Asset Poverty in Rural China: Evidence from the 2009 Chinese Household Income Project

Background and Purpose: Empirical studies report that income growth induced by the economic reform resulted in poverty reduction in China. Nevertheless, poverty in rural China has not been improved significantly. By defining asset poverty as insufficiency of assets to meet household basic needs for a limited period of time, this study examines 1) asset-poverty rate in rural China in accordance with different asset-poverty measurements; 2) demographic characteristics of asset-poverty households; 3) factors that prevent asset poor from avoiding poverty; 4) policy implications in rural China.  

Methods: This study uses China Household Income Project (CHIP) 2009 data, which is one of the most updated national representative datasets including asset assessment. Using a multistage probability sampling method, the dataset includes cases well representing geographic and social diversity of China. The sub-dataset for rural area has a sample size of 8000 households. Referring to the World Bank poverty line, rural poverty line set by Chinese government, and the minimum expense self-reported, different asset-poverty lines are set for calculating asset-poverty rate based using net worth, net worth minus home equity, and liquid assets. In addition to the descriptive statistics, logistic regression and linear regression are conducted to test the association between asset-poverty and household demographics.

Results: The asset-poverty rates based on net worth and net worth without home equity vary from 1.74% to 2.06% and from 8.42% to 11.01%, respectively. The liquid asset-poverty rate based on the World Bank poverty line is 26.68%, approximately six times that of the income poverty rate (4.2%) in rural China. Regardless of different types of asset poverty, it is asserted that most of asset poor have no or even negative assets. Households headed by younger adults, non-married persons, less healthy populations, less educated people, people who do not reside in coastal areas, people who belong to minor ethnicity, people who migrate to work or people with lower income from non-agricultural employments, are more likely to be asset poor.

Conclusions and Implications: Although the economic reform has been implemented since 1978, poverty in rural China is still prominent nowadays and has been underestimated, given by noticeable disparity between liquid asset-poverty rate and official statistics of poverty rate based on income. Further adjustments of existing poverty measurements set by Chinese government are necessary. Another, due to lack of productive assets, liquid assets and access to secure debt, asset poor have difficulties in escaping from poverty. This finding implicates more efforts of helping poor populations accumulate assets are needed, especially enhancing the availability of owning savings and formal credits. Lastly, different poverty rates between net worth and net worth without home equity imply the necessity of loosening regulations on real estate transactions in rural China.