Trends in regional inequality in China

Abstract

In this paper, we examine the tendency towards convergence in real per-capita income among the provinces of China during the period 1952–1993. Real incomes in Chinese provinces did not display strong convergence or divergence during the initial phase of central planning, 1952–1965. During the cultural revolution, 1965–1978, regional inequality widened, as Socialist planning favored the already richer industrial regions at the expense of the poorer agricultural regions. It was only after market-oriented reforms began in 1978 that regional incomes began to equalize sharply. This convergence was strongly associated with the rise in rural productivity, and was particularly strong within the group of provinces that were allowed to integrate with the outside world. Starting in 1990, although convergence continued within these coastal provinces, they have started to grow markedly faster than the interior, and thus regional incomes have started to diverge once again.