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About a decade ago China drew its rural poverty line at 2,300 yuan a year, or 6.3 yuan a day. The World Bank’s most commonly used global poverty line is $1.90 a day. Since 6.3 yuan is worth only about $0.90 at today’s exchange rate, it seems natural to think that China’s poverty line is much lower than the World Bank’s.

Natural, but wrong. A fair comparison must first note that China and the World Bank drew their poverty lines with different years in mind. China’s line is based on the prices prevailing in 2010; the World Bank’s, on prices in 2011. China updates its line every year to reflect the inflation faced by the rural poor. In 2011 the threshold was 2,536 yuan, or 6.95 yuan a day.

That is still a meagre amount. But because prices tend to be lower in rural China than in America, 6.95 yuan stretches further than the equivalent amount of dollars would in America. So the yuan should be converted into dollars not at the market exchange rate, but at the purchasing-power-parity rate. That was 3.04 yuan per dollar in 2011, according to Martin Ravallion of Georgetown University, who helped set the World Bank’s line. Thus China’s rural-poverty line is equivalent to about $2.30 a day in 2011 purchasing-power-parity dollars, comfortably above the $1.90 global line. Indeed, the bank’s poverty count for China is lower than the government’s.

China’s boast of eradicating poverty challenged by new study

June 8, 2021

The Chinese Communist party’s claim that it had eliminated extreme poverty has been challenged by a new study by a former UN economist that argues Beijing used a limited and inflexible definition of what it means to be poor.

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Economists argue the country would benefit from setting a much higher absolute poverty threshold or using a relative or multidimensional measure of poverty, all of which would require first acknowledging that poverty still exists in China.

China’s poverty line is just above the World Bank’s global extreme poverty threshold of $1.90 per day but below the recommended $5.50 per day for upper-middle-income countries.

“China is now an upper-middle-income country,” said Martin Raiser, the World Bank country director for China. “It will be important . . . that poverty alleviation efforts increasingly shift to address the vulnerabilities faced by the large number of people still considered poor by the standards of middle-income countries, including those living in urban areas.”

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The world’s Middle Income Countries (MICs) are a diverse group by size, population, and income level. They are defined as lower middle-income economies - those with a GNI per capita between $1,036 and $4,045; and upper middle-income economies - those with a GNI per capita between $4,046 and $12,535 (2021). Middle income countries are home to 75% of the world’s population and 62% of the world’s poor. At the same time, MICs represent about one third of global GDP and are major engines of global growth.

Upper-Middle-Income Economy Countries

GDP per capita

$8,220 (nominal, 2018 est.)

$18,434 (PPP, 2018 est.)

GDP per capita

$7,859 (nominal, 2019 est.)

$18,558 (PPP, 2019 est.)

GDP per capita

$6,695.85 (nominal 2022)

$12,408.38 (PPP, 2022 est.)