ABSTRACT
The Chinese national poverty line has been based on the cost of consumption of a minimum calorie intake plus a non-food component. Growth creates losers as well as winners and can also add to, as well as reduce, poverty. In China the main reallocations of the 1990s have involved industrial state owned enterprises, many of which are internationally uncompetitive, and are only maintained in operation by central government subsidies. Income distribution can change rapidly and hence weaken the impact of growth an poverty reduction. A modest increase in inequality may be acceptable but beyond a certain point it may become detrimental in growth as well as poverty-reduction terms. Direct poverty reduction is anticipated from impending labour market reform. Cynics would say that one simple lesson from the Chinese case is that one can remove poverty as a policy problem by setting the poverty line low enough.
