I. Introduction
Analysing China’s social sector performance is crucial for several reasons. The remarkable achievements in poverty alleviation and healthcare improvements are often overlooked by mainstream economists, particularly the role played by the Communist Party of China (CPC) and its members, as well as the coordinated efforts of government and party officials. The CPC set clear targets, and government and party officials worked with great determination to achieve them. The fact that China managed to accomplish these goals within a remarkably short period is nothing short of a historic milestone – an achievement unprecedented in human history (Siddiqui, 2024a).
This issue is particularly significant because, like many other developing economies, China historically had a large proportion of its population living in poverty. Understanding how China successfully eradicated extreme poverty provides valuable lessons for other developing nations, offering a model that can be adapted to their specific conditions (World Bank, 2022).
When the People’s Republic of China was founded in 1949, the government implemented radical land reforms to dismantle land monopolies and promote greater rural equality. However, despite the abolition of the feudal land system, rural poverty remained widespread due to low agricultural productivity and limited investment in rural development (Siddiqui, 2019a). To address this challenge, in 1978 the Chinese Communist Party endorsed economic reforms and fully supported the government’s decision to open the economy to foreign investment and technology (Jiang and He, 2024).
In 1978, nearly 250 million people in rural China were still living in poverty, with an incidence rate of 30.7% (Office of Household Survey of the National Bureau of Statistics, 2020, p. 294). The highly centralized people’s commune system, while initially aimed at collective development, ultimately constrained economic growth and social progress. It became evident that this system was incompatible with the evolving demands of rural production and economic expansion (CPC, 2021).
According to Chinese official statistics, individuals earning below the poverty line of 2,800 yuan per year account for approximately 0.04% of the population, or 5.51 million out of 1.4 billion people. In 2013, the Chinese government adopted the “Targeted Poverty Alleviation” strategy, which has played a crucial role in achieving substantial progress in poverty eradication (Zhang, 2023).
Aligned with China’s governance structure, President Xi Jinping’s poverty alleviation strategy emphasizes a multifaceted approach. A key component of this policy is the promotion of private enterprises, which have significantly contributed to employment generation and socio-economic growth. At the same time, state-owned enterprises, particularly in China’s major commercial centres, have also focused on raising wages for workers, further supporting national poverty reduction efforts.
II. Poverty Alleviation Measures in China
Over the past 45 years, China’s economic reforms and openness to foreign investment and technology have led to remarkable progress in poverty alleviation. According to the World Bank, nearly 800 million people in China have been lifted out of poverty (as shown in Figures 1a and 1b). On a global scale, this achievement represents an unprecedented large-scale poverty reduction effort, often described as nothing short of a miracle (Siddiqui, 2015).
China’s share of the world’s poor declined dramatically from 46.38% in 1980 to 1.3% in 2016, ultimately reaching zero in 2020 (see Figure 2). As a result, China has contributed more than two-thirds of global poverty reduction and has become the first developing country to achieve the poverty reduction target set by the United Nations Millennium Development Goals (MDGs). These accomplishments have significantly improved real incomes for millions of people and have played a pivotal role in advancing the global fight against poverty.
Over the past few decades, market liberalization and economic reforms have fuelled a dramatic increase in trade, driving unprecedented economic growth in China (Siddiqui, 2009). The government has leveraged rising prosperity and incomes to implement development-driven poverty alleviation strategies, intensifying its poverty reduction efforts in recent years. As a result, China has witnessed a remarkable decline in the number of its impoverished citizens (Jiang and He, 2024).
Based on the poverty standard set by the Chinese government in 2010, the rural poor population fell from 770 million in 1978 to 5.51 million by the end of 2019. Over this period, approximately 760 million rural residents were lifted out of poverty, reducing the incidence of poverty from 97.5% to just 0.6%. Absolute poverty, which was widespread in rural areas 40 years ago, has now been completely eradicated (Zhang, 2023).
At the same time, the income structure of rural residents has steadily improved. The share of property income and transfer income in disposable income increased from 6.3% in 1978 to 26.2% in 2023. Meanwhile, the spending power of rural households rose sharply, driven by expanding employment opportunities in China’s rapidly growing manufacturing sector (Siddiqui, 2024b).
Following the 2008 global financial crisis and a decline in China’s export demand—particularly from advanced capitalist markets-the Chinese government shifted its focus toward public investment in infrastructure and housing. This strategic move led to a significant rise in employment and income levels over the past seventeen years (World Bank, 2022).
Additionally, China has diversified its economy and significantly increased trade and investment in developing countries through the Belt and Road Initiative (BRI). This initiative has further strengthened China’s global economic influence while supporting economic development in other countries (Siddiqui, 2019b).
Figure 1a: China’s Poverty Reduction, 1978 – 2018.
Figure 1b: Decline of Extreme Poverty in China, 1990-2016.
Figure 2: The Number of Impoverished People and Poverty Incidence from 1978 to 2019.
To eliminate mass poverty and improve the efficiency of rural productive forces, China initiated rural economic reforms, integrating institutional changes into its poverty alleviation strategy. A key component of these reforms was the establishment of the household contract responsibility system (Sun, 2024).
In 1978, a village in Fengyang County, Anhui Province, took the lead in contracting production responsibilities to individual households or groups of households. In September 1980, the CPC Central Committee formally discussed strengthening and refining the system of responsibility for agricultural production, leading to the nationwide promotion of the “contracting production to the household” policy (CPC Central Committee, 1982, p. 546).
These rural policy reforms granted peasants the right to use land for production, clarified basic production relations in the countryside, and significantly enhanced farmers’ motivation for agricultural work. As a result, the development of rural productive forces accelerated, and peasant incomes rose. Additionally, the establishment of a rural market system encouraged rural commodity production and the rapid growth of township enterprises, further boosting farmers’ earnings (The State Council Information Office of the People’s Republic of China, 2009).
In 1980, nearly 97% of China’s population lived in rural areas, with the vast majority in extreme poverty. Even in urban areas, the poverty rate was as high as 70% of the total urban population. However, the introduction of the household contract responsibility system in the rural sector marked a turning point, stimulating farmers’ interest in economic reforms and allowing them to capitalize on new opportunities. Since then, rapid economic growth has enabled hundreds of millions of people to escape extreme poverty, migrating from villages to cities in search of employment. Additionally, agricultural production increased, leading to higher farmer incomes and improved living standards (Sun, 2024).
Between 1986 and 1993, the Chinese government launched large-scale, development-based poverty alleviation initiatives. As anti-poverty efforts intensified, the nature of China’s poverty problem evolved from widespread deprivation to regional disparities, shifting the government’s approach from relief-based assistance to development-oriented strategies (World Bank, 2022).
In 1994, the government introduced the “National Seven-Year Plan of Poverty Alleviation for 80 Million People.” This plan provided a comprehensive assessment of poverty at the time, outlining clear goals, guidelines, and strategies, as well as defining the methods for fund allocation and implementation (Zhang, 2023).
A new phase of poverty alleviation and development began between 2001 and 2012. In 2001, the government adopted the “Outline of China’s Rural Poverty Alleviation and Development Program (2001–2010),” aimed at accelerating poverty reduction in impoverished regions and further advancing the country’s anti-poverty efforts (Office of Household Survey of the National Bureau of Statistics, 2015, p. 112).
Between 1985 and 1993, the government significantly increased funding for poverty reduction programs, leading to substantial improvements. While widespread poverty that had persisted for decades was greatly alleviated, impoverished populations became increasingly concentrated in western provinces and remote rural areas. During this phase, the government shifted its focus from assisting poor regions to targeting individual households, addressing their specific socio-economic conditions to ensure more effective poverty reduction (Sun, 2024).
From 1980 to 2022, China underwent a series of economic reforms, with the Chinese Communist Party (CPC) playing a leading role in both mobilizing and implementing these reforms to achieve its poverty alleviation targets. The bureaucracy and the Party worked in coordination to meet projected goals for economic development and poverty reduction. The government defined its primary objective as “unleashing and developing the productive forces, lifting the people out of poverty, and helping them achieve prosperity in the shortest time possible” (CPC Central Committee, 2021).
As a result, China has witnessed a remarkable decline in the number of impoverished citizens. Based on the poverty standard set by the Chinese government in 2010, the number of rural poor fell from 770 million in 1978 to 5.51 million by the end of 2019. Over this period, approximately 760 million rural residents were lifted out of poverty, reducing the poverty incidence from 97.5% to just 0.6%. Absolute poverty, which was widespread in rural areas 40 years ago, has now been completely eradicated (Zhang, 2023).
China’s approach to poverty reduction has evolved from a quantitative focus—reducing the sheer number of impoverished individuals—to a qualitative approach aimed at improving overall living standards. Driven by economic growth and wealth creation, the effectiveness of rural poverty alleviation is reflected in the significant rise in rural income levels and the continuous optimization of income structures. Between 1978 and 2023, the real per capita disposable income of rural residents increased more than 162 times, rising from 133.6 yuan (measured at 1985 price levels) to 21,691 yuan (Zhang, 2023).
III. Improvements in the Health Sector
China’s healthcare system demonstrated remarkable efficiency during the COVID-19 pandemic, providing free services including testing, vaccines, and treatment. In contrast, many advanced capitalist economies struggled to respond effectively to the medical needs of their populations during the crisis. The pandemic highlighted the limitations of market-driven healthcare systems, particularly in delivering services to low-income groups, whereas state intervention policies proved far more effective in ensuring universal access to healthcare under such conditions (Siddiqui, 2020a).
During the COVID-19 outbreak, China’s healthcare performance compared favourably to that of the United States, where health services struggled to cope with the crisis. China’s effective health delivery system was further strengthened by increased government spending, leading to the expansion of medical insurance coverage and improved access to healthcare resources across the country.
Historically, China’s healthcare system was shaped by the Soviet developmental model. In the 1950s, the system was primarily designed to support rapid industrialization, leading to an urban bias in healthcare services. In 1951, the government established labour health insurance exclusively for urban industrial workers, leaving rural farmers—who made up 90% of the population—without coverage. This urban-centric policy continued until the 1970s, exacerbating health inequalities between urban and rural areas (Siddiqui, 2021).
During the Great Leap Forward and the famine (1959–61), total grain output plummeted, resulting in widespread food shortages and a significant increase in mortality rates. Recognizing the urgent need for rural healthcare, the government launched the Rural Cooperative Medical System in 1965 and deployed barefoot doctors—community health workers—based on their willingness to serve rural populations. This initiative brought substantial improvements in public health outcomes. Between 1965 and 1975, life expectancy at birth in China increased from 49.5 to 63.9 years, while the child mortality rate (under five years old) dropped from 210 to 100 per 1,000 live births.
By the early 2000s, only about 25% of the Chinese population had some form of health protection—with coverage rates of 50% in urban areas and just 10% in rural areas. The majority of people lacked health insurance and had to pay out-of-pocket for medical expenses. Recognizing these shortcomings, the government acknowledged in 2005 that market-driven health sector reforms had been “unsuccessful.” In response, it launched an expanded health insurance program, significantly increasing coverage in rural areas. As a result, health insurance coverage rose dramatically from 22.1% in 2000 to 95.1% in 2022. Moreover, government spending on healthcare increased substantially as a share of total health expenditures.
Between 2012 and 2022, China’s infant mortality rate was cut in half, declining from 10.6 to 5.0 per 1,000 live births. Public healthcare spending per capita nearly doubled, rising from US$167.74 to $304.16 (in constant 2015 US dollars) between 2012 and 2020, while its share of GDP increased from 2.53% to 3%. These investments led to substantial improvements in healthcare infrastructure: Hospital beds per 1,000 people increased by 48.6%, from 4.24 to 6.3. Healthcare workers per 1,000 people increased by 36.7%, from 5.3 to 7.3. Health insurance coverage expanded from 95.6% of the population in 2013 to 97.1% in 2018.
Despite these advancements, China’s government spending on healthcare remains low compared to that of advanced capitalist countries (Siddiqui, 2020b). Due to insufficient public funding, out-of-pocket expenses continue to place a financial burden on many citizens, particularly low-income and disadvantaged groups. Between 2012 and 2019, medical costs as a share of total household consumption increased from 6.4% to 8.1% for urban households and from 8.7% to 10.7% for rural households (China Statistical Yearbook, 2020).
Figure 3: Medical Spending as a Percentage of Total Consumption, 1992–2020.
IV. Market Reforms in China’s Public Health System
In the late 1970s, China implemented market reforms in its public hospitals, paralleling the reform of state-owned enterprises. Under these reforms, public hospitals were allowed to retain profits for purposes such as employee bonuses and collective welfare expenses, effectively linking doctors’ incomes to the economic performance of hospitals. It was argued that without connecting revenue generation to hospital performance, it would be impossible to establish effective competition and incentive mechanisms, and the quality of health services would inevitably decline.
Since then, China’s public hospitals—which make up the majority of hospitals in the country—have largely operated under “self-funded, for-profit” principles, similar to private hospitals. Their main sources of revenue are government insurance and out-of-pocket payments from patients, which cover medical procedures and prescribed medications. Direct government funding now plays a minor role in their finances. For example, in 2002, government budgetary allocations accounted for only 7.5% of the total revenue of government hospitals. By 2019, this figure rose slightly to 9.7%, though it still only covered 28.3% of personnel expenses. This means that nearly 90% of a public hospital’s revenue—and more than 70% of its wage bill—is generated from the sale of checkups, procedures, drugs, and medical consumables.
Healthcare is a critical component of a nation’s overall health and well-being. Improved health outcomes not only enhance the quality of life but also increase labour force productivity, which in turn boosts national output and reduces welfare spending. Despite nearly universal health insurance and improved access to healthcare resources in China, there has been deterioration in some of the country’s major health indicators. Notably, the rise in chronic diseases among younger cohorts deserves focused attention. Medicine alone is insufficient to address these chronic health challenges; health programs focusing on behavioural and lifestyle modifications are also necessary.
On a positive note, China’s public health has benefited greatly from its unique institutional infrastructure. A 2019 study published in the Proceedings of the National Academy of Sciences found that China successfully reduced excess deaths attributable to particulate matter by 370,000, or 92% of the total avoided deaths in 2017. This achievement was the result of a series of stringent measures implemented since 2013, including strengthening industrial emission standards, upgrading industrial boilers, phasing out outdated industrial capacities, and promoting clean fuels in the residential sector.
To sustain a healthy population and workforce, China must continue to adapt its health sector to meet evolving environmental conditions and public health demands. This includes addressing a wide range of health determinants, such as working conditions, housing, income inequality, gender issues, fiscal austerity, and deregulation.
V. Conclusion
China has achieved a monumental breakthrough, transitioning from a period of economic backwardness and poor living conditions to becoming the second-largest economy in the world. The country has seen a remarkable improvement in its people’s living standards – once a population struggling to meet basic needs, China now has a generally well-off population with aspirations to improve all aspects of life (Siddiqui, 2024c).
However, significant challenges remain. By the end of 2010, according to 2008 poverty standards, 26.9 million people in rural China were still living in poverty, with an incidence rate of 2.8% (Office of Household Survey of the National Bureau of Statistics, 2015).
This study finds that, in global terms, China’s poverty alleviation efforts are unparalleled in human history. The country has contributed more than two-thirds to global poverty reduction and is the first developing nation to achieve the poverty reduction target outlined in the UN Millennium Development Goals. This accomplishment represents an extraordinary achievement by any government—successfully transforming the lives of millions and improving their quality of life and income. It is a testament to the power of policy-driven change and deserves global recognition.
Karl Marx argued that capitalist systems, based on private ownership of the means of production, inherently prioritize profit maximization and wealth accumulation, which leads to poverty and increasing economic inequality. Marx believed that true poverty elimination could not occur within the capitalist framework, and that only through sweeping away existing societal structures, institutions, and modes of production could poverty be eradicated at its root. In Marx’s anti-poverty theory, he proposed that the establishment of socialist public ownership – based on public control of the means of production – could overcome the systemic limitations of neoliberalism, offering a solution to poverty.
About the Author
Dr. Kalim Siddiqui is an economist specializing in International Political Economy, Development Economics, Trade and Economic Policy. Since 1989, he has been teaching economics at various universities in Norway and the UK. Dr. Siddiqui’s research interests encompass a wide range of topics, including political economy, international trade, and economic history, South Asia, and emerging economies. He has presented papers at international conferences across numerous countries, reflecting his global engagement in the field. His scholarly pursuits span six broad domains: Political Economy, Development Economics, Economic History, Economic Policy, Globalization, and International Trade. Dr. Siddiqui has made significant contributions to research in areas such as trade policy, globalization, and political economy. His work has been published in chapters of edited books and articles published in peer-reviewed journals. For inquiries, Dr. Siddiqui can be reached at: kalimsiddiqui567@outlook.com
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