A United Nations comparison of the quality of life in 175 countries has praised health and education in China but warned of challenges ahead. The UN Development Programme report says the most difficult issue confronting the nation is the rural-urban divide. 'Two different societies with two different institutional set-ups have existed under the same national roof,' it says. The report says the divide is crumbling as city dwellers and rural labourers begin competing for jobs. China ranked 108 on a list of 175 countries when health, education, environment, lifespan and other factors were compared. Beijing was urged to extend the social welfare system to the countryside and increase spending on health and education. The report says education spending should be boosted to four per cent of Gross Domestic Product and says charities are no substitute for public spending on education in poor areas. It says the collapse of rural health care services must be arrested, and the Government is urged to re-establish co-operative health insurance for peasants. Women have had to go without pre-natal and post-natal care in rural areas because they cannot afford it. The report says economic growth has come at a high environmental cost and cites a World Bank finding that pollution costs the country eight per cent of GDP in loss of life and damage to people's health and property. It calls for urgent attention to be paid to water shortages in the north and expresses concern that China has reached the end of its high economic growth phase. 'When that happens, remaining transitional problems will be more painful and difficult to solve,' it says. Doubt is politely cast on Beijing's claim to have reduced the number of people living in poverty to 50 million, or six per cent of the population. The study cites World Bank estimates that put the proportion living in poverty at 30 per cent and says that even using Chinese surveys, the rural poverty rate was between 17.4 per cent and 28.6 per cent. Tibetans as rated the poorest people in China with many other ethnic minorities over-represented among the poor. The study expresses disbelief at official statistics claiming that urban poverty is falling despite lay-offs from state enterprises, but offers no alternative figures.