Lessons learned from China's fall into the poverty trap

Most economists and policy-makers would now agree that economic growth – in the sense of rising per capita incomes or expenditures – reduces poverty in the developing world. However, it is also true that per capita data does not adequately account for individuals who have fallen into the poverty trap, as in China: a widening gap is developing between the rich and the poor due to a disparity in income and employment opportunities, among other factors, between rural and urban residents, and this gap is not reflected in mean (per capita) parameters. The present paper illustrates how the situation in China during the current period of reform should not be forgotten when other developing countries consider the pros and cons of China's rapid development.