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Speeches & Transcripts December 7, 2017

From local to global: China’s role in global poverty reduction and the future of development

Vice Governor YU Guo’an, Party Secretary SUN Aijun, Mayor XIE Weijun, Vice President GAO Hongbing, ladies and gentlemen.

It is my honor to be here with you today at the fifth Taobao village summit, and to learn more about this exciting initiative that is having a great and growing impact for people across China. The sessions in the next few days will explore the important value of e-commerce in supporting entrepreneurship, employment, poverty alleviation and rural rejuvenation in China.

At last year’s Taobao Village Summit, the World Bank and the Alibaba Group signed a joint research agreement to examine e-commerce development in China and the impact of Alibaba’s largest social welfare program in supporting rural poverty alleviation. 

So I am especially pleased to see the evolution of our partnership with Alibaba Group one year later, as we come closer to understanding the role that e-commerce can play in helping poor families improve their lives.

We expect to launch our results in early 2018, and our joint research team will conduct surveys in selected Taobao and non-Taobao villages to examine what is driving their success alongside the characteristics of those who have benefited from engaging in e-commerce.

Our joint analysis is showing promising impacts on rural communities and for poor people, which can inform the next wave of Taobao village development, and provide lessons for other countries.

I will share some of these findings shortly, but let me first take a step back and put China in the context of the world’s progress on poverty reduction over the past few decades.

The world as a whole has made impressive strides on poverty reduction. Since 1990 in fact, nearly 1.1 billion people have moved out of extreme poverty, which means that the number of people living on 1 dollar and 90 cents per day, or less, has reduced dramatically.

From 2012 to 2013 alone, nearly 100 million people escaped extreme poverty. That’s a quarter of a million people per day; or 200 people per minute.

China and many of its neighbors in East Asia have largely driven the world’s progress. In China alone, nearly 800 million people have escaped poverty since the 1980s.  

And while East Asia was home to around half of the world’s extreme poor in 1990, today just over 9 percent of the extreme poor live in the region.

But the challenge is far from over. According to our estimates, we know that nearly 800 million people in the world still live in extreme deprivation. 25 million of those people live in China.

In a world with nearly endless resources and wealth, this is unacceptable.

So how do we reach those remaining in extreme poverty, and work to fight the global challenges that threaten progress in all corners of the globe?

Growth is important, but it must be inclusive. The benefits of overall growth simply cannot be captured by a privileged few if we expect to see progress and prosperity in the world.

To fuel that growth and build a healthy, educated, engaged society, countries must invest in quality education, in health, in good infrastructure, sanitation, and water for everyone. Without these things, the potential of millions is left on the sidelines, permanently curbed due to preventable barriers.

The rural Taobao program, for example, is using rural education to help poverty-stricken rural areas. The program is setting up village book corners, online classes, and family hotlines, providing stationery for children, and launching an open educational platform.

At the same time, we have to acknowledge that there are billions of people living in the world who are hovering around the poverty line, having progressed a bit, but not nearly enough to secure a future.

Countries that insure their citizens against the risks that can push them back into poverty have been able to protect those gains and make sure that fewer people fall into destitution following a drought, a flood, the loss of a job, or an illness in the family.

China has followed a remarkable development path over the past decades, fueled by strong growth, paired with investments in people to ensure that growth can translate into poverty reduction.

Consider that forty years ago, China was a largely agricultural poor economy, and that today it has one of the world’s largest economies, with its people moving into more skill-and knowledge-intensive sectors.

Nearly all segments of the population, including the poor and vulnerable, have shared the benefits of this progress- and China has ambitious plans to reach those who are still left behind.  

This was the right path for China’s context, and can provide lessons that are helpful for other countries. But, the country still has a ways to go in moving people beyond vulnerability, and in securing equal opportunities and quality basic services for all.

To complicate matters, countries today face increasing risks that know no borders. Issues such as climate change, inequality, economic instability, fragility, and conflict reverberate beyond individual country borders and have consequences for global prosperity and local progress.

No one country can confront these threats alone: international cooperation and action on these issues will be crucial to preventing and mitigating their impacts.

In short: we as a global community have years of progress to build upon, but an uncertain road ahead.

At the World Bank Group, we work with government partners around the world to try to forge a clear path ahead for the most deprived people in every country.

One of the questions that we ask often is: what is the development path for countries that are still struggling to progress?

Will they follow the same path as countries like China, where people moved out of agriculture, into manufacturing, and onward from there?

Or is there scope for some of today’s developing countries to make their own path, learning from those countries that have now moved into middle-income status, and leapfrogging some of the steps that got them there?

Mobile networks and internet access have helped expand the definition of connectivity beyond roads and bridges, enabling those living in remote areas to benefit from services that were previously out of reach.  

We have seen innovations in countries like Kenya, where mobile money has virtually eradicated the need for brick-and-mortar Bank branches in rural areas, and has allowed people who were previously constrained by their remote locations to access financial services and markets.

The grassroots development of Taobao villages harnesses that connectivity and provides some interesting lessons for other countries to consider.  

We know that e-commerce and online retail have developed very rapidly in China.

In recent years, the number of Taobao Villages has increased dramatically, and they are increasingly clustered together, promoting the sale of rural goods and creating jobs.

Rural Taobao in particular has helped expand e-commerce in poor counties. This has provided various goods and jobs for villagers, thus making rural life better.

And because e-commerce provides a more flexible mode of employment and entrepreneurship, it has had a noticeable impact on women in particular.

Women participate in e-commerce entrepreneurship at an equal rate to men and their businesses account for half of total online transactions, whereas in traditional activities they are outnumbered.

Women who own businesses often inspire their friends and neighbors to follow their lead, thus expanding a network of businesswomen and increasing their contributions to the local and national economies.

And we know that when women work, communities benefit. They invest more in their families, their children’s education and health, which can have important impacts for the next generation.

The early findings from our joint research with Alibaba shows that, in fact, e-commerce can help reduce poverty and promote shared prosperity.

It does so by improving market access, which supports local development; and, by spurring entrepreneurship to create jobs.  

But so far, much of what we know is anecdotal. We have heard stories and seen accounts of families and individuals who have started their own e-commerce businesses and then had new cars and houses a year or two later.

But we do not yet have rigorous data to connect those two things.

This is why our partnership with Alibaba is so important- so that we can make decisions, revise programs, and better understand what kind of impact e-commerce is having on people, based on actual data. I am really looking forward to seeing the results of our survey work early next year.

But importantly, I am looking forward to seeing the impacts with my own eyes this afternoon, when I will have a chance to visit some of these villages myself.

This approach is uniquely suited to China, but several lessons can be pulled out for other contexts. 

  1. being connected to a market- whether virtually or physically- is critical for consumers and producers. Otherwise, they are limited to their local community, curbing their potential to earn more to invest in themselves and their families. 
  2. Job creation is the clearest path to poverty reduction- allowing poor workers to translate growth into improvements in their lives and those of their communities 
  3. Progress is not the responsibility of the government alone- private sector partners, citizens, and local communities have an important role to play in developing solutions and spurring action on poverty reduction and equal opportunity.

In the next few days, as you listen, share, and learn around the theme of "infinite possibilities" – I hope you will be able to build on what is working and come up with even more creative and sustainable ideas for the way forward.

These will not only benefit China, but can inspire other countries to seek out unconventional solutions and a wider set of partners to tackle some of their most persistent challenges.

Thank you again to the organizers and to the local community for welcoming me, and I wish you all a constructive and enjoyable summit.