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China: Delving into the detail

Chinese Economy | The Regional Economic Development of China Anthony Harrington

When Western economists talk about China and the growth of the Chinese economy, they tend to talk about the country as a whole. In a detailed report issued in February 2010, Deutsche Bank provides a study of the dynamic relationships between the coastal regions, long the motors of the Chinese economy, and the inner provinces, most of which have been moving at a far slower pace.

However, the report’s authors, Steffan Dyck and Hanna Levinger, argue that the provinces are now speeding up, with some of the provinces just a growth point or two behind some coastal regions.

In all, mainland China divides up into 22 provinces, five autonomous regions, and four municipalities under the direct control of central government, the four municipalities being Beijing, Chongquing, Shanghai, and Tianjin. One of the more startling facts about China’s provinces, Dyck and Levinger point out, is that many of them are on the scale of countries rather than provinces, with the kind of population level and economic output you would expect from a fair-sized country. Both Henan and Guangdong, China’s two most populous provinces, have around 95 million people living in them, about 10 million more each than there are Germans in Germany. If you look just at land mass, then Tibet, Xinjiang, and Inner Mongolia rival South Africa and Columbia in size, with land areas of more than 1 million km².

Guangdong, Jiangsu, and Shandong are the three heavyweights, considered from the standpoint of GDP, with Guangdong’s output being similar to Indonesia’s, at US$514 billion, or the equivalent of 14% of German GDP. The GDP of the other two are on the same scale as Norway, at around US$450 billion each.

The inequalities of the regions date back in the modern era to the 1970s, when China set up Special Economic Zones which were allowed to be market-orientated. The areas chosen were those with proximity to trading partners like Hong Kong, Macau, and Taiwan, and growth mushroomed out from them. Then in 2000 the Chinese Government made a deliberate effort to address these inequalities with a “Development of the West” program, since dubbed “Go West,” in an ironic echo of the US historical development out from the Eastern seaboard.

Many of the inertial factors in the less-developed regions, such as geography, education, infrastructure, and culture, are extremely hard for top-down development strategies to really get to grips with. But the report’s authors point out that already we are seeing “new top performers” emerging, with growth rates to rival the coastal areas. The authors point to Inner Mongolia and Tianjin in the north, Shaanxi in the west, and the southern provinces of Chongquing and Guangxi, all of which have more than 13% real GDP growth.

One inevitable result of the success of the Chinese government’s regional development strategies is that the supply of low-cost labor from China’s inland provinces is shrinking. Inevitably, the top coastal regions are responding to rising labor costs by moving up the value chain towards higher value added products, while labor-intensive manufacturing is having to move much deeper into the more backward of the provinces.

Further reading on the Chinese economy

Tags: China , exports , GDP growth , regional differences
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