5.1 Fiscal Poverty Alleviation Funds in Different Sectors

From 1998 to 2002，40.8% of the Central Government’s Fiscal Poverty Alleviation Funds（FPAF）went to agriculture，22.5% to industry，5% to social undertakings like rural education，medical care and technical training，22.8% to rural infrastructure like roads，irrigation，human and animal drinking water，etc. and 9% to others. See Table 2-11 and Figure 2-8 for details.

Such distribution of the poverty alleviation fund was closely related to the governing rules and priorities of poverty alleviation funds during this period. The poverty alleviation policies between 1998 and 2002 stressed better targeting to avoid misuse of money. This resulted in a bigger proportion going to agriculture as the primary industry. Although rural income from non-agriculture industries is increasing，the major income source of rural poor is still agricultural production. Two thirds of the income of rural people was from agriculture in 2003. The income of the poor is largely from agricultural activities meanwhile the poverty alleviation funding is decreasingly going away from agricultural activities. This to a certain degree explains the phenomenon that an increase in central FPAF did not increase the income of the poor. The“Poverty Monitoring Report of Rural China”reports that the per capita net income of the poor was 531 Yuan in 2002 and 2003，and is only 20 percent of the national rural per capita net income.

But over the years，despite the fact that a major part of the FPAF from the Central Government went to agriculture，we can still see a shrinking proportion of such fund going to agriculture，particularly since the new century when it dropped from 45.6% in 2000 to 29.9% in 2002. According to the poverty monitoring