Geography, Economic Policy, and Regional Development in China

Abstract

Many studies of regional disparity in China have focused on the preferential policies received by the coastal provinces. We decomposed the location dummies in provincial growth regressions to obtain estimates of the effects of geography and policy on provincial growth rates in 1996-99. Their respective contributions in percentage points were 2.5 and 3.5 for the province-level metropolises, 0.6 and 2.3 for the northeastern provinces, 2.8 and 2.8 for the coastal provinces, 2.0 and 1.6 for the central provinces, 0 and 1.6 for the northwestern provinces, and 0.1 and 1.8 for the southwestern provinces. Because the so-called preferential policies are largely deregulation policies that have allowed coastal Chinese provinces to integrate into the international economy, it is far superior to reduce regional disparity by extending these deregulation policies to the interior provinces than by re-regulating the coastal provinces. Two additional inhibitions to income convergence are the household registration system, which makes the movement of the rural poor to prosperous areas illegal, and the monopoly state bank system that, because of its bureaucratic nature, disburses most of its funds to its large traditional customers, few of whom are located in the western provinces. Improving infrastructure to overcome geographic barriers is fundamental to increasing western growth, but increasing human capital formation (education and medical care) is also crucial because only it can come up with new better ideas to solve centuries-old problems like unbalanced growth.Sylvie Démurger, s.

Temporal-spatial patterns of one-person households in China, 1982-2005

“…A time-series analysis conducted by Kanbur and Zhang (2005) shows that since the reform, rural-urban and inland-coastal economic inequalities have increased sharply. The growth rates of GDP per capita in coastal provinces are significantly higher than those of inland provinces (Démurger et al 2002). Between 1979 and 1998, for example, coastal provinces enjoyed average annual growth rates of around 10% GDP per capita, while some inland provinces registered only about 5% (Démurger et al 2002).…”

“…The growth rates of GDP per capita in coastal provinces are significantly higher than those of inland provinces (Démurger et al 2002). Between 1979 and 1998, for example, coastal provinces enjoyed average annual growth rates of around 10% GDP per capita, while some inland provinces registered only about 5% (Démurger et al 2002).…”

“…Since the economic reform of the late 1970s, China has implemented a coastal-bias economic policy, for example, by providing greater expenditure and favourable tax breaks in coastal provinces (Démurger et al 2002). The reform generated rapid but uneven modernisation and urbanisation.…”

Propping through related party transactions

“…This index has been widely used in economics research on China, including that by Li et al (2006) and Gwartney et al (2005). The second market index is the Deregulation Index, which was developed by Demurger et al (2002) using the number of special economic zones developed in a region as a proxy for market development. The two regional variables are Unemployment and Fiscal Surplus, obtained from the China Infobank.…”

Trade-cum-FDI, Human Capital Inequality and Regional Disparities in China: the Singer Perspective

“…Substantial work has been done to investigate the sources of regional income inequality. The most frequently mentioned explanations include preferential policies, greater openness, favourable geographical location and superior infrastructure facilities that the coastal regions have enjoyed, and changes in fiscal policy in the post-reform period (Yao and Zhang, 2001aZhang, , 2001bJian et al, 1996;Sachs and Woo, 2000;Tian, 1999;Zhang, 2001;Demurger, 2001 andDemurger, et al, 2002). The weak spillovers from processing-type exports and the migration effects of the exports and FDI in the coastal regions, which attract educated and skilled labour to migrate from the inland to the coastal regions, is also found to have contributed to the widening regional income gap (Fu, 2004 1 9 5 2 1 9 7 9 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 Fig.…”