Convergence or Divergence ? Debate on China ' s Regional Development

This paper investigates the evolution of regional disparity over the period 1980-2001, reviews the debate on its causes, discusses future development strategies, and draws relevant conclusions for policymakers. Our study confirms that overall regional disparity declined in the 1980s but increased in the 1990s. The gap between the inland and coastal regions was the dominant contributor to the overall regional disparity. There was no club convergence within the inland and coastal regions. Economic, geographical and historical factors put the coast in a better position than the inland for growth. Regional development strategies and policies, globalisation and economic liberalisation, and factor market distortions, which are closely linked with each other, have played an important role in regional disparity. It will be a long-term task to significantly reduce regional disparity. The Chinese central government needs to (1) allow a similar degree of openness and economic liberalisation across regions; (2) work out detailed procedures to remove barriers to the movement of factors of production; (3) provide industrial development guidelines; and (4) help the establishment of better infrastructure in the inland and especially the west, and encourage resource allocation based on comparative advantages.