China's War on Poverty

China's poverty reduction in the past two decades has been impressive; but the effectiveness of the poverty alleviation programs still needs to be thoroughly investigated. In doing so, this paper reviews the development of China's poor area policies over the twenty years, emphasizing on how investment funds have been allocated under the poverty alleviation programs. Through simple econometric analysis, we discover that poverty alleviation can be largely attributed to economic growth, and the effectiveness of the poverty programs has been limited by problems related to targeting, project design and inefficient fund allocation. We also find that household-based projects and funds that directly reach the local agencies have contributed the most to the success of such programs. Finally, the paper advocates a different strategy for poverty alleviation that focuses on investment in human capital.