Attribution: Kalpit A Mankikar, “Poverty Alleviation and Political Primacy: The Way of the Chinese Communist Party,” ORF Issue Brief No. 494, September 2021, Observer Research Foundation.
In February 2021, China announced that nearly 850 million people had been lifted out of poverty since the Chinese Communist Party (CCP) established the People’s Republic in 1949, and that extreme poverty had been eliminated. About 100 million are said to have been brought out of poverty since 2012, coinciding with the ascent of President Xi Jinping as CCP’s general secretary—a significant milestone when the party records his legacy.
Reducing poverty has been a longstanding CCP goal. Mao Zedong’s legacy was that nearly 50 percent of China’s population was at the subsistence level or below the poverty line in 1978. His successors later admitted that Mao’s handling of the economy had brought it to the brink of collapse and the Cultural Revolution had led to tremendous hardships. However, progress on improving living standards gathered momentum in the decades since the Chinese economy opened up. Until recently, the CCP’s legitimacy rested on its ability to deliver rapid economic growth, but China’s double-digit growth has plateaued in the years since Xi came to power. As a result, Xi has been keen to push the narrative that the CCP is focused on issues concerning people’s livelihoods and reining in large corporations, and has tried to recast himself as a populist leader in sync with the concerns of the common citizen. Additionally, by promoting its “success” in reducing poverty, China hopes its political and economic governance model gains recognition and is judged superior to Western democracies.
This brief evaluates the linkages between poverty alleviation and the CCP’s political objectives, especially how China is perceived in foreign countries. The brief will analyse the narratives of poverty alleviation through the different leadership eras and the CCP’s ability to meet its objective of political control through such efforts. It will also assess the impact of the poverty reduction drive on China’s position on human rights and its unique developmental model.
China’s View of Poverty
The 2000 Global Poverty Report by the United Nations Development Programme describes poverty as the deprivation of primary opportunities and choices for human development, namely a healthy life, freedom, social status and self-respect. China defines the term as when “the living standard of an individual or a family does not reach a minimum acceptable social standard”. Academics Tong Xing and Lin Mingang, who studied deprivation in rural China, define poverty as a “general term for economic, social, and cultural backwardness; a living situation characterized by a lack of basic life necessities and services and a lack of opportunities and means for development.”
Another school of thought includes the metric of social inclusiveness. Guo Xibao from Wuhan University argues that eliminating inequality entails tearing down all forms of social exclusion systems to enable the haves and have-nots to enjoy the same social rights. China has an absolute poverty line of around RMB 4,000 (US$619) annually, which translates to roughly US$1.70 daily. The World Bank sets the poverty line at US$5.50 a day for upper-middle-income countries like China.
In the early 20th century, armed conflicts and internal strife impoverished China. After a failed bid to expel foreigners residing in the country, imperial China was obligated to pay US$330 million reparations over 40 years to the eight-nation alliance that had dispatched troops. At the same time, nearly all of China’s rural peasant class braved regular famine. As a result, the post-Mao generation inherited a high incidence of poverty, especially in the rural hinterland. Former Paramount Leader Deng Xiaoping asserted that “Poverty is not socialism, and that socialism stands for eliminating poverty.”
In 1978, the CCP proposed a phased plan for China’s economic development—doubling the gross national product every decade to ensure that people have adequate basic necessities by the end of the 1980s, a moderately prosperous life by the end of the 1990s, and a “relatively affluent life” by 2050 (when the CCP completes its centenary at the helm of the country). Thus, the shift to ‘socialism with Chinese characteristics’ was explained away as necessitated for improving living standards. As per Deng’s ‘two development strategies’, China’s coastal areas would be prioritised over the hinterland for economic development due to their high densities. The policy also stipulated that the interior would get attention once the coastal areas had attained a certain level of development.
In 1986, the government set up a State Council office to identify impoverished provinces, established a national poverty line, and created special funds for poverty reduction. In 1994, it launched the Seven-Year Priority Poverty Alleviation Program, intending to lift 80 million people out of impoverishment within seven years. The CCP also expanded coverage of the dibao programme (unconditional cash transfers), which served as the safety net for China’s poorest, to cover all urban areas in 1999 and all rural areas in 2007.
Debates on Growth and Poverty
Since the 1980s, feuds have raged within the CCP over differing agendas of development. As communist regimes collapsed in Eastern Europe in the late 1980s, the CCP dealt with student-led protests in Tiananmen Square, leading to a collective realisation that the party must manage the economy sufficiently to preserve its grip on power. To pursue economic growth, which some in the CCP saw as the only way to reduce poverty, it began promoting wealth creation and the private sector, especially entrepreneurship. Ren Zhengfei and Jack Ma, among China’s biggest businesspeople, began their career around this time by hawking merchandise on the street.
On the other hand, conservative elements in the CCP preferred greater state control over the economy through centralised planning, thereby maintaining the party’s dominance. Deng believed that investment into China and infusion of technology were important in building industry, and would eventually lead to a better standard of living. Deng countered the conservatives by reasoning that economic systems were not ends in themselves but means to achieve prosperity for all. During his 1992 tour of Shenzhen, he reinforced this belief by asserting that “economic development was of overriding importance” and that CCP leaders who did not have the same goal should be sacked.
China’s handling of state-owned enterprises (SOEs) in the late 1990s impacted income equality. Former Premier Zhu Rongji shut down many SOEs, resulting in job losses for nearly 30 million urban workers. At the same time, the sale of SOE housing blocks provided to urban labourers at nominal rates led to a wealth gap between urban and rural China. Similarly, in the early 2000s, Bo Xilai’s stance during his tenure as the CCP secretary of Chongqing led to an alternative development model within the CCP. Bo’s policies aimed to reduce the wealth gap and ease the rural-urban divide, including through the construction of public apartments for college graduates, migrant labourers and low-income groups. In 2007, he launched a pilot project to make it easier for rural residents to obtain urban status under the hukou household registration system that determines educational opportunities, tax liability and property rights. Bo was convicted of corruption charges in 2013, with one view holding that this was an outcome of his bid to use economic policies to build favour with the people, which was unpalatable to CCP elites—showcasing how several leaders have used poverty alleviation as a tool in power struggles within the party.
Poverty Alleviation in the Xi Era
Since coming to power, Xi has heralded the arrival of a ‘new era’, trying to present himself and the CCP as avuncular authorities who are aware of the challenges faced by the people and empathise with them. Early in his first term, Xi said reducing poverty was among China’s most important battles and declared the goal of eradicating absolute poverty by 2020. China’s poverty eradication scheme has also been envisaged as an instrument of political control and image building, and Xi has encouraged the CCP’s elite to live frugally since “amassing wealth” may alienate the people and could eventually cause the destruction of the CCP and collapse of its regime. Importantly, Xi wants the CCP to build bridges with the people and garner popular support. In 2020, as the COVID-19 pandemic raged, the People’s Daily newspaper began a series titled ‘The General Secretary Visited Our Home’ and distributed it among other media groups. The series depicted Xi clasping the hands of ordinary people to demonstrate that he was aware of their immediate concerns.
Guānxi: The Elitist Art of Patronage
The CCP has a contentious relationship with the private sector. The 1949 revolution was proletarian, leading to a clampdown on private business. Many were imprisoned and their properties appropriated by the state. Following the reforms and opening up of the economy in the late 1970s, private enterprise was permitted again. In the aftermath of the crackdown on student-led protests in June 1989, the CCP ceased enlisting entrepreneurs as members. In 2001, the party began admitting businesspeople as members to acknowledge their increasingly dominant role in China’s future.
Proximity to the CCP is key to a venture’s success. A 2018 study found that companies linked to the CCP elite paid less than half for government-owned land compared to buyers with no political connections. Additionally, members of the CCP Politburo Standing Committee received a 75-percent discount on land purchase. This situation can best be understood through Chinese anthropologist Fei Xiaotong’s assessment of guānxi (connections). Guānxi networks are social capital based on familiarity. Fei compared guānxi in Chinese society to ripples created after a stone is tossed into a water body, with each concentric wave centring on an individual. For the CPP elite, guānxi is created through a patronage framework and on a commonality of interests. For instance, Jack Ma’s Ant Group drew investment from a private equity firm founded by relatives of former President Jiang Zemin.
Many businesses, including Big Tech firms, have flourished on the back of state patronage, subsidised land or support in the form of easy loans. In recent years, there have been calls for improving the CCP writ over the private sector to realise China’s rejuvenation.
The COVID-19 outbreak put renewed focus on income inequality in the country. While China has more billionaires than the US and India combined, about 600 million of its people earn US$150 or less a month. The share of the top 10 percent of the population in the national income increased from just over 25 percent in 1980 to 41 percent in 2018. Over the same period, the share of the bottom 50 percent has fallen from 25 percent to 15 percent.
Figure 1: A comparison of inequality in China, US, and Europe
In the aftermath of the 2008 global financial crisis, luxury merchandise sales grew by 20 percent in China, even as it declined in other countries (such as the US). In 2015, the sale of luxury goods in China crossed US$115 million, making it the top global consumer of such products. While the consumption of essential goods fell by about 5 percent in the first 11 months of 2020, luxury consumption grew nearly 50 percent compared to 2019.
However, the CCP is aware that there is growing resentment against rich businesspeople. The CCP is wary of the restless and unemployed youth, especially during COVID-19. A survey of 10,00,000 companies revealed there were 30 percent fewer openings in the January-March 2020 quarter than over the same period in 2019. The coronavirus outbreak shuttered a large part of the economy in the first quarter of 2020, and despite some economic recovery, joblessness remains an issue. The current unemployment rate for the 16-24 age group stood at 13.8 percent. China announced GDP growth of nearly 18 percent in the first quarter of 2021 over 2020 levels. However, Premier Li Keqiang said that challenges remained over employment despite the green shoots. In May 2021, Li warned that the foundation of China’s economic recovery was not sound and that small and medium enterprises were affected by rising costs, which dampened hiring. On average, around 9 million students graduate from universities on the mainland, adding to the pool of those returning from abroad and the mass of migrant labourers.
Amid the rising wealth gap in China, the CCP is also displeased with the ostentatious lifestyle of businesspeople, many of whom are members of or associated with the party. In November 2020, Xi visited an exhibition on the life of twentieth-century industrialist Zhang Jian in Jiangsu, a prosperous coastal province that is home to several high-tech exporters. Xi has spoken of the need for China’s entrepreneurs to have a “sense of responsibility for the country” and to “fuse the development of their fledgling businesses with the nation’s prosperity”. According to him, “A patriotic entrepreneur is one who can balance the development of their venture with the happiness of people and national prosperity.”
The issue of income disparity resonated at the December 2020 Central Economic Work Conference, a yearly conclave of top leaders that charts the programme for China’s economy. Among other concerns, policymakers resolved to address issues related to housing in large cities and strengthen anti-monopoly measures against big corporations.
Xi has repeatedly expressed commitments to low-income groups. Ahead of the International Workers’ Day commemoration on 1 May, Xi pledged to safeguard the interests of couriers, food delivery riders, and truck drivers and introduce employment policies that specifically address the needs of migrant workers.
In June 2021, the CCP proposed making the rich and well-developed Zhejiang province a “demonstration zone for achieving common prosperity”. In 2020, Zhejiang’s GDP was RMB 6.46 trillion (US$1 trillion), with a per capita GDP exceeding RMB 100,000 (US$15,500), and the province’s per capita disposable income was 1.63 times the national average. The CCP plans to improve the quality of development, reform income allocation and reduce the urban-rural gap in Zhejiang, creating a “better residential environment” by 2035. During a meeting of the Central Committee for Financial and Economic Affairs in August 2021, Xi mooted the concept of ‘common prosperity,’ a plan to redistribute wealth, “rejig excessive incomes” and crackdown on unlawful gains.
Experts suggest China should raise direct taxes and lower indirect taxes. China’s direct to indirect tax ratio is about 3:7, and Shi Zhengwen, a professor at China University of Political Science and Law, has proposed levying property taxes on the rich buying multiple homes and on inheritance. Indirect taxation on commodities means consumers must shoulder the burden. Shi reasons that the actual tax burden of the wealthy is lower than that of the poor, contributing to a growing disparity in wealth.
The CCP endeavours to push a “tertiary” redistribution of wealth to improve the incomes of the poor through charity and donations. According to Jia Ruoxiang, director of the Comprehensive Research Office of the Institute of Land Development and Regional Economics of the National Development and Reform Commission of China, “Tertiary redistribution of wealth is aimed at some high-income groups, encouraging them to participate in some charitable undertakings. By taking on more social responsibilities, they will be returning their accumulated wealth to the society”. For instance, tech giant Tencent is planning to invest around RMB 50 billion (US$7.71 billion) into rural areas to upgrade medical and primary education facilities.
The hukou system also exacerbates poverty. Under the household registration policy, an individual is logged as a resident in a certain area (rural or urban), giving them access to different public services. In China, while only 36 percent of the population possess an urban hukou and 64 percent rural, over 70 percent of children have a rural hukou. In urban areas, the children of rural migrants struggle to be placed in local state schools, and must either be sent to private institutions that are unaffordable for most or return to their hometowns to study in village schools.
Additionally, although China has expanded enrolment to universities, with nearly 10 million new students annually, students from rural areas continue to be left behind. The number of rural students in China’s top 1 percent universities has fallen—about 0.3 percent of rural students make the cut as compared to 2.8 percent of their urban peers. Beijing’s Tsinghua University and Peking University have an acceptance rate of around 1 percent for local students, but only one-tenth of that for applicants from areas outside the capital.
Under the 14th Five-Year Plan (2021-25), efforts are underway to ease residency restraints by allowing people from the rural hinterland to settle in urban areas permanently. In March 2021, Suzhou city, an economic hub in Jiangsu province, began to grant hukous to individuals with college degrees. But despite some loosening of residency restrictions, the odds remain stacked against the poor. Barely 4 percent of the 130,000 non-native applicants in Beijing are on a shortlist for a local hukou. Shenzhen city, with a population of 17.5 million, has blamed new settlers for rising real estate costs and has made it tougher for the less educated to acquire a local hukou. A study found that the probability of students with a hukou in the poorest counties securing a seat in a university were 1 to 7 in comparison to their urban peers, with the odds increasing to 1 to 14 for admission to elite institutions. Consequently, a rural hukou can severely impact upward mobility, limiting access to quality education.
Nevertheless, the CCP is hoping to combat social inequality and improve living standards through schemes that push ‘common prosperity’ to ensure that the future workforce can contribute productively to the economy.
Poverty Reduction and Political Control
The CCP has tried to push the narrative that the goal of the poverty alleviation campaign is improving living standards for all. “The new era will be for the Chinese people of all ethnic groups to work together and work hard to create a better life for themselves and ultimately achieve common prosperity for everyone,” Xi said at the National Congress in 2017 when he began his second term in office.
However, the CCP is also using the poverty reduction effort to exercise informal political control. The programme has been used to enforce state authority in restive regions like Tibet and Xinjiang by co-opting locals and infiltrating the local population. As part of the poverty reduction campaign, the CCP runs a ‘pairing assistance’ programme under which party cadres and officials from prosperous provinces are deputed to impoverished areas to share their experiences. However, human rights groups allege that CCP members gather information on people living in hamlets to curb sensitive political issues from gathering momentum. While the officials are ostensibly deputed to manage poverty alleviation initiatives, they are placed in religious institutions and village and neighbourhood committees to allegedly conduct political education campaigns to ensure compliance.
The poverty alleviation campaign also includes a vocation training project that aims to impart skills like mining, sewing and cooking to Tibetan herders and farmers to help them earn more. But the CCP also hopes to use this project to purge the “bad influence of religion” and weed out “backward thoughts”. The People’s Liberation Army administers the programme with the goal of instilling patriotism. Another aspect of the campaign has been to resettle Tibetan herders in better accommodation to ostensibly improve their living conditions. Between 2016 and 2020, more than 50 million people were relocated from “unsuitable dwellings” into new homes in urban areas across China. In Tibet, 266,000 nomads and farmers have been transferred into 960 new relocation areas. At the new location, the migrants are given ‘ideological education’ in groups and bunched into clusters of 10-15 families.
Burnishing China’s Image
China’s poverty reduction initiative has ramifications beyond its borders as an important component of the country’s—and by extension, the CCP’s—image on the global stage. The West engaged with China in the hope that greater interaction will help it gravitate towards liberal political values and democracy. But Xi is seeking to remould the global system by relegating Western liberal ideals to the sidelines, and promoting the Chinese developmental model; China’s victory against absolute poverty can be projected to legitimise its development model of authoritarianism and state-led capitalism.
The acrimony surrounding Joe Biden’s victory in the 2020 US presidential election, and the attempt by supporters of former US President Donald Trump to thwart the democratic process in the US Congress in January 2021 seems to have been an inflection point for China in its efforts to popularise its authoritarian model. In the aftermath of the incident, the CCP pushed a line that democracy was “flawed” and an “unsound” system that the US seemed keen that other nations practice.,  While labelling the West as in decline due to its political system, the CCP chose to posit its own “Chinese-style democracy” as a counter. China is attempting to promote its poverty alleviation programme as a viable template for developing nations. “The Chinese economic model offers an option for nations who want to accelerate their development while preserving their independence,” Xi said in a speech at the 2017 National Congress.
For the CCP, the poverty alleviation campaign is also handy to deflect criticism over rights violations, and it has tied the campaign to the preservation of human rights. China has argued that while the West merely talks about human rights, its efforts to lift people out of deprivation is ensuring genuine protection of rights. The CCP’s new narrative blames poverty and income inequality in the West for social strife that result in movements like Black Lives Matter, while contrasting its own efforts at spreading prosperity in provinces where ethnic minorities reside.
China also appears intent on mainstreaming its developmental system given concerns of purported ideological infiltration. An internal CCP manual has warned that “rival forces create disarray in society and topple regimes by breaching the ideological sphere and creating confusion among people”. In turn, the CCP promotes the idea of an international order that is more “open” and “diverse,” putting authoritarian governance systems and values on a par with democratic values.
China’s foreign and domestic policies are aimed at maintaining stability and ensuring the primacy of the CCP. The CCP’s political legitimacy stems from its ability to improve the living conditions of the Chinese people. With double-digit economic growth becoming elusive and social disparities increasing due to the COVID-19 pandemic, the CCP’s poverty alleviation campaign has gained new momentum.
The programme helps create a new image for the CCP as a caring entity and shore up its legitimacy in the eyes of the people. “As long as we adhere to the leadership of the Party and follow the road of socialism with Chinese characteristics, we will certainly be able to accomplish difficult tasks such as getting rid of poverty and tackling key problems,” Xi said at an event commemorating the nation’s victory in poverty alleviation. Since this ‘victory’ bears his imprimatur, Xi will likely use the achievement to consolidate power beyond 2022.
However, even as the poverty alleviation programme might be a useful means to augment state capacity in regions like Tibet and Xinjiang, China is only exposing its Achilles heel. With Sino-US tensions rising, its forced labour practices in these areas will come under increased scrutiny and may invite stiffer sanctions.
Legitimising China’s development model of authoritarianism and state-guided markets is an important aspiration for the CCP, especially as it celebrates its centenary. If other developing nations find China’s governance model attractive after evaluating its success in reducing poverty, they may also be tempted to adopt other aspects of China’s system, such as clamping down on individual liberties and freedom of speech, which will pose challenges to the key tenets of liberal democracies.
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