Over the period that the study covers, inflation was low and in one year, 2002, negative.

Yasheng Huang, of the MIT Sloan School of Management, said that although the bank's finding did not surprise him, he believed that poverty in China could be even worse.

He said the Chinese defined poverty at a level that understated the size of the problem, at about 650 yuan (US$83) a year in income, equal to about five per cent of average per capita income, compared with the US benchmark of 12 per cent.

"The Chinese definition of the income threshold for poverty is set extremely low," he said.

Rural residents were also forced to buy services, such as health and education, in the cities where they were much more expensive, he said.

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