The Government has built up an ambitious poverty reduction program over the last two decades. While recognizing China's exemplary success in reducing poverty, this report has concluded that the job is still far from complete.

International standards indicate that there are still more than 100 million rural poor, concentrated in the western provinces and mountainous regions. To meet this challenge, it is clear that the Governments efforts must not diminish. To the contrary, achieving further major reductions in poverty will require stronger institutions, and a more targeted and concentrated program than the current one. The village and household based approach should continue and intensify, and its effectiveness needs to improve. This article has suggestions on ways to accomplish this including modifications in institutional arrangements, targeting, and program content.

A first step in improving the effectiveness of the program is to strengthen institutional　arrangements. The program needs strong and effective leadership, oversite and accountability　from the top levels of government, better control over the use of funds, improved coordination　between funding channels, and a much stronger monitoring effort. Increasing funding for　supervision and monitoring of poverty programs is essential. Poverty offices should be　strengthened at the township level in order to have enough staff to property oversee the quality of program works and activities. Institutional strengthening should be complemented by greater　accountability through stronger and more independent financial and impact monitoring,　contracted to an impartial government agency. Involving the poor in planning and monitoring is　an essential aspect of successful programs and participatory approaches should be used much　more extensively in all future government poverty reduction efforts.

A powerful measure to increase the impact of poverty alleviation programs would be to　direct all poverty funding directly to poor townships within and outside of the nationally　designated poor counties, instead of to the counties themselves. This would reduce leakage to the　non-poor in the nationally-designated poor counties, and reach the poor living in non-poor　counties who currently do not benefit from the national program.　

The impact on the poor could be improved by changes in the types of interventions　funded by current programs. One of the most effective means to address the problems of the　absolute poor is through a set of multi-sector, and complementary interventions, delivered　through a multiyear project approach. For the poorest, this approach should replace the large　subsidized poverty loan program which has performed well below expectations. Access to credit is an essential part of poverty reduction measures, but the government efforts to run credit　schemes do not look promising and government funds would be better spent supporting　micro-credit in other ways. Refinements in existing agriculture, health and education, labor　mobility and voluntary resettlement programs could bring marked benefits.