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Regional growth of the Chinese economy

Qing, Zhang,1964- 2002 , 'Regional growth of the Chinese economy', PhD thesis, University of Tasmania.

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The objective in this thesis is to analyse the growth of China's three major regions and
of China itself. The study is motivated by apparently divergent rates of growth in the
eastern (coastal), central and western regions of China. The East is modifying its
economy at a faster rate and although there is an element of modernisation in the
central provinces, the West remains a more traditional economy, rich in resource
endowments, but in need of large infrastructure investments to progress into the

An introductory chapter (Chapter 1) is followed by an overview of the recent
development of China (Chapter 2) which culminates in the identification of the year
1978 as the benchmark year in China's recent development. The doors of the Chinese
economy were opened in this year, inward foreign direct investment (FDI) was
welcomed and export expansion encouraged. The major conclusion from this
overview is that 1978 was an appropriate starting point for the analysis of regional
development which follows. The literature about regional development is reviewed
and two common themes are identified: the significance of the nexus between output
growth and exports and between inward FDI and exports. These relationships are
analysed at a national and regional level in a fourth Chapter. Cointegration,
equilibrium correction modelling (ECM) and Granger and Sims causality tests are
applied and the major finding is that exports and FDI are subject to feedback
(bilateral) causality in the case of the PRC as a whole, the eastern and western regions
but that exports lead inward FDI in the Centre. An explanation is provided in Chapter 4.

The major innovation of the thesis occurs in Chapter 5 where Feder's model of
economic development is extended to include a distinction between inward FDI and
domestic investment. This provides a basis for additional insights, in particular, the
role of the relative productivity of the export and domestic sectors of China's regional
economies. A panel data set is applied to the growth model. Inward FDI and domestic
investment are both significant causes of regional growth but the outcomes for exports
and labour are mixed. Export expansion has a positive and direct impact on the
growth of the PRC and its eastern and central regions but not on the growth of
western China. Further, it is only in the western region where labour expansion plays
a significant role. This issue is resumed in Chapter 6 where both dynamic and static
shift-share analyses of labour growth are explored in each region. The major findings
are as follows: only the eastern region's industrial mix produces job gains while this
does not occur in the other two interior regions. The competitive shift component of
labour growth indicates the opposite finding. The net outcome is that job losses
occurred in the East but job gains prevail in the Centre and the West. The labour
growth by sector reveals that the West still depends on traditional industries where
productivity is low.

The final step in this research project is a study of the income distribution effects of
China's regional growth in the form of the question: are per capita incomes
converging or diverging in China and its three regions? The following answers apply:
China's per capita income sigma converged from 1978-90 but not for the period of
1990-98. Within each of the three regions, only the eastern region shows evidence of
per capita income sigma convergence throughout the period 1980-1996. In central
China, the coefficient of variation fluctuates so much that it is not possible to infer
that incomes in the central provinces are converging. In the poorer western region,
however, per capita incomes diverged throughout the period 1978-98. Convergence
conditional on both FDI and exports suggests that per capita income (3 converged in
China for all periods except 1994-1998. Inward FDI played a significant role in
China's per capita income convergence during 1990-1994 while exports were
especially important during 1986-1990.

The final chapter (Chapter 8) is dedicated to the discussion of policy issues and future

Item Type: Thesis - PhD
Authors/Creators:Qing, Zhang,1964-
Copyright Holders: The Author
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Copyright 2002 the author - The University is continuing to endeavour to trace the copyright
owner(s) and in the meantime this item has been reproduced here in good faith. We
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Additional Information:

Thesis (Ph.D.)--University of Tasmania, 2003. Includes bibliographical references

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