemes notwithstanding.

Meanwhile, benefits from these schemes also proved increasingly unsustainable as

conflicts over natural resource use, particularly access to water, water pricing, and

secondary salination in the reclaimed area were not carefully examined. Government

officials tended to rely on feedback and advice from the better-off households with theresult that resettlement programs were increasingly divorced from their original target of

helping the poor to achieve sustainably improved livelihoods.

49 In addition to resettlement schemes, in 1983 the Government of China

announced its decision, to help poor areas change their backward situation into

prosperity(Shi Youjing 1999). This decision reflected the seriousness with which the

central party committee of the Communist Party of China regarded the challenge of rural

poverty. Assistance came in the form of a majorWork for Foodprogram, under which 2.7

billion per year of food would be distributed to poor people in exchange for work to upgrade


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rural infrastructure. The program, which distributed in excess of 3 billion of food in 2000,

is managed by the SDPC and has a reputation for effective poverty targeting in the 10

designated poor provinces and regions in which it has been implemented. (Zhu Lin 1996)

Nonetheless, the program has suffered because implementation is planned according to

the availability of funds rather than needs. The Work for Foodprogram has not responded

to a systematic planning process informed by local peoples participation in planning and

needs assessment. But, the program did represent methodological progress, for it

employed a multi-agency approach that allowed related agencies at county level to

contribute under the coordination of the planning commission. The multi agency strategy

not only made it possible to address poverty as a multi-issue challenge, but it also

precipitated debate on matters of governance (Li Zhou, 2001, Watson 1994)

50 Chinas formal national poverty alleviation program was officially started with the

establishment in 1986 of the Leading Group Office for Poverty Alleviation and Economic

Development in Backward Areas (LGOP). This group, which came to be known simply asthe Leading Group, brought together the heads of the main in-line ministries and agencies

that were perceived by the State Council as key policy making and implementation

stakeholders whose cooperation is essential for a national approach to poverty reduction.

51 At its first meeting, the LGOP defined absolute poverty in China as resting on

four criteria: (i). annual per capita income of USD 53 (in 1985 prices); (ii). food deficit for at

least 3 months a year; (iii). lack of access to drinking water at less than 2 km horizontal or

100m vertical distance from the home; and (iv). lack of irrigation water for at least 6

months of the year. Great gains were made in poverty reduction under this system. The

incidence of poverty across China is estimated to have fallen by 210 million persons

between 1980 and 2000. At its first meeting the LGOP also identified Chinas national

poverty goal as meeting the basic needs of all the poor by 1990. Thereafter, poverty

eradication would be a priority in Chinas western provinces, in the old revolutionary

provinces of central and southern China, and provinces where minority populations

represent a significant proportion of poor households (LGOP, 2000).

52 By the start of the 1990s, the LGOP had refined these broad priorities to highlight

central government support for the development of local economies through the promotion

of small and medium enterprises utilizing local resources. This shift heralded a decade ofpublic sector subsidies for the formation oftownship and village enterprises (TVEs), which

were meant to create off-farm employment opportunities for the rural poor. It also meant

the provision of central government funding for local infrastructure development,

particularly road construction, communications and water storage and reticulation systems.

Chinas commitments to resettlement of rural people into newly developed irrigation areas

and infrastructure development through Work for Foodwere incorporated into the LGOPs

mandate. Gradually each province established its own equivalent to the LGOP, which

resulted in the formation of a nationwide network of provincial and county based Poverty

Alleviation Offices (PAOs) for organizing and implementing the LGOP program. Funding


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was secured through the central budget with a formal allocation specified in the national

Five-Year-Plan. This procedure legislated the poverty alleviation program national wide.

53 Chinas national poverty program received funding in both grant and loan forms,

which throughout the 1990s were allocated to each province according to proposals

received from each province. These proposals were meant to reflect the magnitude of the

poverty reduction target set within the provincial development plan by the Provincial

Planning Commission in consultation with the LGOP and the local PAO. Meanwhile all

ministries were directed by the central government to take responsibilities for poverty

alleviation, with the result that each ministry set up its own internal office for poverty

alleviation, funded from the ministrys own resources. By the start of the 1990s, therefore,

China had a poverty alleviation program that was networked through the LGOP and local

PAOs, but with individual ministries free to develop and implement their own poverty

alleviation activities, to be actioned through their own in-line staff at the local level.

54 Almost all ministries developed programs that were pro-economic growth,

supportive of TVEs, and committed to infrastructure improvement, following the LGOP

model. However, under this strategy, the linkage between different ministries and the

LGOP was very weak. Linkages among the ministries were even weaker. The annual

State Council-LGOP meeting on poverty was the only real chance for the exchange of

experiences. The programs favoured by individual ministries were not designed for group

targeting, but mainly for geographic or area targeting. Consequently, explicit monitoring of

the impacts of ministry programs on the livelihoods and welfare of poor households was not

easy to achieve. It did not help that projects within ministry programs were mainly

designed by officials and experts, with very weak or no participation by poor households in

the programming process. Impact monitoring was almost non-existent, with the result that

the leakage of poverty funds to non-poor households or groups in rural China increased

(IFAD and WFP 1999, LGOP, UNDP and World Bank 2000, Benyon et al. 2001 and World

Bank 2001b).

55 In 1994, the government released its new anti-poverty strategy called the 8-7

Poverty Alleviation Plan. This plan sought to address some of these shortcomings, in the

hope that more explicit poverty targeting, both in terms of area and population, would

maintain the rate at which the incidence of poverty had been reduced through the 1980s.The 8-7 plan identified 592 poor counties as primary targets of the national poverty

alleviation program, and 80 million poor as the number of people by which the incidence of

poverty would be reduced by 2001. Further, the 8-7 plan introduced innovations in

program integration, with shifts in policy and governance decreed to raise the priority given

to education, health and cultural aspects of development. At household level, a small-scale

loan program was introduced for the first time, funded via policy loans distributed and

administered through the Agricultural Bank of China (ABC). The LGOP was responsible

for all aspects of poverty reduction planning under the 8-7 program, while the State

Statistics Bureau was made responsible for impact monitoring (LGOP, 2000).


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56 The 8-7 Program was an important advanced in national poverty policy in China.

However, it did not stem the leakage of poverty resources to the non-poor, and it did not

provide a mechanism by which the benefits of economic growth could be biased in

favour of the poor. The 8-7 plan lacked pro-poor targeting procedures. The participation of

poor households in project design was not encouraged. Gender issues were not given any

great prominence, and attention to sustainability was followed more in rhetoric than in

reality. Poverty reduction planning was almost entirely top down. The result was a national

poverty program that by-passed the poor and exhibited signs of stalling. Key poverty

reduction trends were no longer on the improve. In the latter years of the 1990s, gross

domestic product (GDP) increased at twice the pace of household income. In the rural

sector, this outcome was reflected in the fact that while agricultures contribution to GDP

declined from 23% in 1985 to 12% in 1998, 70% of the rural labor force still found its

primary employment in agriculture. Over the same period, rural off-farm employment grew

by less than 5 percent, yet the numbers employed in agriculture fell by 10 percent. Rural

unemployment increased, as did the pressure/incentive for rural people to migrate to urbanareas in search of work and a better livelihood. In its recent report on poverty in China, the

World Bank and UNDP attribute the failure of poverty trends to keep improving to three

main factors: (i) ineffective poverty targeting, reflected in a rising proportion of poverty

resources that never reach the poor, in part because of poor poverty intervention decisions

associated with failed investments in TVEs using LGOP sourced poverty funds; (ii)

perverse fiscal policies that have lead to taxation systems in which the poorest 20% of rural

households are paying 50% of taxes collected in rural areas; and (iii) increasing income

inequality, which deteriorated by 23% in rural China during 1988-95 (World Bank 2001b,

and LGOP, UNDP and World Bank 2000).

57 In May 2001, the State Council convened a national poverty alleviation meeting in

Beijing, coordinated by the LGOP as the newly authorized public sector agency

responsible for national poverty reduction strategy formulation, policy design and

implementation. At this meeting the State Council endorsed a new national poverty

reduction strategy to address the problem of hard core poverty and the leakage of national

poverty resources to the non-poor. The new policy shifted the geographical focus of

poverty policy in two important ways. (i) Future poverty policy would be directed at the

geographic source of poverty in rural China, poor villages; and (ii) national policy would

concentrate on village poverty in the poorest regions in China, which are heavilyconcentrated in Chinas western provinces, the old revolutionary bases in provinces which

had harbored the industrial heart of the Maoist revolution following the long march of the

1940s, sensitive border areas that suffer poorly developed infrastructure, and areas with

significant minority populations. Within these priority areas, the national list of poor

counties would be replaced by a list of Kew Working Poor Counties (KWCs). County

authorities would assume responsibility, previously delegated to provincial agencies, for

ensuring that poor villages are integrated into and national poverty planning processes.

58 Since the May 2001 national poverty meeting, Chinas 592 nationally designated


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poor counties, of which 38 counties were located in eastern and central provinces, have

been replaced in the national poverty reduction program by 592 KWCs, now almost all of

which are in western provinces. Only KWCs are eligible to access national poverty

reduction funds, though the Government of China has directed that counties not included in

the list of KWCs, Tibet excepted, must develop and fund their own poverty reduction

programs. Tibet has been given special treatment as a strategic autonomous region,

which continues to be eligible to access national poverty funding even though counties in

Tibet are not included in the list of KWCs. Although CPAP has been developed with KWCs

in mind, it does not follow that the community based participatory poverty reduction

planning methodology developed for KWCs is inappropriate for other counties, those not

included in the list of KWCs, which have significant numbers of poor households.

59 Associated with the announcement of VPR as the core of Chinas new national

poverty reduction strategy are a number of important changes to governance of poverty

policy formulation and implementation. The most prominent change is theinstitutionalization of the LGOP as Chinas premier independent agency responsible for all

aspects of national poverty reduction planning, policy development and implementation.

Previously the LGOP had been imbedded in the Ministry of Agriculture (MoA), with no

power to manage or organize its operations without the approval of the MoA hierarchy. The

State Council has now separated the LGOP from the MOA, establishing the LGOP as a

formal public sector agency with its own functional structure to deal with both internal and

external matters. The LGOP has been given the lead roles in poverty planning, finance,

monitoring and evaluation, and coordination of the involvement of stakeholder agencies,

especially the Ministry of Finance (MoF), the State Development Planning Commission

(SDPC), the State Statistics Bureau, and the Agriculture Bank of China (ABC).

60 Other governance changes arise from the shift in national poverty reduction

policy to embrace participation, gender, community based planning and an expanded role

for NGOs in poverty policy implementation, progress monitoring and impact assessment.

Village poverty reduction planning is the heart of the new program, with individual village

plans based on the situation specific needs of the poor. With the assistance of the county

LGPO, Village Poverty Reduction Groups (VPRGs) will need to be formed to take the lead

in village poverty reduction planning. The role of county government is limited to ensuring

that village poverty plans are integrated into the County Development Plan (CDP), settingof specific poverty reduction targets for each plan period, and ensuring that national

poverty reduction resources are directed, through local LGOP offices, at income and

employment generation initiatives identified by VPRGs. It is left to the LGOP to ensure that

the methodology and guidelines to be applied in implementing village poverty reduction are

appropriate and flexible enough to account for socioeconomic, cultural and geographic

differences between counties.

61 Chinas village poverty reduction strategy is based on participatory approaches to

the analysis and redressing of key sources of chronic poverty in China. Because the


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county is the lowest level of local government to which national authorities have direct

contact, administration of the policy will be coordinated through county based authorities,

including county based offices of the LGOP. As a result, the methodology underlying the

national strategy has been dubbed County Poverty Alleviation Planning (CPAP). CPAP

builds from the village up, using the rich lode of local knowledge held by village

communities to identify sustainable income and employment generation activities for

inclusion in village poverty reduction plans, using participatory methods of problem

analysis, solution identification, activity designs, budgeting and progress monitoring and

impact assessment.

62 It is the commitment to participatory approaches that marks CPAP critically

different from predecessor strategies of national poverty reduction policy. However, there

is a desire by the State Council that this shift should be accomplished with a minimum of

conflict or reform of existing LGOP managed governance of national poverty alleviation

policy and practice in China. This is a laudable and understandable goal, but the increasedemphasis given to participatory, bottom-up procedures does imply some important

changes in governance at both national and local levels, and change of this sort rarely

comes without some opposition. CPAP is a further devolution of poverty planning in China

towards a needs and demand driven framework, as compared to a centrally controlled

bureaucratic process. The devolution is to be welcomed, and should be seen as a further

step towards democratic processes in an important aspect of Chinese public policy.

1.3 Motivation for Change in National Poverty Policy

63 One might ask, what is it that has caused the State Council to determine that a

shift in strategy is needed in national poverty policy and practice at this time? The answer

is likely to be complex, but when all is said and done it is probable there are just two issues

that constitute the fulcrum on which this policy evolution moves. First, China is concerned

that the challenge of poverty that remains is fundamentally different from that which has

already been addressed. The poverty that remains in China is dominated by what can be

characterized as 'hard core poverty'. In order for poverty reduction planners to understand

what causes hard core poverty to persist, it is no longer possible to assume that past

policies merely need minor refinement. Second, the GoC is very aware that the lack of

progress in poverty reduction in recent years is linked to the serious leakage of nationalpoverty reduction funds to the benefit of those who are not poor. If this leakage is to be

stopped, the changes needed in key areas of national poverty policy governance cannot be

minor. Shifting responsibility for accountability for the delivery of national poverty funds to

the poor from the province to the county is not a minor change. Nor is recourse to

participatory approaches in poverty reduction planning and implementation a minor

change.

64 Those active in national poverty policy implementation are aware that, in the face

of entrenched desperate poverty at village level, provincial and township officials have a


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strong incentive to attempt to get the best outcome for the limited poverty alleviation

resources at their disposal. A result of this process has been the channeling of support for

TVEs, only some of which have in fact led to benefits for poor people in the poorest villages

in China. In the main, the hard core poor have been by-passed and poverty reduction

resources have 'leaked' to the benefit of the non-poor. In recognition of these outcomes of

current strategy, the State Council has determined that a new approach is needed; one that

will target the hard core poor in ways that significantly increase the probabilities that

sustainable poverty reduction will be achieved. Participatory village poverty reduction

planning is this new approach, with administration shifted from provincial and township

levels to counties. This paper reports positively on several action research field tests of

CPAP which, together with supporting feedback from CPAP training exercises conducted

in Fujian, Hebei, Gansu, Guangxi and Qinghai provinces, give the authors cause for

confidence that local level support for CPAP is constructive and readily forthcoming,

governance changes notwithstanding.

65 Neither the State Council nor the LGOP are so nave, however, as to believe that

a policy shift such as CPAP represents will not meet bureaucratic inertia or resistance. The

opposite is the case. As a result, those responsible for national poverty policy in China are

keen to see that the governance of CPAP will involve a minimal set of bureaucratic reforms,

and gradual re-education within existing administrations to the realities of participatory

poverty reduction planning. Nonetheless, change is heralded by this shift in policy, if only

because the shift has signaled a significant clarification of goals for national poverty policy.

These goals are:

(i) more effective targeting of poverty reduction resources at the abolition of hard core

poverty;

(ii) increased poverty reduction through the capture of poverty reduction fund 'leakages';

(iii) greater village level self-reliance for sustainable poverty reduction through the use of

participatory approaches to location specific poverty reduction interventions; and

(iv) the repositioning of national poverty reduction programs to move away from relief and

welfare payments to the poor, towards investments in productivity based growth in capacity

for self help in poor villages.

66 Participatory poverty reduction planning is new to China. It is a step along the

path to rural democratization that parallels national trends towards smaller government,and user-pays strategies of service delivery by local government. Institutional changes will

be needed at village level to accommodate the different roles that will be played by existing

planning and poverty reduction agencies and local government authorities. CPAP

proposes the formation of a new administrative group at village level to provide grass-roots

leadership and facilitation services for participatory village poverty reduction planning. This

group is called the Village Poverty Reduction Group (VPRG), so named to make explicit its

key role in CPAP.

67 The VPRG is inclusive. The existing Village Committee, consisting of the Village


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Leader, The Party Secretary, the Village Accountant, and the leader of the Village Women's

Group, are members. To their number is added the village teacher and health worker, a

representative from each 'natural village' for which the Village Committee is responsible,

plus at least one representative from each 'functional' poverty group into which households

in the village can be divided. If the average Village Committee is responsible for a

community of 50 or so households and 4 natural villages, the typical VPRG will consist of

15-20 people. This is a large group, but for the purposes of the participatory exercises

needed to achieve effective village poverty reduction planning it is not inappropriately so.

68 It is expected that the Village Committee will act as an 'executive' for the VPRG, to

take charge of the administrative details that must be considered to ensure that the

logistics for participatory village consultation, data gathering and mobilization of village

people into CPAP procedures can be done well. A national program of 'training of trainers'

for CPAP is implied, and has already been initiated in the provinces of Fujian, Hebei,

Gansu, Guangxi, Sichuan and Xingjiang. (See Chapter 8, below, for further details onCPAP capacity building).

69 The leakage of poverty reduction resources to the non-poor has been a concern

at State Council and LGOP level for some time. CPAP will not solve this problem, but it can

help to significantly reduce the leakage. By going directly to the county, CPAP addresses

county poverty priorities rather than township or provincial development planning goals.

Hence, CPAP by-passes two levels of government, which, if nothing else, should produce a

dividend in terms of lower administration and transactions costs. Less of the budget for

poverty reduction activities will be needed just to trace and document the paper trail of

bureaucracy. However, the most important method by which poverty reduction resource

leakages is expected to be cut is through more effective and deliberate targeting of poor

people and poor areas. A serious studies on the issue in Chinas poverty alleviation

program have shown that lack of attention to targeting has meant that resources intended

to go to the benefit of the poor have leaked to the benefit of others. (Zhu Lin 1996, Li Ou,

1996, Li Xiaoyun 1997, Park 1999, World Bank 2001)

70 Under CPAP, it is the responsibility of the VPRG to bring forward proposals to the

County Poverty Alleviation Office (CPAO) that are tailored to address the causes of hard

core village poverty. A poverty reduction 'bonus' will be added to poverty reductionactivities done under CPAP by the extent to which VPRG proposals have a leveraging

influence on the priorities adopted in county development plans that target the poor in poor

villages.

71 One area of national poverty policy in China that has not been changed by the

State Council is the commitment to the need for close collaboration between many

stakeholder institutions, ministries and agencies. Multi-institutional participation in national

poverty policy has been one of the strengths of Chinas approach to poverty reduction

since at least the early 1980s. This has meant that in addition to the flow of national


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poverty reduction funds from Beijing, all key ministries finance, agriculture, health,

education, infrastructure, development planning and statistics- have allocated their own

resources to the national poverty alleviation effort. Li Zhou (2001) estimates that in 2000

the financial contribution made by cooperating ministries accounted for 30% of all official

funding for poverty alleviation in China, which in that year exceeded 9 billion. It is

envisaged that national implementation of CPAP over the next three to five years may

involve 300bilian Yuan according to a informal source from the LGOP to support village

poverty reduction. Hence, a good and effective working relationship between the LGOP,

the MoF, the ABC and the SDPC will be essential.

72 In summary, the motivation for CPAP arises because key policy makers in China

have recognized that there is a need to:

(i) redress deteriorating inequality in China;

(ii) stem the leakage of poverty funds to inappropriate beneficiaries; and

(iii) make in-roads on the incidence of absolute poverty in rural China.

73 CPAP seeks to achieve these objectives by focusing national poverty policy

directly at village poverty, with proposed poverty reduction assistance informed by a

willingness to listen to the poor and address the constraints that have prevented them

from escaping poverty, their best efforts notwithstanding.

1.4 Monitoring Poverty Reduction

74 Current practices in poverty reduction monitoring in China are based on tangible

output level and not directed at impact assessment (Li Xiaoyun 2001). The management

system that the LGOP has in place is focused on the flow of money in a manner consistent

with a system that has treated hard core poverty as a welfare problem. Consider the

contrast between Diagrams 1 and 2.

Diagram 1.1: Trickle-down poverty planning

LGOP

Poverty

Reduction

Provincial

Government

Office for

Economic

County

Township

and

County & Township

Infrastructure and

In-line Agency

Poor

Villages

Trickle-down poverty planning


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75 In Diagram 1.1, the village is a minor player. What little trickles down from above

is some employment opportunities and welfare transfers for the destitute and those hit by

natural disasters, but little else. There may also be some spin-off benefits from

infrastructure development, but these are serendipitous and rarely deliberate. The work

program of in-line agencies is not poverty focused, even though there are regular contacts

between village committee members and staff of the ministries of agriculture, health,

education, finance, etc. The focus of top-down planning has been provincial economic

growth through picking what seemed to be income and employment generation

opportunities, especially through TVEs. In this process, the monitoring systems of the

LGOP are concentrated on the paper trail documenting the distribution of relief payments

to the poor. Little or no attention was given to following the impact of investments at village

level that lift the productivity of village households. If data is collected, it is related to the

grouping of village households according to monthly income levels, households without an

adequate supply of grain, households without access to adequate labour for household

survival, or households burdened with disabled members. Statistics collected formonitoring purposes concentrate on documentation rather than impact assessment or

discrimination between who benefits, who does not and which initiatives contributed most

effectively to change in the incidence of poverty. The CPAP framework is built around a

participatory development planning paradigm that requires participatory M&E. This will be

a challenge to the LGOP, which has only limited experience and capacity to facilitate and

coordinate participatory M&E at village level. This fact presents donors and NGOs with an

opportunity to make a significant contribution to the success of CPAP by assisting the

LGOP to improve its capacity to implement and manage a national participatory M&E

system.

Diagram 1.2: Bottom-up participatory poverty planning

LGOP

Poverty

Reduction

County

Poverty

Alleviation

Office

County and

Township

Infrastructure

and

Village

Poverty

Reduction

County

Township

and

Trickle-up poverty planning

Outside

Technical

Assistance

County

Planning

Commission


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76 Diagram 1.2 represents an idealized schematic representation of what a shift to a

participatory village poverty reduction planning process implies. In Diagram 2, welfare

payments do not appear, as they are not an investment in sustainable poverty reduction.

The links that appear are those that represent cash flows into poor villages for employment

creation, plus expenditures on activities identified by the VPRG that are intended to

increase the absolute level of productivity of village household livelihood activities. Gone is

the concern to ensure that poverty relieftransfers and welfare payments are made. These

payments remain, but their administration is outside the CPAP process and continues to be

the responsibility of the Village Committee. The CPAO shares the center stage with the

VPRG. There are weak links at the beginning of the process to the CPC, but these should

improve as CPAP experiences spread their influence on thinking and conventional

practices in development and poverty planning. A link to outside technical assistance and

research agencies represents the important place that problem resolution through

technology transfer, technology adaptation, and technology development will play in

assistance given to villagers to increase output in livelihood activities, and diversify thesources of village livelihood activities.

77 Procedures for monitoring the impact of CPAP must be designed to be consistent

with the flows represented in Diagram 2. At its core this means that there will be far more

attention given to the factors that will ensure that village poverty reduction is sustained. Six

key performance indicators (KPIs) will be given special attention:

(i) Value of village output, in total and on a household basis;

(ii) the per person productivity of household livelihood activities;

(iii) changes in the absolute number of households and individuals in each

functional poverty group in the village;

(iv) the cash flow that is passing through village households from all sources;

(v) changes in the village weighted participatory poverty index (PPI) and its

component parts; and

(vi) the level of participation by the poor.

78 Data on each of these six KPIs are to be collected by the VPRG on an on-going

basis through regular consultation with village residents. The results are to be reported to

the CPAO for recording, independent analysis and discussion with the VPRG to allow for

any changes that experience shows is warranted to scheduled poverty reduction activities.

79 At the time of writing there are only limited signs that the system is gearing itself

up for the bureaucratic changes that the adoption of CPAP on a national basis will bring.

However, there is reason to be positive. The LGOP has embraced CPAP and has

enthusiastically assisted in the field testing of component parts. The LGOP has also

cooperated unreservedly in the initiation of a training of trainers program for CPAO staff

and village leaders in the essential elements of the participatory methods used in CPAP.

1.5 Principles of County Poverty Alleviation Planning (CPAP)


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80 The State Council has determined that future poverty alleviation programming in

China will be based on village poverty reduction planning, but that implementation of the

national policy will be facilitated at county level. This change will require the development

of complementary village and county poverty alleviation planning procedures; a

methodology for which constitutes the primary focus of this report.

81 There are eight propositions that constitute foundation stones for CPAP. These

eight are:

(i) Poverty reduction at village level needs investments supported by local policy and

administrative changes that enable households to increase the productivity of their

economic activities and their access to regular cash flow.

(ii) Hard core poverty reduction must be planned so that the necessary resources are

appropriately targeted at the poorest villages in each county. Critical to this process is the

choice of indicators to guide the selection of poor villages and planned interventions.

Resource flows to poor villages must be closely targeted so as to minimize 'leakages' to thenon-poor.

(iii) Our understanding of the constraints that keep poor villages poor must be informed by

participatory dialogue, participatory problem analysis, and participatory solution design

with poor villagers, the target beneficiaries. The needs of poor people, their

understanding of the constraints that prevent them from escaping poverty, and their

appreciation of capacity to mobilize resources and manage projects are key inputs into the

planning process. Knowledge of this sort cannot be had without a strong commitment to

participatory approaches to all steps in the project cycle and program processes.

(iv) CPAP must be systemically compatible with China's bureaucratic commitments to

centralized accountability, rigorous documentation, and simple-to-use key performance

indicators. As such, the methodology proposed must be user-friendly and easy to

replicate across counties and provinces. Participatory approaches to poverty reduction

interventions, whether based on public sector-funded infrastructure upgrades or private

sector-led production activities, must be integrated into these systems as part of policy

implementation and governance reform.

(v) Village poverty reduction plans will be based on recommendations arrived at through

participatory approaches to project identification and design, but their success is

dependent upon effective integration of these projects into County Development Plans as

a matter of due process. This will involve innovations in procedure and institutionaldevelopment at village and county levels that increase the avenues for involvement in

village and county-level decision making by poor people. In particular, it will commission a

Village Poverty Reduction Group (VPRG), to be responsible for village-level participatory

planning, project level design, and PM&E. Only if the recommendations of VPRGs are

integrated into County development planning procedures will clear targets be set, and

essential support services programmed from mainline agencies, (e.g.: agriculture,

extension, education and health), and public sector enterprises, (e.g.: seed and fertilizer

suppliers) to ensure that they will be forthcoming in a timely manner and in sufficient

quantity.


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(vi) Progress in poverty reduction must be measured against improvements in the

incidence of poverty at all functional levels of the poverty pyramid. This means that

success in poverty reduction will not only lead to increased numbers of successful

micro-entrepreneurs, but also to a reduction in the absolute number of dependent

vulnerable poor, subsistence poor, wage-earning poor, self-employed poor and

entrepreneurial poor.

(vii) Village poverty reduction should result in increased levels of self-reliance among

households in poor villages. The level of self reliance can be measured in many ways, but

CPAP gives priority to the eight indicators that form the basis of the PPI, especially

increased per capita cash flow into poor households, a fall in the number of households at

village level that live with food insecurity, a decline in the number of children dropping out

of school, improved levels of village-based economic activities, and a downward trend in

dependence on public sector resource flows, as measured by the number of persons

reliant on welfare for their survival.

(viii) Poverty reduction involves the achievement of greater equity at village level,especially for poor women and ethnic minorities, in access to basic services, sources of

financial intermediation, human resource development opportunities, paid employment,

income earning choices, access to productive resources, and participation in decision

making positions.

1.6 The Poverty Pyramid: A Structural and Philosophical Framework for

CPAP

1.6.1 Understanding Poverty: A Functional Poverty Pyramid

82 Poverty is both systemic and functional. At the systemic level, deliberate

attention is given to the problems that plague the livelihoods of the poor, the sources of

these problems, and the institutional constraints that keep poor people poor, no matter

how hard they work to escape their poverty. Participatory approaches to development

attempt to redress the lack of respect that systemic poverty structures deny the poor as a

group. Participatory poverty reduction planning also rejects the welfare handout approach

to poverty alleviation, that dismiss the poor as without the skills and the capacity to

contribute in a major way to the abolition of village poverty. At the functional level,

attention is directed to how the poor earn their livelihoods, the absolute return to their workeffort, and the constraints that keep these returns low. By combining these two ways of

looking at poverty, we construct a view of poverty and the opportunities to reduce poverty

that ispro-poor,pro-self-help, and inclusive of the poor in poverty reduction planning.

83 A poverty pyramid illustrates how systemic and functional poverty is revealed at

village level,. On the vertical axis the pyramid shows average earnings per person in each

strata of functional poverty. It is possible to view the vertical axis as showing the relative

productivity of poor people by their primary source of livelihood, even where this is only a

part-time source of employment. On the horizontal axis the poverty pyramid shows the


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number of poor villagers, separated by gender, whose main livelihood engagement and

source of income is the primary livelihood function that applies to each stratum. A

comparison of the average income earned per person in each stratum reveals the loss of

productivityassociated with being lower in the poverty pyramid. In the course of a year, a

villager can occupy a place in different levels of the poverty pyramid, depending upon his

or her primary source of livelihood at that time.

84 Diagram 1.1 presents a gender sensitive functional view of the poverty pyramid.

The numbers refer to the distribution of the poor across each stratum in the poverty

pyramid, and their average earnings per person. The numbers are taken from 9 villages in

Fengning County, Hebei Province, PRC, where the methodology outlined in this paper for

CPAP has been field tested.

Diagram 1.3 A functional Rural Poverty Pyramid for ChinaSource: PRA data on Employment structure and average income of rural labour in Qibailong TownshipDahua County Guangxi Zhuang autonomous Regions.

85 The poverty pyramid shown in Diagram 1.3 hypothesizes that the rural poor can

be viewed as resting on a base made up of vulnerable poor whose poverty is

characterized by their dependence on others for their survival. The poor earn very little

per person, typically because young children, the old aged, the disabled, the unemployed,

those whose movement is restricted, such as the disable and those recovering from injury,

predominate among the poor villagers classed in this group. In China the vulnerable poor

usually make up a small proportion of the village. In China there is a program known as

the five guarantees, which targets the disabled, old aged without work opportunities, and

those with serious heath problems. Finance for the 5 guarantees is raised by a village

committee under a collective levy on each house, supplemented by both local and central

government funds where natural disasters or poverty mean that individual villages cannot

afford to provide for the 5 guarantees from local household levies. Because of the

existence of the 5 guarantees program, this group of poor villagers is not regarded as

among the direct target beneficiaries of poverty reduction initiatives instigated by the

LGOP network. However, new poverty reduction policy adopted by the State Council

Vulnerable Villager

Subsistence Farmer

Wage-earning Villagers

Self-employed Villagers

Entre reneurial Villa ers

1000 person

1200 person

1750 person 1900 person

1400 person

800 yuan

1500 yuan

3500 yuan

45000 yuan

600 person

58 person

3 person

20 person

Males labor Females labor

2500 yuan


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formally declares the inclusion of this group in LGOP led poverty alleviation planning

(PAP). . In CPAP, therefore, this group of poor are eligible direct beneficiaries, because

their productivity can be increased through CPAP procedures. CPAP directs that the

VPRG to listen to the vulnerable poor and learn of the things that will make them less

dependent through improved productivity and capacity to contribute to household

sustainable livelihoods.

86 The vulnerable poor are not entirely helpless. As a group they make a

contribution to household livelihood, if only in a minor way. This contribution can be

improved, which it must be if the dependency-ratio in poor households, (ie, the proportion

of household members unable to do regular work), is to improve. It is the task of the

Village Poverty Reduction Group (VPRG), to identify and translate the opportunities for

increasing the productivity of the vulnerable poor into project proposals that can be

included in village poverty reduction plans.

87 The next poorest group in the poverty pyramid, the subsistence poor, describes

those poor villagers who obtain their primary livelihood from subsistence activities, such

as farming. This group makes up a large proportion in almost all poor villages in China.

The subsistence poor belong to households that in China are also know as Pingkun

Households, or households that need to be targeted if rural poverty is to be reduced.

88 Self-employed subsistence farmers realize a 'wage' that they pay themselves in

the form of the products they produce and consume. Economists call this an 'own-wage'.

Typically the own-wage of poor subsistence farmers is below the wage earned as an

unskilled employee doing itinerant day laboring, which they willingly take on whenever the

opportunity arises.

89 It is often a surprise to find that the livelihood difficulties of Subsistence Poor

households are exacerbated by a shortage of economically active labor. As a result,

subsistence families often have above average dependency ratios, which increases their

vulnerability and capacity to be self-reliant.

90 It is the task of the VPRG, to consult with the subsistence poor to identify why

their productivity is so low and what might be done to improve it. Because subsistencefarming is such an important source of livelihood in poor villages, one should expect that a

village poverty reduction plan will devote considerable attention to how subsistence

farming can be made more remunerative, and how subsistence farmers can be aided to

diversify their livelihood sources beyond subsistence farming, especially into

cash-cropping and other livelihood activities, including off-farm income earning

opportunities, that realize a higher return to effort. In so doing, the VPRG will build on the

assets, skills and market opportunities that are available to village members.

91 Above the subsistence poor in the poverty pyramid are those households who


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survive by selling their labour for wages. Wage-earning poor households share with the

subsistence poor the fact that their livelihoods are earned predominantly by selling their

labor, the one for an own-wage and the other for a market wage. This latter group typically

makes up the second largest group in the poor villages of China. The wage-earning poor

sell their labor to an employer instead of themselves, mostly on casual terms that occupy

less than half the working days in any given year.

92 Even though the market determined unskilled wage rate is normally above the

own-wage of subsistence livelihoods, the absolute amount the wage earning poor receive

in the course of a year is not enough to enable the household to rise out of poverty and

sustain a livelihood above that level. Even where wages appear to be relatively high, the

absence of on-going employment makes it difficult for the rural wage earning poor to

achieve average income levels above the rural poverty line. Here again, the VPRG will

explore with members of the wage-earning poor what might be done to increase the

number of days of paid work available, how the wage earned can be increased, or how theavailable days of underemployment might be gainfully exploited to achieve an improved

standard of living.

93 The stratum above the wage earning poor is occupied by the self-employed poor.

The self-employed poor sell the fruits of their labor, rather than the labor itself. The

productivity of the self-employed poor is a function of all the factors that determine the

value they can add to the raw materials they transform into products for sale to consumers.

The realized wage of the self-employed poor is normally higher than that of the

subsistence or wage-earning unskilled poor, though there are exceptions, especially

among women who have limited opportunities for income generation and are prepared to

work at handicrafts and other home-based employment at very low returns to effort. It is

the responsibility of the VPRG to examine, in a participatory way with the self-employed,

the problems they face that prevent them from gaining a greater return from their

self-employment. Ideas on interventions designed to remove or at least relieve these

constraints will arise from this investigation, and it is these ideas that the VPRG must then

incorporate into the village poverty reduction plan.

94 The top stratum of the poverty pyramid comprises village poor people who are

not only self-employed but also employ others. In the main these persons remain poorbecause their involvement as entrepreneurs and employers is only a part-time activity,

possibly seasonal. Nonetheless, theirproductivity, (ie., the wage they earn from the

profits they make), is enhanced by the fact that they benefit from the profits to be made

when wages paid to employees are below the value-added that employees, typically

members of the wage-earning poor, contribute to the production process. Microenterprise

development, (MED) programs and microfinance providers often target members of this

stratum to encourage business expansion and employment generation. Alternatively,

they target members of lower strata to enable individuals to migrate up the poverty

pyramid, into this stratum and, eventually, to levels of income per person that are above


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the poverty line.

95 Not all villagers in poor villages are poor. CPAP does not exclude these village

members from the participatory village poverty reduction planning process. The near poor

or the not-poor in a village are an important asset to village capacity for poverty reduction

planning, and growth in realized potential for self-help. Nonetheless, the target of CPAP

activity implementation is to maximize the involvement, as beneficiaries, and the

productivity improvement experienced by poor villagers.

96 The poverty pyramid is both a heuristic device for analyzing poverty and for

reorienting poverty targeting along functional and systemic lines. (See Remenyi, 1991,

1992, 1994, and 2000 for further details on the poverty pyramid and its use in poverty

analysis, targeting, and planning). Reorientation of national poverty policies towards a

focus on functional poverty and improved livelihoods is needed in China. It is needed

because the top-down paternalistic traditions of past poverty policies in China have beenlocked into a process of poverty targeting that served best the transfer of funds instead of

investment in poverty reduction.

97 Current public sector poverty intervention in China gives great weight to

ensuring that funds intended for poverty alleviation are properly transferred from the State

Council through to poor Provinces, on to poor Counties, and only then to poor Villages and

poor households. However, recent research supported by DFID and the World Bank, (see

Beynon, et al., 2001), has shown that extant practices give little effective attention to

poverty targeting procedures that would remove constraints to greater self-reliance, or

target village level activities designed to raise productivity of village livelihoods, or the

capacity of villagers to earn cash income. CPAP seeks to redress these failings by

employing a more functional approach to poverty targeting and public sector involvement

in village poverty reduction.

98 The methodologies that make up CPAP leave to village people what can be left

to them, the incidence of poverty notwithstanding. CPAPl also nurtures sustained village

poverty reduction by encouraging villagers to identify the constraints that prevent them

from being more self-reliant and more productive in what they do to support themselves.

CPAPs use of participatory approaches to poverty reduction planning is intended topromote migration up through the poverty pyramid and beyond, to levels of livelihood well

above the poverty line. The CPAP approach defines for the public sector a role in village

poverty reduction that is tied to specified poverty reduction targets. These links are

strongest when there exists clear procedures for integrating these targets and associated

activities into county level development planning.

1.6.2 Some Key Performance Indicators

99 CPAP addresses the poverty pyramid by setting poverty reduction targets that


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reduce the absolute numbers of village people in any of these functional poverty strata.

Productivity improvements are reflected in increasing earning capacity, which will push

more and more of the poverty pyramid upwards towards the poverty line and, hopefully,

above it.

100 Participatory methods are an especially appropriate method to use to

characterize poor villages according to the number of poor people or households in each

functional poverty category or stratum. Poor villagers know their village intimately and are

readily able to classify their fellow village residents according to their main occupations

and survival strategies. Similarly, participatory methods are the quickest and least

expensive method of amassing details of the problems that poor households face and the

constraints that prevent them from overcoming these problems. These data about village

poverty can be used by VPRGs to construct 'problem trees' that are basic inputs into a

simple poverty reduction planning logical framework. These problem trees can be

superimposed onto the functional poverty pyramid to increase the heuristic value of thedata collected for participatory solution analysis.

101 At root, the poverty pyramid that underlies the CPAP framework highlights low

functional productivity and inadequate cash flow as the two key characteristics of

hard-core-poverty. These two characteristics of chronic poverty are the outcomes of

systemic poverty processes. The CPAP framework emphasizes the removal of major

constraints that have thus far prevented poor households from escaping poverty.

102 There is a gender component to each stratum of the poverty pyramid. Key

performance indicators of progress in poverty reduction will include the number of females

in each stratum, plus the average contribution that women make to household earnings.

Success in poverty reduction will see the number of women in each stratum shift in ways

that are indicative of movement up from lower to higher strata. Productivity trends will be

shown by increases in the average contribution by women to household income.

103 Further, while short-term interventions may be identified to increase productivity

and cash flow in poor households, experience has also shown that poor villagers are

concerned to ensure that their children will have better opportunities for work and lifestyle.

These longer-term commitments may, therefore, cause villagers to opt for resourceallocations that have only limited immediate personal benefits. Participatory approaches

to poverty problem analysis are fundamental to ensuring that village poverty planning

does more than nod in these directions.

104 The CPAP framework proposed accepts the widely held view that the

persistence of hard-core-poverty is connected to resource access and wealth distribution

issues. However, the philosophical framework for CPAP does not allow particular

subjective attitudes to wealth redistribution or the need to redress gross inequities in

income or economic opportunities, to cloud the important role that wealth creation and


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household capital accumulation must play in sustained poverty reduction and increased

capacity for self-help. Where access to resources is indicated as a key strategy, this factor

should be addressed by the VPRG in whatever manner is appropriate. In the main,

however, wealth creation will take the form of productive asset accumulation, including

more productive use of household savings.

1.6.3 Overview of the Procedural Framework

105 The procedures by which the foregoing poverty planning framework is to

be implemented are summarized in Diagram 2.2. (next page)

106 There are three essential steps to CPAP: Phase 1: identification of poor villages;

Phase 2: village poverty reduction planning; and Phase 3: county integration, when village

poverty reduction proposals are vetted and integrated into the county's overall poverty

alleviation development plan. All three phases call for the employment of participatorymethods of data collection, problem-solution design, implementation planning, and

monitoring and evaluation.

Phase 1 Identification of Poor Villages

107 Unique to the CPAP system is the calculation and use in phase 1 of a weighted

Participatory Poverty Index, PPI, which integrates three key dimensions of poverty using

eight selected poverty indicators. The weights applied to each indicator are determined

by the target beneficiary poor householders in the course of the participatory problem

analysis exercises conducted under the facilitation of the VPRG. Target villages are

selected using the PPI, with those villages with the highest PPI given priority, unless

political criteria intervene to indicate otherwise.

Phase 2 Village Poverty Reduction Planning

108 For each selected target village, the VPRG takes responsibility, in phase 2, for

the assembly of baseline data on village poverty status and household poverty

characteristics. The methods used will be village group meetings, village resource

mapping and consultation with key members of the Village Reference Group (VRG), acollection of village leaders, important service providers, (eg. teachers, health workers,

and shop keepers), and representatives drawn from a cross-section of the functional poor.

The results of these consultative exercises is a household typology, a numeric gender

sensitive summary of the functional poor in the poverty pyramid, and an analysis of the

poverty problems that exist in the village. These data comprise the raw materials for the

initial design of Poverty Reduction Proposals by the Village Poverty Reduction Group

(VPRG), which is composed of members drawn from among the existing Village

Committee, representatives from the major categories of functional poor and important

village service providers, such as teachers, health workers and enterprise operators. If


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Indicator Develo ment

Villa e Data Collection

Poverty Village Selection

WPI Calculation

Indicator Wei hts Scorin Scheme

Monitory PlanSupporting Need Project Need

SWOT & Feasibility Study

Need Identification

Povert Anal sis

Villa e Data Collection

Household Classification Ma & ChartBaseline Data

Need Integration

Pro ect Packa e Selection

Goal & Task

County Project

County Poverty Alleviation

Village ProjectSupporting System

Im lementation Plan

Monitor S stem

County

Socio-Economy

National Goal

& Policy

Diagram 1.4: Summary of CPAP


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available, county officials and technical experts as appropriate could also be invited to be

members of the VPRG. It is then the responsibility of the VPRG to subject their proposals

to a Strengths, Weaknesses, Opportunities and Threats, (SWOT) analysis, possibly with

the assistance of external consultants, to assess the resource needs of proposed poverty

reduction interventions, finalize village proposals into a simple logical framework format,

and to detail the PM&E procedures to be used.

Phase 3 Formulation of County Poverty Reduction Plans

109 It is in phase 3 that the village poverty reduction proposals are vetted by county

officials from the County Poverty Alleviation Office. Those proposals that are appraised

as practical and achievable in the coming planning period have then to be integrated in the

County Poverty Alleviation Development Plan (CPADP). In order to do this, all PAO

approved village proposals are grouped into type, so that the full extent of the claims on

the county infrastructure budget, health budget, education budget, etc., can bedetermined. Selection of which projects can and should be funded is then left to a process

that matches politically determined poverty reduction goals at county level, and locally

expressed village poverty reduction targets or 'aspirations', against resources available

for CPAP in the County Development Plan (CDP). Only at this stage can project priorities

be formulated, the role of the county in the facilitation of village poverty reduction be

finalized, and village poverty reduction activities be scheduled. These latter three

components make up the final 'project outcome' of the CPAP process. What remains is

agreement on CPAP implementation timetable and arrangements for participatory CPAP

monitoring and evaluation procedures.

Financing CPAP

110 Sources of financial resources for poverty alleviation in China are of three main

kinds:

(i). National and local government;

(ii). Relief funding from the Ministry of Civil Affaires;

(iii). International donors, including both multilateral and bilateral sources; and

(iv). Private non-government organizations.

111 According to official classification of financial inputs to poverty alleviation, public

sector funding for poverty reduction in China can be divided into three major categories (in

order of magnitude of funds disbursed):

(i). Loan for Poverty Alleviation, funded through the MoF but disbursed through the ABC,

which includes following items, special loan for poverty counties, supporting loan for

underdeveloped area development, supporting loan for revolutionary bases, minority area,

remote area and poor area, loan for TVE development and special loan for grassland poor

county development.

(ii). Economic Development Fund for Underdeveloped Area, which is disbursed through


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the SDPC but funded via the MoF; and

(iv). The Food for Work Program has been developed to support the improvement of

infrastructure in the poor areas. The fund is funded and administered through the SDPC.

112 It is the role of the LGOP to ensure that there is coordination across these

expenditure areas and the responsible agencies.

113 Total annual expenditure under these three headings have been expanded yearly.

In 2000, total expenditure has reached to 264.5 billion Yuan (LGOP 2000), which is 30

times than the figure of 1980. It has been planed to allocate total 300 billion Yuan after 2002

yearly (informal source of the LGOP 2002). It is generally believed that the subsidised loan

program has made a valuable contribution to improved farmer employment and income

generation opportunities, with an estimated 15% of all households in the poor areas

receiving a loan under the program. However, this gain has come at a very high cost

because the bulk of the benefits may not have gone to assist genuinely poor households.(Vide Fang 2000). In keeping with the top-down nature of policy making practiced

throughout most of Chinas recent development history, the subsidized loan program was

not designed or implemented on the basis of consultation with intended beneficiaries. The

program has no effective mechanism for targeting the poor, and is likely to have excluded

the poor by limiting access to loan funds to farmers able to offer the ABC acceptable

financial instruments or assets as loan collateral. The record also shows that the program

has accumulated a bad debt rate that reached 40% by the end of the 1980s and has

deteriorated further since then (ibid). LGOP data indicates that between 1991 and 2000

almost 74 billion yuan was disbursed through the subsidized loan program.

114 Chinas Food for Work Program was started in 1985. It has worked in close

collaboration with the UN World Food Program since the beginning, with WFP

contributions accounting for approximately 30% of the value of food disbursed. Where the

subsidized loan program was supposed to be available to all poor farmers, irrespective

whether the farmer was located in an officially designated poor area or not, the Food for

Work Program has been restricted to villages in officially designated poor counties.

Studies by Lin and Zhongyi 1995, and others indicate that the food for work program has

contributed significantly to the improvement of local infrastructure and short-term income

earned by the poor. The WFP has also undertaken a significant number of impactassessments of food for work in China, and generally found that the economic internal rate

of return is significantly above the opportunity cost of capital in China, that projects

completed are typically bankable and replicable, and that additional data provided from

other projects confirms the positive findings (WFP 1997). LGOP data shows that during

the period 1991-2000, the GoC expended almost 41 billion on food for work projects.

115 The economic development fund for poor areas was started soon after the

economic reforms of 1978 opened the economy of China to freer trade with the rest of the

world. The MoF manages the fund, and allocates budget to designated poor counties


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directly for improving physical and social infrastructure, such as communication, education

and health. However, over time the fund has largely become a source of subsiding funding

for local government budgets. The close tie that should exist to projects targeting poor

households has been eroded with time. LGOP data show that 1991-2000, a total of 22

billion has been disbursed through the economic development fund for poor areas.

116 An important source of poverty reduction funding is public sector resources not

coming from central government budgets. In the main these sources come from budget

allocations by provincial ministries and in-line agencies. The LGOP estimates that since

1994, at least 15 billion has come from here, but the impact of these funds on the

livelihoods of the poor is unclear. There is anecdotal evidence that suggests that local

government offices have very weak mechanisms for ensuring that funds allocated to

poverty reduction do more than offer welfare relief. The notion that poverty reduction

requires governments to investin poor people and poor communities is still widely resisted.

117 From the foregoing it is not clear where resources can best be diverted from

predecessor programs into CPAP. There is a need for the current financing mechanisms to

be reformed. Nonetheless, the directions of the reforms needed are much clearer. First,

as a participatory process that engages different stakeholders to define what should be

supported in a strategic manner, CPAP requires a complex of multi-agency cooperation

and multiple sources of funding that could easily embrace all four of the sources identified

above. A prerequisite, therefore, is that CPAP needs to be understood and accepted by all

potential stakeholder agencies. It will fall to the LGOP and the State Council to facilitate the

education process that this will entail, though it is the responsibility of the LGOP to detail

what it will need to ensure that CPAP can be successfully implemented at local level.

Second, CPAP targets the functional poor, with a view to transforming the poverty pyramid

into communities that are successfully overcoming the constraints that keep them poor.

The government economic development fund can support the capacity building that this

will involve, including infrastructure development such as schools, health centers, potable

water systems and road construction. This will be facilitated if proposals arising from the

work of VPRGs are integrated into CDPs. There appears to be no major barrier to this

happening. Increasing the transparency of how the fund is used and administered will be

useful, but involving the poor in the process is essential. Strengthening of the national

auditing function will assist in ensuring that the goal of transparency is served, andproblems of moral hazard are kept to a minimum.

118 The Food for Work Program has a high relevance to CPAP. It can be tailored

Documents

ADB-Principles and Philosophy Underlying County Poverty Alleviation Planning-China Case Study