Regional Inequality in Guangdong Province Volume 1 HongYu A Thesis Submitted for the Degree of Doctor of Philosophy School of East Asian Studies The University of Sheffield August 2008 To my dear parents 2 Abstract Guangdong has made impressive achievements in economic growth during the reform period and has been one of the fast growing provinces in China since 1978. However, regional inequality of income in Guangdong has intensified during the same period. A huge income gap between the Pearl River Delta Area (PRDA) and the peripheral regions has been found in this province. The Gini coefficient and coefficient of variation (CV) for per capita income in Guangdong's counties had been showing a steady upward trend between 1980 and 2005, not only in terms of the absolute figures of CV and Gini coefficient, but also the dramatic upward trend. The benefits of rapid economic growth have not been distributed equally among the different regions in Guangdong. The economic growth in the peripheral, hill regions has been much slower than in the PRDA. As far as income per capita is concerned, the striking regional difference between the PRDA and its periphery is evident. Based on field research interview, analysis of geographic characteristics and regression model analysis, this paper attempts to investigate the main causes of regional disparity in Guangdong. The findings suggest that two inherited locational advantages of coast and market proximity have made a significant contribution to unbalanced regional development since 1980. In addition, the agglomeration effect is crucial in understanding the core - periphery pattern of regional inequality. This study argues that the spatial economic inequality within Guangdong is mainly caused by the double-strengthening mechanism of both geographical location and agglomeration effects. During the reform period, this mechanism has been the key factor in shaping spatial economic inequality and it is likely rto cause further widening of such inequality within Guangdong in the future. 3 Preface and Acknowledgements Regional disparity makes a difference to economic growth and worsening spatial income disparities require effective resolution. Regional development inequality is a real threat to China in that long-term economic growth becomes difficult to achieve. Worsening regional inequality and long-term economic development will not stand side by side and reduction of this disparity is the key to dealing with many other serious challenges that face China, including poverty and underdevelopment of health and education services. Guangdong takes the lead in many aspects of economic development. It was also one of the earliest regions in China to implement the 'reform and open-door' policies. How should the people judge these reform policies? By focusing case study on Guangdong, this research attempts to offer meaningful and illuminating discussion of the serious issue of regional inequality in China and the re-consideration of 'reform and open-door' policies on economic growth and human development which could add to the knowledge of policymakers and scholars. Guangdong province has made dramatic advancements in economic growth since 1978. However, the core-periphery pattern of regional inequality within Guangdong has shown an upward trend and the imbalance is severe. I have two main objectives in conducting this research. First, by adopting time-series inequality measurement, I will systematically analyze intra-regional development disparities in terms of economic and human aspects within Guangdong during the reform period. Secondly, I intend to provide a conclusive judgment on the main cause of widening regional inequality in this southern pioneer province. This research comprises three main parts. The first section presents a literature review of approaches to measurement of regional inequality, whilst traditional economic geography, economic convergence and divergence theories are also assessed here. The second and third parts discuss measurement of regional inequality within Guangdong and analyze the main factors causing the worsening regional inequality within Guangdong, respectively. First, I would like to take this opportunity to express thanks to my dear parents for their sacrifice and support during my PhD research. I am deeply indebted to my PhD supervisor, Prof. Chris Bramall. He has not only spent immeasurable amounts of time in giving me professional advice and valuable comments, but also provided encouragement throughout my research. I would also express thanks to the Provincial Government of Guangdong and other relevant administration organizations for offering me interview opportunities during my field research. In addition, my grateful thanks go to the staff in the English Language Teaching Center, University of Sheffield for their valuable language support and academic assistance throughout my PhD thesis writing. I also acknowledge the technical assistance given by Ms Chunqu Xu and other members of the South China Agricultural University and Mr Chaopeng Guo at the Department of Information Studies, University of Sheffield. Moreover, I would like to express my sincere thanks to the Universities' China Committee in London (UCCL). Without the research funding provided by the UCCL, I would have been unable to conduct the field research in Guangdong. 4 This research has certain limitations and omissions and mistakes will inevitably occur. I accept full responsibility for any misinterpretation of scholars' theories and arguments. HongYu Sheffield October 2008 5 TABLE OF CONTENTS LIST OF TABLES 10 LIST OF FIGURES 12 LIST OF MAPS 13 CHAPTER 1 GENERAL INTRODUCTION 15 1.1 The Issue of Regional Inequality 15 1.2 The Significance of Guangdong 20 1.3 Research Structure Overview 23 CHAPTER 2 LITERATURE REVIEW PART I: INEQUALITY MEASUREMENT APPROACHES 26 2.1 Introduction 26 2.2 Inequality Measurement Approaches: GDP and HDI 26 2.2.1 GDP Measurement Approach: Advantages and Criticism 26 2.2.2 HDI Measurement Approach: Advantages and Criticisms 30 2.2.3 Comparison and Evaluation: GDP and HDI 35 2.3 Happiness Theory 55 2.4 Conclusion 64 CHAPTER 3 LITERATURE REVIEW PART II: TRADITIONAL ECONOMIC GEOGRAPHY 66 3.1 Introduction 66 3.2 Traditional Economic Geography 66 3.2.1 Transportation Costs 66 3.2.2 Locational Advantage: Proximity to the Coast or Ocean-Navigable Rivers 68 3.2.3 Geographical Advantage: Market Proximity 78 3.2.4 Infrastructure, Transportation Costs and Economic Development 81 3.2.5 The Effect of Railroad on Economic Growth 82 3.3 Traditional Economic Geography: Its Critics 87 3.3.1 Criticism of Transportation Improvement 87 3.3.2 Caimcross's Theory: The Death of Distance 91 3.3.3 Criticism of the Location Advantage 95 3.4 Conclusion 98 CHAPTER 4 LITERATURE REVIEW PART III: REGIONAL ECONOMIC DIVERGENCE 100 4.1 Introduction 100 6 4.2 New Economic Geography 100 4.2.1 The Agglomeration Effect and Economic Growth 100 4.2.2 History and Agglomeration 103 4.2.3 Factor Concentration, Agglomeration and Economic Growth 105 4.2.4 Opposing Forces to Agglomeration 115 4.2.5 The Self-Reinforcing Pattern of Agglomeration 118 4.2.6 New Economic Geography: its Critics 122 4.2.7 Conclusion 128 4.3 Other Theories on Regional Divergence 129 4.3.1 Myrdal's Theory: Spread and Backwash Effects 129 4.3.2 Friedmann's Theory: Regional Economic Polarization 132 4.3.3 Hirschman's Theory: the Growth Pole 134 4.3.4 Endogenous Growth Theory 135 4.4 Final Conclusion 137 CHAPTER 5 LITERATURE REVIEW PART IV: REGIONAL ECONOMIC CONVERGENCE 140 5.1 Introduction 140 5.2 Regional Economic Convergence 140 5.2.1 Kuznets's Hypothesis: the Inverted If-curve of Regional Inequality 140 5.2.2 Neoclassical Growth Theory 143 5.3 World Evidence Discussion: Regional Inequality Tendency 150 5.3.1 Evidence against Kuznets's Hypothesis 150 5.3.2 Evidence against Myrdal's Spread Effect Thought 151 5.3.3 Evidence against Neoclassical Growth Theory 153 5.4 Conclusion 161 CHAPTER 6 GEOGRAPHY, ECONOMIC GROWTH AND REGIONAL INEQUALITY IN CHINA 163 6.1 Introduction 163 6.2 China and Traditional Economic Geography 163 6.2.1 Geographical Advantage and Coastal Proximity 163 6.2.2 Transportation Costs and Economic Development 166 6.3 Industrial Cluster and Economic Agglomeration in China 172 6.3.1 History and Agglomeration 174 6.4 The Developing Trend of Regional Inequality 179 6.5 Skinner's Macroregion Model 182 CHAPTER 7 METHODOLOGY AND FIELDWORK DESIGN 187 7.1 Introduction 187 7.2 Research Methodology and Fieldwork Study Design 187 7.2.1 Research Methods: Questionnaire and Interview 187 7.2.2 Research Sample 194 7.2.3 Research Reliability and Validity 199 7 7.2.4 Ethical Issues 205 7.3 Conclusion 206 CHAPTER 8 CHINESE DATA, AND ASSOCIATED LIMITATIONS 208 8.1 Introduction 208 8.2 Analysis of Official Statistical Data in China 208 8.2.1 The Quality of Chinese GOP Statistical Data: Its Critics 208 8.2.2 The 2004 China Economic Census 213 8.2.3 The Quality of Chinese GOP Statistics 218 8.2.4 Official Statistical Data of Guangdong: Reliability and Accuracy 225 8.3 Conclusion 229 CHAPTER 9 MEASUREMENT OF REGIONAL INEQUALITY WITHIN GUANGDONG 231 9.1 Introduction 231 9.2 Measurement of Regional Economic Inequality 231 9.2.1 Inter-regional Economic Disparities 231 9.2.2 Inter-County Income Inequality within Guangdong 240 9.3 Measurement of Regional Income Inequality within Guangdong 259 9.3.1 Overview of Regional Inequality Indicator 259 9.3.2 Measurement ofInter-county Inequality within Guangdong 1980- 1990 260 9.3.3 Measurement ofInter-county Inequality