Investment and regional development in Post-Mao China

Abstract

This paper investigates China's changing investment systems, investment patterns and their impact on regional development. It reveals that the reforms have brought profound changes to Mao's investment system and investment allocation. Investment decentralization has given localities considerable autonomy and incentives in economic development. Budgetary investment has declined dramatically while enterprise funds, bank loans and foreign investment have increased significantly in China. An increasing amount of these new sources of fixed investment have been channeled to more profitable non-state sectors. In terms of regional changes, China's coastal provinces, particularly Guangdong, Jiangsu, and Zhejiang have recorded more rapid investment growth and have much higher per capita investment than many interior provinces. In addition, investment in the coastal provinces relies less on the state and is more profitable than that in the poorer interior. The sectoral and regional unevenness of fixed investment has significantly contributed to the uneven regional development in China. This research also has important theoretical implications, as it shows that regional investment is neither a cumulative causation process nor a convergent process, but influenced greatly by government policy, local states and local conditions, and foreign capital. An analysis of these factors should improve the understanding of investment allocation and regional development, especially for the transition economy in which the control and capacity of the central state has declined, while local and global forces have emerged as equally important forces shaping spatial change.