How China Escaped the Poverty Trap: Reviewed by Yalin Xin

How China Escaped the Poverty Trap. By Yuen Yuen Ang, Ithaca, New York: Cornell University Press. 344 pages. Reviewed by Yalin Xin

“Wading across the river by feeling for stones on the riverbed.”

At the beginning of the China’s economic reform in 1980, when China’s GDP per capita was ranked at the near bottom of the UN’s Least Developed Countries (LDC) list[1], this allegorical saying that came out of the central government became a catchy phrase and actually provided directive to the economic reform and alleviation of poverty across China. “Wading across the river by feeling for stones on the riverbed” called for taking steady steps, improvising, experimenting and summing up experiences in the initial process of the country’s economic reform. Four decades later, the world witnessed the miracle of China’s economic transformation.

One of the best studies on China’s economic transformation was done by Yuen Yuen Ang, professor at the University of Michigan, in her book How China Escaped the Poverty Trap (2016), published five years ahead of China’s completion of its goal of eradicating extreme poverty. It was prophetic, in a sense, but the value of her study lies in her research and analysis, challenging current rhetoric on the China phenomenon, conventional wisdoms in development and economic growth theories. Her theoretical framework and data analysis are impressively comprehensive. Depending on needs, readers can glean relevant insights from her dynamic narrative.

Ang critiques the concept that economic growth should be jumpstarted by capital investments from developed nations. “But how do impoverished countries secure investments? … many studies find the link between foreign aid and prosperity tenuous. Some even contend that foreign aid has actually worsened corruption and brought more harm than good to the poor” (Ang 2016, 20). The Weberian paradigm of “good governanceàgrowth” is also problematic in that it does not take the stage of development into consideration. “When trying to build markets, however, the Weberian model did not fit best with the objective of achieving fast growth and maintaining political stability.” In China’s case, “a Weberian model would actually fail to take advantage of a unique and vital resource of preindustrialized communities, that is, the personal connections of county cadres, as well as the mobilization power of a communist apparatus” (80).

The books demonstrates how China, as a nation with a poor economy four decades ago, escaped poverty by harnessing existing institutions to create growth. In one of the case studies she demonstrates how local governments in Glorious County took a bottom-up initiative in mobilizing existing local resources (81). “Harness(ing) weak institutions to build markets” is a lesson other developing countries can reference. Start with what you have, your human capital, and your weak institutions.

Ang’s conclusive statement is most interesting and insightful. She identifies the cause of economic development in China’s case as in “the construction of an adaptive environment that empowers relevant actors to improvise solutions to continuously evolving problems” (340-41). This is a message for policy makers as well as leaders of various levels and communities, that it is essential to empower people who will “wade across the river by feeling for stones on the riverbed,” and who will discover and address root problems in their ever changing contexts.

[1] Refer to World Bank Data: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=1980&most_recent_year_desc=false&start=1979