This paper attempts to explain why China performed better than India in reducing poverty. As two of the most populous countries in the world, China and India have both experienced fast economic growth and high inequality in the past four decades. Conversely, China adopted a more export-oriented development strategy, resulting in faster industrialization or urbanization and deeper globalization, than India. Consequently, to conduct the comparative study, we first decompose poverty changes into a growth and an inequality components, assessing the relative importance of growth versus distributional changes on poverty in China and India. Then, Chinese data are used to estimate the impacts of industrialization, urbanization and globalization on poverty reduction in rural China. The major conclusion of this comparative study is that developing countries must prioritize employment generation in secondary and tertiary industries through industrialization and globalization in order to absorb surplus agricultural labor, helping reduce poverty in the rural areas.
Banking in the Shadows: A Comparative Study of China and India