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Speeches & Transcripts September 26, 2021

World Bank Country Director for China Martin Raiser's Speech at the second Sustainable Development Forum

Distinguished Vice President Long, dear fellow panelists, ladies and gentlemen

Let me begin by congratulating the Development Research Center under the State Council, the Municipal Government of Beijing and our friends and colleagues from UNDESA, UNESCAP and UNOSSC for organizing this Sustainable Development Forum. This is a timely occasion to remind ourselves of the 2030 agenda and renew our collective commitment to its goals.

The world is facing unprecedented challenges in the wake of the COVID 19 pandemic and the specter of uncontrollable climate change. As development partners, when the world faces severe challenges as we do today, our first and foremost attention should be on those least able to protect themselves. Indeed, if COVID-19 has taught us anything, it is that our gains in poverty reduction and shared prosperity are fragile. Today, we face the risk of an uneven recovery because of inequities in access to vaccines, in the quality of health systems and in the policy space available to provide sustained support to businesses and households. We estimate that the economic impact of COVID-19 may have increased the number of extreme poor people globally by about 100 million. Inequality, already high before the pandemic risks increasing further.

It is in this context that China’s own experience deserves special attention. Allow me to focus the remainder of my brief remarks on this experience and what we can learn from it.

First, China in 2020 announced the eradication of extreme poverty. This is one of the sustainable development goals and China should be congratulated on this achievement, a decade early! Together with the Center for International Knowledge in Development (CIKD) we have analyzed China’s poverty reduction. Our key findings suggest that it was primarily a story of sustained economic growth over four decades. This was possible, in part, because China began its reforms in the 1980s with favorable conditions: high rates of literacy and life expectancy, high domestic savings and significant technical capacity (albeit without corresponding technologies). Economic reforms and the growing role of markets and the private sector were also important, as were sustained public investments in infrastructure and in health and education services. This is a fairly standard story of successful development and yet it isn’t easy. China’s administrative capacity and a policy orientation that leveraged foreign competition and comparative advantage played a key role.

Second, despite the eradication of extreme poverty, China’s poverty reduction agenda is not over. Indeed, using a standard of poverty of US$5.5 per day, more appropriate to upper middle-income countries like China, there are still some 180m people that can be considered poor or vulnerable. The profile of these 180m people is significantly more diverse than the profile of the extreme poor. Among them is around one third living in urban areas, doing informal sector jobs with limited access to education and health services and limited social protection. The COVID-19 pandemic hit this group hard, at least in the early phase, forcing many to return to their villages. To address the vulnerabilities of this group, therefore, the traditional focus of poverty reduction initiatives on rural areas may not be sufficient. Instead, the integration of the new rural revitalization strategy with existing social assistance mechanisms could help create a more integrated system of social protection, better suited for the growing volatility characteristic of a modern service-oriented economy.

Third, China’s poverty reduction success was achieved despite a fairly rapid increase in inequality during the first three decades of reform and opening up. China’s Gini coefficient increased from below 30 to almost 50, and despite a small reduction since around 2011, income inequality in China remains high. Going forward, growth is likely to be slower and the drivers of growth will shift. As a result, addressing inequality may become more important to achieve lasting reduction in vulnerability. This is arguably one of the motivations for China’s focus on common prosperity, which I interpret as the objective to create equal opportunities for all. This is a laudable aim – and indeed fully consistent with the spirit of the Sustainable Development goals. Few policies could be more important in this regard than the expansion of access to quality education and health services for China’s rural residents – including those living in cities but with a rural hukou. The cost of closing the education gap could be reduced by relaxing or fully abolishing remaining hukou restrictions. This and the introduction of more progressive property and income taxation to offset the increased cost of service provision on local governments could go a long way to sustain China’s poverty reduction gains into the future.

Ladies and gentlemen – China’s story of how some 850m people escaped absolute poverty is an inspiration for all of us. The country’s transition to high income is no less daunting in the challenges it presents for social policies. I am confident that China will generate more lessons for sustainable development as it addresses these challenges. Together with our UN partners, we are privileged to be a small part of this journey.