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This paper surveys the literature on regional inequality in contemporary China. It reviews the trend of convergence or divergence of real GDP or income across different regions in China since 1952, and examines the degree of regional inequality using different measurements. It then discusses various factors that may cause the increasing regional inequality and the empirical evidences correspondingly. Finally it gives policy implications.
Key Words: Regional inequality; Convergence; Economic growth.
JEL Classification Numbers: H, O, R.
(ProQuest: ... denotes formulae omitted.)
1. INTRODUCTION
Since 1978, China has been undergoing a process of gradual and incremental reforms from a centralized economy to a 'socialist market economy'. A significant economic growth has accompanied more than two decades of reform. The average annual growth rate of real GDP was 9.8 percent over the years 1978-1998, among the world's highest during the time period.
While the economic growth in China is exceptional during the reform era, it is by no means even across the country's 31 provinces, centrallyadministered municipalities and autonomous regions. From 1978 to 1998, Fujian (on the eastern coast), the fastest growing province, experienced an average annual growth rate of 13.9 percent in real GDP; whilst Gansu (on the hinterland), the slowest one, grew only at 6.7 percent. In 2000, the top 10 provincial units with the highest GDP per capita were mostly from the eastern coast of China. The GDP per capita in Shanghai (on the eastern coast), the country's highest, was 9.65 times the level of Guizhou (on the inland), the country's lowest.
A question of great interest is whether there exists convergence in real GDP per capita across regions in China such that the poor regions are catching up with the rich ones, or the poor regions and the rich regions diverge into two clubs such that the gap in the level of living standards between the poor and the rich is persistent or even widening. The neoclassical growth theory states that poorer economies tend to grow more rapidly than richer ones due to decreasing returns. The theory predicts absolute convergence across economies with similar technologies and preferences, where 'technology' here takes a broad view that includes production technology, natural resources, institutional factors, government policies and etc., see Barro and Sala-I-Martin (1995). Empirically,...
