Betting on the strong: Local government resource allocation in China's poverty counties

China's primary approach to addressing poverty in its rural areas has been geographic, through the targeting of loans, grants and public works at designated 'poverty counties'. The efficacy of this approach is increasingly being called into question as China faces entrenched poverty and rising inequality despite decades of rapid economic growth. At the same time, evidence is growing that recent reforms to fiscal policy have disadvantaged poverty counties, leaving them with limited resources with which to achieve poverty alleviation and rural service provision. This article considers how these two processes interact by explaining the pattern of resource allocation in a national poverty county in Shanxi Province. Evidence suggests that the county government, operating in a highly constrained fiscal environment, is betting on the strong. It concentrates resources in villages with better existing conditions to the detriment of poorer villages who are in greater need. Such a pattern of resource allocation amplifies existing inequalities and does little to address remaining poverty in rural China. (C) 2014 Elsevier Ltd. All rights reserved.