Variations in the determinants of regional development disparities in rural China

Abstract

The presence of persistent regional development disparities in rural China has become one of the most important concerns about the country's further sustainable development. As the key engine driving the rural economy, rural industrial development plays a dominant role in understanding rural regional development disparities. This study utilizes a provincial panel dataset to examine the determinants of industrial development in rural China over the period 1992–2014. The analysis compares rural output growth and export growth as indicators of rural industrial development, and identifies significant regional variations in the determinants of these indicators across the three main regions of the country. The results suggest that domestic capital investment is the most important cause of regional rural output growth disparities, while FDI is the main reason for rising regional disparities in export growth. A strong self-reinforcing effect in output growth is identified for the Eastern region, which has generated faster economic growth compared to the other regions. There exists a regional divergence in export growth, accelerating the regional export disparity between the three regions. Based on the findings of this study, we argue that, to reduce regional development disparities, the formulation of policies to promote national economic goals should take explicit account of the regional context in which those policies operate.