Chinese Poverty: Assessing the Impact of Alternative Assumptions

This paper investigates how estimates of the extent and trend of income poverty in China between 1990 and 2001 vary as a result of alternative plausible assumptions concerning key parameters that influence the poverty line and estimated consumption levels. Our methodology focuses on the following sources of variation: alternative purchasing power parity conversion factors, alternative estimates of true per capita private incomes, alternative estimates of the share of income assumed to be consumed by the lower income groups, and alternative consumer price indices. We find that regardless of the assumptions we make within a reasonable range, a remarkable reduction in consumption poverty occurred in China during the 1990s. However, estimates of the extent of Chinese poverty in any year are greatly influenced by the assumptions made. China’s record of reducing aggregate deprivations is encouraging, but must be interpreted with care, especially in view of some recent evidence concerning possible increases in consumption poverty (especially in urban areas) and worsening nutrition.