Whether the Chinese provinces have achieved their potential efficiency in economic growth?

Abstract

PurposeMost economic growth is concentrated in the eastern and coastal provinces of China, while the western and central provinces have not yet experienced the expected economic growth. This study aims to address the following crucial research questions: Do the central and western provinces achieved potential efficiency in economic growth? Have China’s provinces used their resources effectively in implementing economic growth strategies?Design/methodology/approachThe research design concerns the use of a panel dataset on province-specific economic growth in China over the years to 2000–2020. The methodology used was a stochastic frontier gross domestic product (GDP) model with time-varying technical efficiency over time. The approach uses the existing literature to identify the important variables influencing economic growth at the provincial level to model the stochastic frontier GDP model for empirical analysis.FindingsThis study concludes that the central provinces show the highest rate of efficiency in economic growth, though not 100%, followed by the Eastern and Western provinces. By increasing and improving skilled education institutes and intensifying supply chain opportunities through foreign direct investment (FDI), the central provinces achieving 100% growth efficiency may not be ruled out.Research limitations/implicationsThe modes of economic governance and policies to improve GDP growth have been rapidly changing from increasing incentives to improving competition. Thus, more unique avenues and expansion of the horizon for impending research on provincial, national and international macroeconomics would emerge that would make current methodologies of the growth analysis outdated.Practical implicationsThe empirical analysis highlights the importance of improving skilled education institutes and intensifying supply chain opportunities through FDI for achieving sustained economic growth.Social implicationsThe empirical analysis facilitates finding ways to reduce income inequality across provinces in China.Originality/valueTo the authors' knowledge empirical analysis examining the Chinese province-specific economic growth efficiency explicitly has not been carried out using the recent Chinese panel dataset.