Author: Martin Ravallion, Shaohua Chen.

While the incidence of extreme poverty fell dramatically in China over 1980–2001, progress was uneven over time and across provinces. Rural areas accounted for the bulk of the gains to the poor, though migration to urban areas helped. Rural economic growth was far more important to national poverty reduction than urban economic growth; agriculture played a far more important role than the secondary or tertiary sources of GDP. Taxation of farmers and inflation hurt the poor; local government spending helped them in absolute terms; external trade had little short-term impact. Provinces starting with relatively high inequality saw slower progress against poverty, due both to lower growth and a lower growth elasticity of poverty reduction.