Chinese Regional Development, a Consequence of State Interventions or the Private Sector?

Abstract: A current topic in today’s China is to find paths for passing the middle income. Although the restoration process has been ongoing for a couple of decades, the complete marketization transition has not yet turned into reality. However, the pace of development is still impressive, partly depending on an increasing private enterprise mobility. This paper provides a panel data analysis of Chinese regional development approaches and discusses whether growth is driven mainly by the state or by the private sector. Using Dumitrescu-Hurlin Granger-causality tests, this study reveals that the regional level of marketization is an important element in order to generate growth. Further, both gains in institutional efficiency and an increasing share of private enterprise employment show significantly positive effects on per capita GDP-growth, indicating on a necessity of a mutual influence from these components to achieve regional economic development. However, private employment also significantly effect level of marketization, why this paper suggests that the main driver of regional development is the private sector.