5.1 China’s poverty reduction policies as a case study in pro-poor governance

BOX 5.1 China’s poverty reduction policies as a case study in pro-poor governancea

It has long been recognized that a capable, credible, and committed government is key to the success of development strategies. The 2017 World Development Report (World Bank 2017) aims to break down the core functions of effective governance to draw lessons for development. Its main message is that effective governance institutions deliver three core functions: credible commitment, enhancing coordination, and inducing cooperation. All three core functions were present in the design and implementation of China’s poverty reduction efforts, which represents an interesting case study of effective governance.

First, the credibility of the government’s commitment to poverty reduction was signaled early on, with clearly defined targets and the creation of the Leading Group on Poverty Alleviation and Development to oversee progress and establish accountability at the highest level. When it became clear that economic growth alone would not suffice to reach the last mile of poverty reduction, President Xi declared the eradication of absolute poverty to be one of his “three decisive battles” and set it as a key target of the 13th Five-Year Plan (2016–2020). With this rallying call it became clear that failure was not an option (FreijeRodriguez, Hofman, and Johnston 2019).

Second, the use of incentives played a very important role in facilitating coordination across different levels of government. Since 2013, the membership of the Leading Group on Poverty Alleviation and Development has been expanded to include all central ministries and departments, reflecting the importance placed on interdepartmental coordination. While the central government through the Leading Group provided broad guidance, local officials were given wide latitude to experiment and indeed compete with each other (Ang 2016; Heilmann 2008). Clearly defined reward and accountability mechanisms, with a strong performance management system, ensured that cadres aligned personal goals with central priorities (Xu 2011). Career promotion of local officials depended on their performance in achieving predefined outcomes (for example, economic growth, social stability, or poverty reduction). With the launch of the poverty reduction campaign, poverty reduction targets in the designated poor counties became one of the top performance evaluation criteria for local officials, with poverty reduction management teams delegated from higher levels of government to poor villages and counties with the exclusive task of working toward the goal and monitoring and reporting on progress made. While there have been reports of local collusion, fraud, and diversion of resources, tight supervision and unannounced inspections from higher levels have on the whole ensured strong compliance. Fiscal incentives reinforced the performance management targets, encouraging local governments to mobilize the resources necessary to achieve their goals. Poverty reduction is one of the few areas in which China has experimented with programmatic budgeting, allowing the governments of 832 poverty-stricken counties to pool resources across several departments, prioritized in line with local requirements (World Bank 2018).

Third, China has adopted a whole-of-government and whole-of-society approach, particularly in the latest phase of the poverty eradication campaign, which is inducing cooperation across government and nongovernment stakeholders. The poverty reduction campaign (like the COVID-19 [coronavirus] containment efforts more recently) is a good example of China’s approach to social mobilization, including cadres at all levels, state and privately owned enterprises, academic institutions, and others. These stakeholders were encouraged to make substantial financial and human resource contributions to the poverty reduction campaign. Participation is perceived as a patriotic duty (Freije-Rodriguez and Zhao 2021). One example of this social mobilization and induced cooperation across stakeholders is the “East-West Cooperation for Poverty Reduction” described in box 4.3.

Although the governance functions exemplified by China’s poverty reduction efforts can be applied to many development contexts, the specific institutions developed in China are arguably unique. For example, few countries would have the mobilization capacity of party cadres at all levels of government. Moreover, China’s governance mechanisms, while effective at reaching specific targets, such as economic growth or poverty reduction, confront challenges when dealing with multiple objectives requiring trade-offs across priorities (World Bank and DRC 2019).

a. This box builds primarily on CIKD (forthcoming, chapter 9), and World Bank (2017).