Reducing Inequality for Shared Growth in China Strategy and Policy Options for Guangdong Province DIRECTIONS IN DEVELOPMENT Human Development Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized 58846 Reducing Inequality for Shared Growth in China Reducing Inequality for Shared Growth in China Strategy and Policy Options for Guangdong Province © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. ISBN: 978-0-8213-8484-8 eISBN: 978-0-8213-8501-2 DOI: 10.1596/978-0-8213-8484-8 Library of Congress Cataloging-in-Publication Data Reducing inequality for shared growth in China : strategy and policy options for Guangdong province. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8484-8 — ISBN 978-0-8213-8501-2 (electronic) 1. Guangdong Sheng (China)—Social conditions—21st century. 2. Guangdong Sheng (China)—Social policy. 3. Guangdong Sheng (China)—Social planning. 4. City planning— China—Guangdong Sheng. 5. Education—China—Guangdong Sheng. 6. Social change— China—Guangdong Sheng. 7. Guangdong Sheng (China)—Politics and government—21st century. I. World Bank. HN740.G83R43 2010 307.3 '4095127—dc22 2010030042 Cover photo: Panorama Media Limited Cover design: Naylor Design, Washington, DC v Foreword by Wang Yang xvii Foreword by James W. Adams xxiii Acknowledgments xxvii Abbreviations xxix Overview 1 Background of Guangdong Province 3 The Challenge of Inequality in Guangdong 4 Reducing Inequality with Spatially Unbalanced Growth 10 Reducing Inequality: A Three-Pillar Strategy 12 Eliminating Absolute Poverty through the Dibao System 15 Boosting Rural Income by Giving People Opportunities 18 Investing in People through More Equitable Service Delivery 29 Conclusion 39 Notes 41 References 42 Contents Chapter 1 Understanding Poverty and Inequality in Guangdong 45 Measuring Poverty in Guangdong 49 The Current Poverty Situation in Guangdong 53 Profile of the Poor 62 Inequality in Guangdong 65 Summary and Policy Implications 74 Notes 76 References 76 Chapter 2 Supporting the Poor through Rural Dibao 79 How to Evaluate a Social Assistance Program 81 Evolution and Main Policy Features of Rural Dibao in Guangdong 83 Challenges Faced by the Dibao Program in Guangdong 86 Building a Dibao Program for the Future: Policy Recommendations 98 Notes 102 References 102 Chapter 3 Developing an Efficient and Integrated Labor Market in Guangdong Province 103 Labor Market Overview 106 Barriers to a Mobile and Flexible Labor Market 116 Policy Implications 120 Notes 124 References 124 Chapter 4 Making Finance Work in Reducing Inequality and Poverty in Guangdong 127 The Current Situation 131 Issues and Problems 147 Conclusions and Summary of Recommendations 157 Annex 4.1 Comparison of the Regulation Framework for Commercial Banks and Rural Financial Institutions, 2008 162 Annex 4.2 Different Requirements for Microloan Companies by Central versus Local Authorities 164 vi Contents Annex 4.3 Innovative MSE Lending Project in China 168 Annex 4.4 Mutual Societies in Poor Villages 170 Notes 171 References 171 Chapter 5 Guangdong: Reforming Land Policy for Better Rights Protection and a Healthier Development Pattern 173 A New Platform for Pursuing Bolder Innovations 174 Conclusions 190 Notes 192 References 192 Chapter 6 Spending for Compulsory Education in Guangdong 193 Key Outcome Gaps in Compulsory Education 195 Spending Gaps in Compulsory Education and the New Free Compulsory Education Scheme 204 Conclusions and Policy Implications 235 Annex 6.1: Outcome Indicators in Guangdong Province 244 Annex 6.2: Spending Indicators in Guangdong Province 247 Notes 259 References 260 Chapter 7 Skills Development in Guangdong Province 261 Preparing for Change 264 Meeting the Challenge for Skills Development 274 Annex 7.1: Tables 287 Annex 7.2: Rural and Urban Household Surveys 296 Notes 299 References 300 Chapter 8 Reducing Regional Disparities in Health Services in Guangdong Province: Challenges and Options 303 The Challenge of Inequality and Regional Disparities 305 Contents vii Resource Mobilization and Allocation 314 Summary and Recommendations 320 Improvement of the Efficiency and Equity of Health Protection Schemes 321 Strengthening of Health Services Delivery Capacity in the Lagging Areas 332 Issues Needing Further Attention and Suggestions for Further Study 340 Notes 341 References 342 Index 343 Boxes 1.1 Guangdong Rural and Urban Household Survey Data 48 1.2 Measuring the Incidence, Depth, and Severity of Poverty 54 1.3 Measuring Inequality 66 3.1 Measuring Inequality 105 4.1 Understanding Finance 128 4.2 The Financial Crisis Legacy in Guangdong 135 4.3 The Microlending Experiments by China Postal Savings 147 5.1 Vietnam: Land Policy Reforms and National Land Registration Program 177 5.2 Transferable Development Rights (TDRs) 181 5.3 The Case of Atlanta 184 5.4 Smart Growth 185 5.5 Property Tax as Good Local Tax 189 6.1 Examples of Funding Formulas in Central America 240 8.1 MA Pilot in the Yubei District of Chongqing Municipality 331 8.2 Practice on Retention of Rural Health Workers 338 Map O.1 The Four Regions of Guangdong Province 3 Figures 1.1 Comparison of GDP and Per Capita GDP across China’s Provinces, 2007 46 viii Contents [...]... 3.5 Decomposition of Income Inequality in Guangdong Province, 2007 Poverty Lines in China Comparison of National Poverty Lines in East Asia, Selected Countries Poverty Headcount, Depth, and Severity in Guangdong, 2007 ($2-Per-Day Poverty Line) Concentration of Rural Poverty in Guangdong ($2-Per-Day Poverty Line) Concentration of Urban Poverty in Guangdong ($2-Per-Day Poverty Line) Rural Poverty by... Guangdong by Quintile, 2005–07 Comparison of Gini Indexes of Income Inequality, 2007 Trends in Rural-Urban Disparity: Guangdong and China Lorenz Curves for Per Capita Rural and Urban Income, 2007 Regional Income Disparity in Guangdong and China, 1998–2007 Distribution of Regional Population and Economic Activities in Guangdong, 2007 Urban-Rural Distribution of Population and Economic Activities in Guangdong, ... ($2-Per-Day Poverty Line) Rural Poverty Dynamics in Guangdong ($2-Per-Day Poverty Line) Rural Income Mobility by Quintile, 2005–07 International Comparison of Poverty, 2005 ($2-Per-Day Poverty Line) Profile of Household Poverty in Rural Guangdong, 2007 ($2-Per-Day Poverty Line) Profile of Individual Poverty in Rural Guangdong, 2007 ($2-per-day Poverty Line) Poverty Rate and Distribution in Rural Guangdong, ... be focusing on shortterm measures to sustain growth Meanwhile, maintaining long-term This overview was prepared by Chunlin Zhang and Xiaoqing Yu 1 2 Reducing Inequality for Shared Growth in China competitiveness and more balanced development requires that the government continue to tackle a series of long-term issues in a timely and sensible manner Indeed, the sharp economic slowdown that China has... facilitating the integration of urban and rural economies, reducing disparity, and promoting equality in social service provision As the pioneer of reforms in China for three decades, Guangdong is well-positioned to take on these new challenges and implement a comprehensive approach to development Guangdong s success in fostering shared growth will not only position the province as a leader in China s... Expenditures, and Per Capita GDP by City for Guangdong Province, 2006 Average Annual Wage of Fully Employed Staff and Workers by Economic Sector, 2003 and 2006 Local Government Spending on Education in Guangdong Province, 2000–06 Schools, Enrollment, and Full-Time Teachers by Type of School and City, 2006 Employees Training by Firm Size in Guangdong Province, 2006 Firms Training by Export Status in Guangdong Province, ... reflected in disparities among households and individuals in terms of income and wealth, has risen to an alarming level Some inequality of outcomes is inevitable and even good for efficiency and growth particularly when inequality of income reflects uneven performance among individuals However, inequality of outcomes can become harmful to growth when it is too high and generates substantial inequality. .. deepen reforms in income distribution Sound and fair income distribution is an important part of the institutional design for reducing inequality in opportunities and containing inequality in outcomes Efficiency and fairness need to be properly balanced in both primary distribution and secondary distribution of income, and secondary distribution should pay more attention to fairness and let taxation and. .. China s leading growth powerhouse and a pioneer of reform and opening up for three decades, Guangdong province is now facing the same challenge and has the opportunity to lead the nation again in paving the way for pro-poor and more equitable growth, setting an example for other provinces to follow The recent global economic downturn significantly complicates the challenges faced by Guangdong In response... stimulate the economy and maintain growth; xxiii xxiv Foreword however, it is important to recognize that longer-term issues, such as unbalanced growth, will determine the vitality of the economy and the cohesion of society Despite being China s leading growth powerhouse, Guangdong province like other provinces—faces major challenges in tackling inequality, and the World Bank team examined these along three . Authorized 58846 Reducing Inequality for Shared Growth in China Reducing Inequality for Shared Growth in China Strategy and Policy Options for Guangdong Province ©. 10.1596/97 8-0 -8 21 3-8 48 4-8 Library of Congress Cataloging -in- Publication Data Reducing inequality for shared growth in China : strategy and policy options for Guangdong province. p.