Regional Growth in China -A Study on Convergence across the Chinese Regions

Abstract: This study investigates whether the income is equalising across the Chinese regions. This is done by answering the research question do the Chinese regions show any signs of convergence in gross regional product (GRP). Regressions have been done using the OLS-method to find correlation between initial GRP and the growth rate in GRP. This has been done for four time periods: 1952-2007, 1952-78, 1978-99 and 1999-2007. Three geographic areas have been investigated: China, western China and eastern China. The time distinctions are based on political reforms and policies that have had different regional impact. The policies have benefitted different geographical areas, hence the geographic distinctions. The results show weak signs of convergence. But the lack of convergence can be interpreted as China being a transitional economy. The calculations indicate that all the Chinese regions are moving towards a higher income level and that all regions are getting richer. Nonetheless, the eastern regions that have experienced preferential treatment have started growing at an earlier stage, and thus is growing faster than the western.