Can Western Development Narrow Down China’s Regional Disparity? Can the Strategy of Western Development Narrow Down China’s Regional Disparity?* Wei Zhang Abstract Faculty of Oriental Studies The main causes of the faster growth in China’s eastern coastal University of Cambridge Sidgwick Avenue area, and thus for the rise in income disparity between eastern Cambridge CB3 9AD and western regions, are the rapid increases in foreign trade and United Kingdom foreign investment resulting not only from the government’s [email protected] coastal development strategy but also from inherent advantages of the eastern coastal area. Since 1999, the development strategy for western China has focused on the injection of large amounts of capital, but fiscal constraints make this strategy unsustainable. China’s government should allow mobility of the labor force across regions to play a bigger role in solving the income disparity problem. 1. Introduction China embarked upon economic reforms in 1978. Since then, the average annual growth rate of China’s GDP through 2001 has been 8.9 percent.1 The pace of GDP growth in different regions has varied, however. If we di- vide China into three areas based on geographical location and government policy coverage (viz., eastern, central, * I thank Wing Thye Woo, Cyril Lin, Maozu Lu, Guy Liu, and Zhichao Zhang for insightful discussion on this topic. I also beneªted from discussions during the Asian Economic Panel conference on 9–10 October 2003 in Seoul, South Korea. The views expressed in the paper are those of the author and should not be interpreted as reºecting the views of those who have helped with the paper. I thank Nancy Hearst at the Fairbank Center of the East Asia Institute at Harvard for her help. 1 This calculation for the 1978–2001 period used constant prices based on the price level of 1978. Asian Economic Papers 3:3 © 2005 The Earth Institute at Columbia University and the Massachusetts Institute of Technology Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/1535351054825229 by guest on 01 October 2021 Can Western Development Narrow Down China’s Regional Disparity? and western),2 the average growth rates of GDP in these areas during 1978–2001 were 10.2 percent, 9.08 percent, and 8.19 percent, respectively. This means that in- come disparities across the three areas have increased during this time, given that the coastal area was already relatively richer than the central and western areas in 1978. The GDP share of the eastern area in the total national GDP increased from 52 percent to 60 percent; the share of the central area decreased from 31 percent to 27 percent; and the share of the western area decreased from 17 percent to 12 per- cent (see table 1). The widening of regional disparities is also seen in the changes of GDP per capita across regions. During 1978–2001, the ratio of GDP per capita in the eastern area to the average GDP per capita nationwide increased from 1.28 to 1.42, but the corresponding ratio for the central area decreased from 0.86 to 0.75, and that of the western area decreased from 0.72 to 0.57 (see table 2 and ªgure 1). To address this worsening of regional disparity, the Chinese government mapped out a strategy of western development in 1999.3 In general, it should take a long time to implement a regional development policy and even longer to obtain any sustainable results, so it is perhaps premature to evaluate the effectiveness of China’s strategy of western development at present. The main purpose of this paper is to investigate the relevance of, or relationship between, the causes of China’s re- gional disparity and the policies chosen by the government for the development of China’s western area. 2. China’s strategy of western development In June 1999, at a meeting on the reform and development of state-owned enter- prises (SOEs) in Xi’An, Jiang Zemin, then General Secretary of the Central Commit- tee of the Communist Party of China and President of China, formally put forward the concept of the development of the western region.4 The participants of the Cen- tral Economic Working Conference held in November of the same year determined the strategy for the development of the western region. In January 2000, a leading 2 The eastern area is made up of Beijing, Tianjin, Shanghai, Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian, Guangdong, Guangxi, and Hainan; the central area covers Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, and Hunan; and the western area includes inner Mongolia, Sichuan, Chongqing, Guizho, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang. Guangxi is an autonomous region with a seaport, Beihai. It is one of the 11 coastal provincial-level units that has enjoyed the central government’s preferential policies since 1984. It was also listed as one of the western provincial-level units when the central government launched the campaign of western development. For consistency in the data analysis, we categorize Guangxi as a coastal/eastern area. 3 Jiang Zemin, “Talk at the Workshop of State-Owned Enterprises’ Reform in Xian,” People’s Daily, 18 June 1999. 4 Ibid. 2 Asian Economic Papers Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/1535351054825229 by guest on 01 October 2021 Can Western Development Narrow Down China’s Regional Disparity? Table 1. China’s GDP and the percentage share of GDP in total GDP for the three areas (1978–2001) Eastern area Central area Western area National GDP GDP GDP GDP (million yuan) (million yuan) % (million yuan) % (million yuan) % 1978 346,354 181,832 52.5 106,466 30.7 58,056 16.8 1979 394,275 203,873 51.7 123,687 31.4 66,715 16.9 1980 439,596 229,585 52.2 136,908 31.1 73,103 16.6 1981 479,347 250,961 52.4 151,041 31.5 77,345 16.1 1982 533,108 279,868 52.5 166,131 31.2 87,109 16.3 1983 598,085 311,019 52.0 189,495 31.7 97,571 16.3 1984 712,537 373,412 52.4 223,875 31.4 115,250 16.2 1985 862,066 455,246 52.8 267,538 31.0 139,282 16.2 1986 965,648 511,314 53.0 300,087 31.1 154,247 16.0 1987 1,144,177 612,845 53.6 352,365 30.8 178,967 15.6 1988 1,445,266 786,501 54.4 434,060 30.0 224,705 15.5 1989 1,635,691 895,790 54.8 489,251 29.9 250,650 15.3 1990 1,833,023 989,966 54.0 547,920 29.9 295,137 16.1 1991 2,110,312 1,164,293 55.2 605,130 28.7 340,889 16.2 1992 2,584,738 1,459,328 56.5 725,345 28.1 400,065 15.5 1993 3,422,001 1,981,049 57.9 931,780 27.2 509,172 14.9 1994 4,521,683 2,652,547 58.7 1,212,823 26.8 656,313 14.5 1995 5,763,278 3,361,540 58.3 1,586,764 27.5 814,974 14.1 1996 6,730,552 3,970,377 59.0 1,916,757 28.5 843,418 12.5 1997 7,547,520 4,445,350 58.9 2,164,300 28.7 937,870 12.4 1998 8,106,540 4,807,090 59.3 2,287,150 28.2 1,012,300 12.5 1999 8,619,170 5,156,430 59.8 2,397,450 27.8 1,065,290 12.4 2000 9,527,990 5,752,720 60.4 2,625,020 27.6 1,150,250 12.1 2001 10,501,650 6,362,436 60.6 2,867,045 27.3 1,272,169 12.1 Sources: Chinese Statistical Yearbook, 1984 to 2002. Note: GDP per capita is calculated by current price. group for western development was set up, with Premier Zhu Rongji as the leader, Vice-Premier Wen Jiabao as the deputy, and 19 ministerial-level ofªcials from rele- vant ministries and commissions under the State Council as members. This group produced the report Some Policies and Measures Concerning the Launch of the Great Western Development in October 2000. This document has been regarded as the for- mal commencement of the implementation of the strategy of western development. In March 2000, the Leading Group of the Western Development Ofªce under the State Council was established as part of the State Development and Planning Com- mission (Leading Group of the Western Development Ofªce 2000). The basic content of the strategy for western development was later included in the Outline of the Tenth Five-Year Plan (2001–2005) for National Economic and Social Devel- opment in China (State Development and Planning Commission 2001). The strategy has three main goals: ªrst, to narrow regional disparities in economic development and income distribution; second, to maintain social and political stability in the western area by accelerating western development; and third, in response to the slowing economic growth in China, to create new economic growth by expanding domestic demand. The central government also stressed the following ªve focal points for developing the western region (Wang 2001): 3 Asian Economic Papers Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/1535351054825229 by guest on 01 October 2021 Can Western Development Narrow Down China’s Regional Disparity? Table 2.