ABSTRACT
The evolution of poverty is closely linked to the overall reform process in China. This process started in the rural areas in the beginning of the 1980s, with the de-collectivization of the commune system, and then spread to the urban areas in the beginning of the 1990s with privatization of state owned enterprises (SOEs). The effects of these reforms have been a reduction in absolute poverty in the countryside, while inequality increased massively (Kanbur and Zhang, 1999; Ravallion and Chen, 2007). Also regional inequality increased substantially due to the official policy of creating wealth in the Eastern regions through the “coastal development” strategy. These inequality trends were reinforced by the introduction of market-system and public sector reform which resulted in user fees, both formally and informally. This led to reduced access to essential public services for the poor in China. These inequalities could reinforce the “twin-peak” poverty-growth path, in which inequality and economic growth rise simultaneously.
