Poverty reduction in China a myth?

July 9, 2026

The World Bank methodology: how much have the incomes of the poorest have risen in real terms using a whole-economy basket. If it’s just the luxury goods getting cheaper, this is admittedly a flawed approach. The bare-bones basket flounders in the opposite direction: let’s pretend that in the greatest period of economic structural change ever known – what is being produced and how it’s being produced has been utterly transformed – people are buying exactly what they did before.

For example cloth got much dearer in 1993 – the year poverty increased enormously according to the authors. In 1980 the majority of the population (rural) still wore self-made clothing. Yet by 1993 they all wore cheap mass-produced clothing. They no longer bought cloth. The large price jumps weren’t passed on to consumers because 1) there were enormous counteracting increases in labour productivity (To mentally picture: Volkswagen factory in Shanghai went from producing two cars a day to 60,000 a year in three years 1985-1988) and 2) the Chinese cleverly lifted controls on producer goods (cloth) before consumer goods (clothing). The dual-track pricing system meant that the large majority of cloth had already been sold at market prices for years anyway.