Research On Poverty-Reducing Effects Of Public Investment In Rural China

In September 2000, the government leaders of 189 states reached a historic agreement on the "Millennium Declaration", a clear commitment to reduce the proportion of global poverty by half before 2015. China have also made great progress in achieving the Millennium Development Goals, especially in rural areas, the number of the absolute poor is declining constantly. According to the poverty standard of Chinese authority, Chinese rural poverty rate (the proportion of population) has decreased from 30.7% in 1978 to 1.6% in 2007 and the number of rural poor has dropped from 250 million to 14.79 million. At the same time, the public investment in rural areas is developing rapidly and the government's total financial expenditure is rising gradually. But with the development of rural areas,the public investment is becoming increasingly inadequate. For example, education, health and medical conditions in rural areas, are seriously lagging behind the national average level and the infrastructure in rural transport is also lagging behind the rural development. The lack of public investment in rural areas severely constrained the implementation of Reducing Rural Poverty and has become a bottleneck for the development of rural areas.According to the theory of economic growth, the positive effect of public investment on economic growth is significant.However, the views in the previous research on the relationship between public investment and poverty is not conclusive and great difference still exists.This paper will focus on the poverty-reducing effects of public investment and the internal mechanism between public investment and poverty reduction. The result shows that the increasing in income promoted by economic growth is a necessary condition for poverty reduction and the public investment will further impact on economic growth. Public investment eventually can have impact on rural poverty through multiple channels, primarily through the impact of agricultural growth, rural wages, non-agricultural employment, labor transition, food prices and other channels to promote poverty reduction.Based on the above theoretical framework, this paper makes empirical research on the poverty reduction effects of public investment in Chinese rural areas.The result shows that public investment can indeed facilitate the growth of agricultural production and at the same have significant effects on poverty reduction.In public investment, the effect of investment in education on rural poverty reduction is the most significant, followed by R&D investment in agriculture, road transport investments, telephone, electricity, irrigation and poverty lending. In the eastern, central and western regions of the rural areas, poverty-reducing effects of these public investments are very different. Government's public investment in western rural areas has significant poverty-reducing effects but has little effect on the eastern regions. Research on the regional differences of poverty-reducing effects shall help us to adjust rural public investment, adopt a specific investment in different regions and achieve the rapid development and poverty alleviation in rural areas.This study follows the idea of combining standard research and empirical research,combining theory and practice and combining static analysis and dynamic analysis and mainly utilize the statistics, econometrics, development economics and institutional economics and other relevant theoretical knowledge and methods to establish a analytical framework on the relationship between public investment and poverty reduction and will provide better guidance for decesion-makers in the use of existing technology and information.The principal innovations of this study are to develop an analytical framework and clearly points out the intrinsic link between public investment and poverty reduction, and formulate the optimal public investment strategy according to different regions and different types of poverty-reducing effects.Then based on empirical studies, a proposal is made to strengthen the management of public investment in rural China. A project management model of participatory poverty reduction can give farmers more rights to take part in the supervision and management of projects, thus enhancing the efficiency of a public investment.Finally this paper provides several recommendations with regard to public investment in rural areas, showing that only understanding in-depth the scope and role of public investment ,optimizing the national policy object of public investment in rural areas, highlighting the focus of public investment and priority areas, the poverty-ruduction work can be achieved better and step forward a well-off society.