The author claims that ‘Finding Beijing's much trumpeted "400 million Chinese that have been lifted [out of] poverty" is like finding Noah's Ark’, and quotes an unnamed UN source as having said that ‘... more than 300 million Chinese in some of the poorer regions of China live on US$1 or less a day, six times more [people] than that [sic] reported by Chinese authorities.’

These statements are out-of-date and inaccurate. In a press release of 26 August 2008, the World Bank provided new estimates of poverty in the developing world, based on the final results of the 2005 International Comparison Program that had been released earlier in the year. Using an estimated poverty line based on the average national poverty line for the poorest 10-20 countries (US$1.25 in 2005 prices), the Bank estimated that the number of people living in extreme poverty in China had dropped from 835 million in 1981 to 207 million in 2005. As a proportion of the population, the numbers of people in China living on less that US$1.25 per day (2005 prices) were estimated to have declined from 84 percent to 16 percent.

These estimates are of course subject to a considerable margin of error, but they must be regarded as more reliable than the earlier estimates published by the UN that Arthur Thomas quotes (which would have come from the World Bank in the first place). The World Bank quoted the Director of its Development Research Group, Martin Ravallion, as saying that “The new estimates are a major advance in poverty measurement because they are based on far better price data for assuring that the poverty lines are comparable across countries.'

I want to ask a question.

In your previous article on this topic, on January 12, you argued that regeneration projects, especially stopping desertification, had failed. This would be very disappointing, and sad, if true.

What evidence do you have for this claim? I had believed that the rate of desertification had been arrested.

IanC

Thanks for your comment.

Because of serious flaws in raw data collection combined with official's self-interest and flawed upstream methodology and China's statistics, I question the official numbers.

World Bank has experience in dealing with China but must comply with protocol, including acceptance of China's official statistics.

World Bank report "The Cost of Pollution in China – Economic Estimates of Physical Damages" is an example of problems it faces in presenting reports contrary to China's official expectations.

March 2007, the CCP pressured World Bank to modify the report exposing the lethal effects on the population of China's reckless disregard for the environment. 33% of the document was deleted, including crucial maps.

It was July 2007 before World Bank released the heavily censored report containing reference to widespread pollution related deaths and debilitating life long diseases.

To its credit, World Bank published the final censored report despite Beijing's objections. Reference to 750,000 premature pollution related deaths a year, 16 of the world's 20 most polluted cities being in China, and the disproportionately affected poor, remained. Beijing argued that releasing the uncensored report would trigger widespread civil unrest.

Those with extensive experience in China acknowledge that averaging, as well as statistics on demographics and wealth distribution, can be meaningless and misleading.

World Bank and UNDP reports would obviously link the rise of the Middle Class to the Gini Coefficient in China and that is where problems can arise. Combining the model for "estimated poverty line based on the average national poverty line for the poorest 10-20 countries" and its considerable margin of error, the possibility of a disproportionate variation in the meaning of Middle Class will compound errors.

Which Middle Class?
While numbers range from 100 to 150 million, the official January 2007 estimate quotes 80 million. What numbers did the World Bank use?

2 official conflicting interpretations define China's Middle Class -

1. Households with an annual income between US$8,700 to US$73,000 equivalent.
The include entrepreneurs, managers in high-tech, foreign firms, financial institutions, and "some" self-employed private entrepreneurs.

contd

Continuing
2. Recent state media reports on civil disturbances refer to middle class including taxi drivers, teachers, auxiliary police officers seeking pay rises.
Government media regularly quote National Bureau of Statistics for end 2006 estimating the "Middle Class to be around 5% of China's total population" and earning of US$7,250 and US$60,000 equivalent a year.

2008 data adds confusion with references of per-capita urban resident income reaching 13,786 yuan ($1,907).

Where is the statistical line drawn?

Who are the Poor
To protect China's developing nation status, the CCP draws attention to the "rural poor sector" in the media. A recent official statement referred to "China's 800 million peasants."

That is despite massive expenditure on symbols of power and wealth including the 2008 Olympics, the 2010 Asian Games, the 2010 world Expo and reference to its massive cash reserves.

Understanding China's official statistics lies in its registered population. Those not registered, don't exist. Desertification, relocations, illegal migrant employment has resulted in millions of rural poor losing their registration or being misrepresented.

Prison and work camp inmates don't exist. Neither do millions employed by Chinese companies operating illegal worker migration into Burma's northeast, Russia's Far East, Pakistan, and many Chinese companies in the Africas and South America.

In Tibet mass relocations displaced nomads from rangeland to urban housing in areas where there is no work. Then there is Drapchi Prison.

Other indicators should include China wealth disparity and especially its high hidden and trade debt levels. While the US$2 trillion exchange reserves sound impressive, it needs to be put in context against China's US$2.4 trillion trade debt due for rollover in 2009. Another audit trail for investigation is the timeframe involved in accumulating personal savings in rural regions.

What is the basis for calculating averages? Use the actual number of registered rural poor? Who makes up the Middle Class?

I appreciate the constraints under which World Bank works but unless the forgoing, and many other discrepancies are incorporated in the model, I would rely more on the earlier World Bank numbers.

AT

Arthur,

My own experiences in China revealed to me that many an entrepreneur is not your honest Confucian broker, rather, their ways more charateristic on the "Shang",from their days of old. Surely, Shang in Confucian clothing should be dealt with caution.

In the same frame, do you feel the popular "How to Do Business in China" books on the shelves of many a book store, really provide adequate insights in the ways of Mr China ordinary businessman, oliarchs and politicians?

Arthur T,

Thank you for your reactions to my comment. I can’t begin to answer all of your questions in a (maximum) 350-word post.

You ask ‘What is the basis for calculating averages? Use the actual number of registered rural poor? Who makes up the Middle Class?’

I never mentioned the middle class and that is a separate matter from the measurement of absolute poverty. No, the Bank’s poverty estimates do not use the number of registered poor. They use results from household surveys combined with data on prices collected for the International Comparisons Program.

You say that ‘Those with extensive experience in China acknowledge that averaging, as well as statistics on demographics and wealth distribution, can be meaningless and misleading.’ I don’t know what you mean by averaging. I was quoting estimates of the population living below a standardised poverty threshold, which emerged from an international comparative exercise of unprecedented scope.

I didn’t quote any demographic statistics. But to take one demographic comparison that doesn’t seem meaningless to me, China’s estimated under-five mortality rate’ decreased from 120 per thousand live births in 1970 to 27 in 2005 – a reduction of almost 80 percent. Tragically, there are some countries (Rwanda, Zambia, Zimbabwe) in which there was virtually no change in child mortality over the same period, and others in which the decrease was quite modest by comparison with China’s.

To my mind, this steep fall is evidence supporting the likelihood that there has been a substantial (indeed unprecedented) decline in income poverty in China, which may now be reversed to some extent.

This steep decline is not inconsistent with the distribution of wealth having become more unequal over the same period. That is an important subject in its own right, but is not relevant to my comment.

IanC,

The Gini Co-efficient is a common measure of the level of economic equity. It might prove helpful to you?

That said, if parties to the Lorenze curves, both become richer, together, the disparity remains unchanged.

Without looking, my guess is the urban Chinese entrepreneurs are becoming wealthier than China's rural folk.

In dynastic China, leaders took better care of the rural classes, because they would retire on the Land, when they didn't have earned income and bribe income, to sustain them.

Berti7

Not sad. Disastrous.

Statistics on regeneration can be misleading. Regeneration also includes orchards and commercial wood chip plantations not in degraded areas. Open space, freeway landscaping Olympics venues also included as is landscaping of government office complexes.

The scope of the problem comes into focus when viewed as an annual overall impact.

China's deserts are merging and expanding between 4,000km2 and 5,000km2 each year.

Each year, China's expanding deserts and annual dust storms impact on the economies and health of downwind South Korea and Japan.

China also uses the term "Mongolia" loosely when referring to dust storm sources when it should name Inner Mongolia and not, independent Mongolia.

Resource development is creating new deserts in Tibet. Forcing nomadic herders into fixed communities has also resulted in massive pasture degradation.

AT

Oliver

If you know your own business very well, then you are in a good position to make on floor assessments, but don't forget upstream and downstream differences and traps.

Accept what is available and learn from there with continual research and personal observations. Never accept as wrote, since most are general in approach.

Careful with wording and translators. One word has several meanings in respect to government and corporate titles. Minister could only be a director of a department or even a manager. Ask the same question three or four times on separate occasions during more than one discussion but couched in different terminology. Save one up for a heavy meal when the spirits are flowing and ask different individuals.

Impossible to become a short term expert. Take it step by step, otherwise information overload, confusion, and errors.

Get used to operating in a country where "half truth, lies and damn lies" is common place. This is more to do with face (mianzi) than the inference the west gives to the practice. Face is sacred and applies to the individual, family, corporation, and government. To be aware provides balance and awareness. Respect the customs of the country you are in.

AT.

Arthur,

Thanks for your reply.

"Get used to operating in a country where "half truth, lies and damn lies" is common place." - AT

A PAP (Singapore) Minister and I went into provincial China (2001), to purchase a secondary school. In China, we were encouraged towards the purchase of the same, on the basis of the profitability of the immediate stratgic business unit.

After investigations were carried-out, it transpired said immediate strategic business was not really where the Chinese party was looking to make the kernel profit. Rather, the profit was in the student of accommodation, which was not part of the joint venture deal.

In my experience, Americans (universities mainly) and other Westerners are relatively open, whereas, Chinese are more knowledge retentive.